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Buy-to-let Britons are learning a painful lesson from their investment in the holiday rentals market, says Hugh Ash
Already reeling from news that their properties' values are under threat, British homeowners in Spain are facing a double whammy that could plunge thousands into huge debt.
A fresh crackdown by Spanish tourism and tax authorities over unlicensed apartments and villas that are let to holidaymakers threatens to trap countless Britons, anxious to maximise their investment in homes on the Costas and the Balearic Islands.
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The news comes two weeks after shares in major Spanish property companies slumped by up to 22 per cent - due to the oversupply of houses - and soon after the euro interest base rate's rise to 3.75 per cent, which has added to buyers' mortgage burden.
Many of the 300,000 British investors in Spain's overheated property market have already turned to the lucrative holiday rentals sector and many more are considering doing so to ease their mounting financial strain.
But, seduced by the prospect of netting £1,000 a week in high season for a two-bedroom flat with a sea view, few realise that they face swingeing fines of up to £20,000 (€30,000) because they are breaking tourism laws.
The expanding opportunities for buy-to-let investments, which generate income to repay mortgages, have acted as a hefty inducement in luring thousands of British people into snapping up properties in the Spanish sun.
However, the vast majority of flats and villas cannot be offered for holiday rental, because the tourism authorities do not license them. And, even if official permission is sought, it is rarely granted.
"There are strict conditions before properties are approved for rental to holidaymakers," says a spokesperson for the Spanish Ministry for Tourism. "Nearly all are not licensed, which means letting them to tourists is illegal."
Property owners also face action from the Spanish and British tax authorities, who have stepped up their scrutiny of holiday rental websites if they fail to declare income from lettings.
Already several British investors in Majorca, the second most popular holiday-home market after the Costa del Sol, have fallen foul of Spanish law.
Londoner Tania Osbourne is appealing against a £20,000 fine for letting out her £200,000, two-bedroom flat on a complex in a popular Majorca resort for holiday rentals, after a Spanish neighbour tipped off the tourism authorities.
Another British owner was recently fined £4,000 and ordered to withdraw his apartment from a holiday rentals website. And five others, who wanted to let their apartments to holidaymakers, have been threatened with legal action by neighbours.
Tania, 63, from St John's Wood, explains: "I wanted the flat as a buy-to-let investment and the developer's sales director told me it had excellent holiday rental potential of up to £800 a week in high season. So I bought it with a mortgage from a Spanish bank.
"After I'd completed the purchase early last year, I put the apartment on a holiday rentals website and was overwhelmed with inquiries from the UK. Very quickly it was booked solid for nine months.
"But I was suddenly called to a meeting with the head of the community residents' association. And he spelt it out in the bluntest terms that the development was unlicensed and we would be reported if we continued to offer our flats as holiday accommodation.
"We had no idea the development had to be authorised for tourism use and we were all relying on the lettings income to pay off our mortgages.
"I immediately pulled the apartment off the website and put it up for sale. But that didn't stop one vindictive neighbour from informing on me to the authorities. Now I've been hit by a £20,000 fine - far more than I ever made from the lettings - but I'm hoping to get it reduced on appeal."
Lawyer Sebastian Stalter, whose practice in Palma specialises in advising foreign clients about property purchases, warns: "The rules governing holiday rentals are particularly tough in the most popular tourism areas, like Majorca and the Costas.
"So British buyers must be extremely careful if they seek properties for buy-to-let investments, because the experience can be a painful one if they have not checked out the pitfalls in advance.
"Many developers don't give accurate information about what their properties can be used for and it's very rare that apartments are licensed for tourism."
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