Property in Spain: one less tax, squatting companies and first rent cap fine

Plusvalía property tax ruled illegal

Spain’s Constitutional Court has ruled that the country’s plusvalía property tax is unconstitutional.

Previously a municipal tax charged by town halls on property sales, the plusvalía taxed the increase in value of the land on which the property lies from when it was sold.

The Constitutional Court’s decision means that property owners who sell their homes in November will not have to pay the plusvalía tax, but there will be no retroactive refunding on past sales, unfortunately.

It has been reported, however, that Spanish tax authority Hacienda are thinking up new ways to recoup some of the increases in land value, as town halls across Spain worry about how much the constitutional ruling will affect their public coffers.

First Barcelona landlord fined for ignoring rent cap

A Barcelona landlord has been fined €9,000 for overcharging his tenants, the first such fine issued by Barcelona City Council for violating its 2020 rent control legislation.

The new tenants became suspicious when the previous rent wasn’t referred to in the contract (something legally required by the legislation) and then realised that the landlord had indeed increased the rent when they checked what the previous tenants had paid - €950 per month - while their contract was set at €1,200. 

The tenants made a complaint and the landlord was fined, but refused their demand for a further decrease in the rent.

The Spanish government announced its own new housing bill this week, and many in the Catalan government worry about the effect this could have on its own rent cap legislation.

The 2020 legislation has long been a source of debate, and challenged at the judicial level by both the Spanish government and the pro-business People's Party. It comes just months after another Barcelona landlord was fined €45,000 for refusing to rent his property to a Moroccan man.

Will Spain's rising Consumer Price Index affect rents?

With inflation rocketing in Spain, CPI (or IPC in Spanish) will reach 5.5 percent before the end of October according to the recent forecasts by the National Institute of Statistics (INE). 

Rising inflation has, in part, been caused by spiralling utilities prices - particularly electricity - on the back of increased natural gas trading prices, but this has had a knock-on effect on consumers on daily essentials ranging from electricity to fuel.

But one under-looked effect of rising inflation and CPI is that of rent increases. With many rental contracts in Spain containing clauses that link rent increases to that of the CPI, many landlords are well within their rights to increase monthly rent in accordance with the CPI.

Spain edges closer to new housing law

On the subject of rent control, Spain's Council of Ministers approved on Tuesday the first housing law of the country's democracy. 

The PSOE-led coalition government is therefore one step closer to implementing a wide-ranging set of property market reforms as part of its proposed 2022 housing budget.

However, Pedro Sánchez's administration has not yet guaranteed the support of this draft law in the Spanish Congress, and opposition Popular Party has already announced they will oppose the reforms at the country's Constitutional Court.

One of the main headline grabbers in the proposals are rental price freezes, particularly the regulation of landlords with more than ten properties. If approved, the law would force landlords to lower rents based on the reference index, and smaller property holders who are letting out properties in expensive neighbourhoods will also have to freeze rents.

The bill also proposes to build more social housing, something Spain trails behind the rest of the EU on quite dramatically. Spain has the lowest amount of social housing in the EU with 290,000 units, only 1.1 percent of all properties in the country, and according to the proposed housing law up to thirty percent of new builds will have to be social housing projects meant for the rental market.

The reforms also include taxes on empty properties, and rent discounts of up to €250 for 18 to 35 year olds who earn below €23,725 a year.

READ ALSO: What you need to know about Spain's new housing law

Squatting and anti-squatting companies spreading across Spain

Although okupas (squatters in Spanish) are occupying properties across Spain in greater numbers in recent years, legal challenges against the practice are actually falling.

This is partly due to the rise in numbers of asesorías de okupación, anti-squatting 'consultancy' businesses that help clients get the squatters out of their homes without having to take the matter to court. 

These anti-squatting services are proliferating and are now present in cities such as Murcia, Valencia, Barcelona, Madrid and Zaragoza, among others.

Many desperate property owners are turning to these businesses which often include bouncers, boxers and other hardmen as staff in order to find extra-judicial solutions, including deal-making directly with the squatters themselves, or using other means of putting pressure or sometimes extorting them to leave.

Spain's National Organisation of People Affected by Squatting (La Organización Nacional de Afectados por la Okupación) estimates there are as many as 120,000 properties occupied by squatters across Spain today.

Squatting, they believe, affects over a million Spaniards, and is a trend on the rise at a rate of 40 new squats reported a day in the last year.

The occupations are sometimes carried out with the help of an organised underground network, with many cities in Spain now reportedly having a squatters' office (known in Spanish as a oficina de okupación) that offers legal and practical advice for those wanting to occupy a property.

It's worth noting as well that according to the latest data by Spain's National Statistics Office, there are 3.4 million empty homes in Spain. 

READ ALSO:

• How to stop squatters from moving into your empty home in Spain
• Why is Spain making it harder to evict squatters?

Article by Conor Faulkner