Valuation as Home or Business: Supreme Court Ruling Impacts Property Use and Value in Spain

The Spanish Supreme Court has declared that a residential property, (apartment, townhouse, villa, etc) used for paid tourist rentals is a business use that can be prevented by the Community of owners in which it lies where their statutes state that there should be no business use. The Planning departments are also likely to use this decision to prevent such use and not grant holiday rental licenses or even revoke existing ones. The law and regulation are assumed not to apply to owners who work from their homes, as increasingly occurs with fast internet access, as long as residential is still the primary use.

The decision must mean that apartments, in Urbanisations where there is a restriction on use in their Community regulations, could be worth less than those where there is the possibility of tourist rentals. However, the opposite can also apply, where lack of tourist rentals, with their possibility of 24-hour noise and other disruption, can make the urbanisation more attractive to long-term residents, especially if they are working or have children.

So, in valuation, the valuer needs to judge each Urbanisation as to its character, primarily residential or tourist. Things can change quickly, so there should be a check on whether the Community Regulations do or can prevent tourist business use, and how any change could affect the potential of the apartment or the character of the urbanization.