Spain's Supreme Court upholds ban on tourist rentals by communities

Supreme Court allows communities to ban tourist rentals

Can a homeowners' association shut down someone's business of renting their flat to tourists? The Civil Chamber of the Supreme Court has ruled on cases in Oviedo and Donosti, upholding the right of communities to veto tourist rentals in their buildings if their bylaws prohibit economic activities. The ruling is unambiguous: "The rental of housing for tourist use is an activity included in the statutory prohibition, as it is an economic activity," the judges stated. In short: if your bylaws forbid economic activities, your flat cannot be used as holiday accommodation. Period.

What exactly did the Supreme Court decide?

The key lies in the wording of the community's bylaws. Both rulings were based on the fact that the prohibition of economic activities was already established in the bylaws, rather than being a later decision by the assembly. This distinction is crucial: it is different for a building that was established with such a clause to one that seeks to add it later. In the latter case, Article 17.12 of the Ley de Propiedad Horizontal (Horizontal Property Law) applies, which lowers the requirement from unanimity to a three-fifths majority of votes and participation quotas to incorporate such a prohibition. In other words, the path exists, but it is not a simple matter.

Some argue that the sentence opens the door for any community to change what they tolerate today. However, the counter-argument is that the Supreme Court is not inventing anything: it is merely interpreting a clause that was already written. The difference between the two is the difference between a right and a whim.

Why owners who paid for licenses are left empty-handed

A question arises in every conversation regarding the ruling: who compensates the owner for the tourist license they paid for? The City Council collected the fee, it wasn't cheap, and now the owner may be left with a permit that is completely useless. No compensation mechanism has been proposed. Furthermore, the property depreciates: if it stops generating holiday rental income, its investment value drops, leaving the owner with an asset that no longer yields the same returns.

The most optimistic calculation for the investor assumes the flat returns to the residential market and remains profitable. The pessimistic scenario assumes that traditional long-term rentals cannot cover the mortgage, turning the asset into a burden. Between these two extremes lies a housing stock that, in some cities, has become specialized in tourist use.

The unexpected argument: professional services could also be affected

The ruling has peine a flank that its supporters had not foreseen. If a community can prohibit an economic activity in a flat, why wouldn't they be able to prohibit a lawyer's consultation, an architect's office, or a consultant's workshop that receives clients at home? That is the loophole. The law speaks of economic activity, not specifically of tourist rentals. And a community with a sufficient majority can interpret it in whatever direction suits them.

In response, the opposing side points to an undeniable reality: a tourist rental generates constant movement, suitcases at 3 a.m., broken locks, ringing doorbells, and a level of turnover that no neighbor signed up for when they bought their home. Living together in an apartment block is not an abstract concept; it is what happens in the hallway.

The hotel sector watches from the sidelines

There is an uncomfortable reading of the situation: if tourist apartments are closed and supply is reduced, accommodation prices rise. The sector best positioned to raise prices without hesitation is the hotel industry, which has spent years watching part of its clientele escape to private rentals. The fact that this measure might benefit hotel chains does not make it false, but it is worth noting before celebrating too early.

The other side is the usual one: the owner renting to tourists is not always a vulture fund or a speculator. Often, it is a family that bought a flat, renovated it, and found holiday rentals to be a way to pay the mortgage. The ruling does not distinguish between these profiles. It prohibits the activity, not the income.

What if my community wants to ban tourist rentals?

It depends on what your bylaws say. If the prohibition of economic activities is already included, the community can veto tourist use without further procedure. If not, the bylaws must be amended with a three-fifths majority of votes and participation quotas, according to Article 17.12 of the Ley de Propiedad Horizontal. The process is neither immediate nor free, and any affected owner can challenge it in court. Meanwhile, investor legal certainty remains uncertain: what is legal in your building today could change after a single assembly and a vote.

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Ultimately, the Supreme Court has done what courts do: read a clause and define its meaning. Neighbors celebrate being able to sleep; owners calculate their losses; and hotels, discreetly, rub their hands together. Everyone is happy—or almost.