VILLA RENTAL agencies in the Algarve have come under attack over the past two months with surprise visits from government watchdog, Inspecção-Geral das Actividades Económicas (IGAE), the general inspectorate for economic activities.
The inspectorate is clamping down on agencies and private villa owners who are renting out their properties to holidaymakers without holding the requisite licence, the Licença de Utilização Turística.
Legislation was brought in in 1997 to ensure properties meet health and safety standards, provide a range of certain essential features and conform to a list of detailed criteria.
While all properties must hold a habitation licence (Licença de Habitação) before they can be lived in, properties that are built with the intention of being rented out to tourists must be licensed for tourism purposes (see details below for which properties fall into this category). Fines ranging from 2,500 to 30,000 euros have been handed out, seriously damaging some companies and apparently even forcing others to temporarily suspend the rental operations side of their business. Speculation within the industry also points to the likelihood of some agencies being forced to close completely or layoff staff before the holiday season begins this year.
All those in the property industry agree that it is important to regulate standards, however, the complex nature of the legislation in force and the bureaucracy involved in obtaining the Licença de Utilização Turística is causing much frustration. Many owners, it seems, do not yet hold the licence and, with inspections beginning suddenly two months ago, the race is now on to obtain licences before the summer season begins and, most importantly, before inspectors pay a visit!
Confusion surrounds legislation
After speaking to several industry figures and private owners, The Resident’s Caroline Cunha discovered that there appears to be a distinct lack of awareness concerning what is required of property owners. Furthermore, after speaking to those who are aware of the need to hold a licence, it is clear that there is enormous confusion about how to obtain it. This, in part, seems to be due to the fact that not only has the law from 1997 been subsequently amended on several occasions, but the entity responsible for both issuing and enforcing licence ownership has also changed. The common view is that the law was brought in without a proper framework in place to administer it and without any consultation with the parties involved. It is also widely felt that the law and its guidelines have not been efficiently communicated.
Why the sudden spate of inspections?
Some believe this measure is simply one of the many measures recently introduced to bring in much-needed funds for the government to bridge the state deficit and just follows on from the rise in taxes, and so on. Others believe it is merely a coincidence arising from one isolated case that has now sparked a spree of inspections.
Industry up in arms
Elidérico Viegas, president of the Associação dos Hotéis e Empreendimentos Turísticos do Algarve (AHETA), the Algarve hotel and resorts association, laments the decision taken by the government to transfer responsibility to loca l Câmaras for issuing the licence, as he believes they do not have the resources to cope. He also states that the IGAE’s approach to enforcing the legislation is “heavy handed and unhelpful”.
“In my opinion, the law should be changed. The councils do not have the time or resources to administer this and I don’t really see why a property needs an extra licence. A habitation licence should be sufficient and the owner should just be asked to register with the Tourism Board.”
Viegas continued: “It was different when the Direcção Geral de Turismo (DGT) was responsible for issuing the licences and enforcing the legislation. Now, with the IGAE, what we have is a ‘fine culture’ – the inspectors just fine everyone. There should be a warning period so that owners can have time to organise what is required to obtain the licence. The IGAE is trying to apply legislation that is simply not workable. While we need to bring the ‘parallel beds’ (a term used to describe private tourism accommodation as opposed to what is supplied by resorts and hotels) under legal control, there are more sensible ways of doing it, this is not the way.”
Bad news for region’s tourism
Viegas concluded his comments by saying: “This situation is not contributing positively to tourism development in the region and I will definitely be bringing up the matter, along with other issues, at AHETA’s forthcoming meeting with the Secretary of State for Tourism, Bernardo Trindade.
According to reports received from villa agency owners from Almancil, the area seems to have been particularly targeted by the IGAE in recent weeks.
One villa management agency owner in Almancil, who asked not to be named, commented: “This legislation is a complete joke; it is unreasonably complicated. The licence itself costs just 40 euros, but it could cost you around 5,000 euros to get all the architect drawings and paperwork together to apply.”
The agency owner continued: “There are thousands of villas in the Loulé area and there is no way the Câmara can cope with all the applications and inspections. They do not know how to guide people on this. Plus, when I wrote to the Ministry for Tourism for assistance, they told me they don’t have a department for this yet and to contact them again in a few months! I am currently in the process of submitting all my paperwork and I know there will be long delays and I could even be fined in the meantime.”
A private owner, who also requested not be named, told The Resident: “I didn’t even know I needed a licence. Do I need to contact the Tourism Board? What does this have to do with the Câmara?”
Another agency owner in Almancil, who also declined to be named, confirmed that their agency had recently been inspected and had received notification of fines. However, the matter is currently in the hands of the company’s lawyers and, therefore, “the management is not able to comment at this time”. However, the company did reveal that both the owners of the villas being rented and the company itself have been fined.
Not good for anybody
The Resident also approached Aníbal Moreno, president of the Associação Empresarial de Almancil, the Almancil business assocation, for his views on the situation. “The current legislation is not good for anybody. Yes, there should be rules in place, but there needs to be an easier way to obtain the licence. Once again, good people with legal businesses, who are paying tax, are being penalised,” he said. “I am due to have a meeting with the President of Loulé Câmara to talk about this subject and get his feelings on the issue.” Meanwhile, Rita Pina from Loulé Câmara’s press office confirmed that applicants should “first go to an architect and request a project to be made for the property to meet tourism requirements, then come to the Câmara and request the licence”. She did, however, explain that the Câmara needs to consult other entities and the process is likely to take around two months.
Due to the serious nature of the problem, The Resident decided to consult well-known law firm Neville de Rougemont to find out if they could offer useful advice for those needing to obtain a licence in order to rent their property. Here is an article they submitted exclusively for publication in The Resident:
Licensing of holiday lettings in Portugal – requirements, implications and solutions
In 1997, the Portuguese government issued a Law (34/97) to regulate the letting of privately owned or managed villas and apartments. The main purpose of this law was to submit the regular lettings to a licensing process in order to control and supervise such activities with the intention of guaranteeing holiday safety.
This legislation, its requirements and the devised licenses are compulsory if properties are regularly leased for tourism purposes or the lettings are made through an intermediary or an agency, and whenever the letting is advertised to the public.
Private owners or managers, who rent their properties only for a few weeks per year without using intermediaries or advertising and without offering tourism services and facilities, do not have to comply with these legal requirements – they are submitted to a general lease law, known as Regime de Arrendamento Urbano (RAU).
Regarding apartments and villas, according to the law, they must comply with some infrastructure requirements, such as the sanitation network, waste collection systems and drinking water supply network, whether they are private or public. Other security and quality conditions are also set out, such as the number of beds per room or the composition of the property, namely toilet, kitchen and swimming pool requirements.
Water and electricity supplies must be included in the price and other services like hygiene and cleaning must, under some circumstances, be provided by skilled personnel.
These apartments and villas must have a visible identification sign approved by the government, as well as a reception area or an attending office in order to grant some minimum services for the users. There are different classifications that should appear in the sign regarding the villas and the apartments, bearing in mind their location, quality, equipment and furniture as well as the services supplied.
Finally, this law even foresees a rule regarding check out, stating that the user check out time must be at 12 noon; if not, it will be considered as a renewal that the proprietor or manager can eventually accept.
The law came into force on September 18, 1997, and foresaw a two-year period for the owners or managers to comply with the new legislation in order to obtain a licence or maintain an existing one.
Ultimately, in case of non-compliance with any of these rules and requirements, fines will be applied, depending on the seriousness of the offence and the classification of the property.
If all the above mentioned requirements are met, the letting of privately owned or managed villas and apartments must be licensed according to the law 167/97. The applicant must engage an architect who will draft a project of the property, including all the necessary changes made to meet the tourism requirements.
Afterwards, one must submit the project together with the modification request of the usage purpose to the city council’s department of urbanism, project section (Câmara Municipal, Departamento de Urbanismo, Secção de Projectos).
Within 30 days of the request, the city council must proceed with an inspection (vistoria) of the property. Moreover, if the request and the project have been approved, the city council’s economical activities department (Departamento de Actividades Económicas) will issue the licence for the usage with tourism purposes (Alvará de Licença ou de Autorização de Utilização Turística) within 30 days.
If the council departments do not execute the due acts mentioned above, according to the law 555/99, the applicant can compel the Câmara to practice it, through a judicial injunction request to the administrative court.
In case of non compliance with the registration and the requirements foreseen in the law, you will find yourself with a feeble defence against the respective fines, based on the principle of legality contained in the Portuguese Constitution and in the law that regulates fines.
A situation that can lead to a fine reduction is when the punishable offence was practiced without intent, which can happen to many private property owners who may consider that letting a house for holidays is not subject to specific requirements or licensing processes.
Nevertheless, this law also sets out a limitation period of two years starting from the beginning of the penalty proceedings which, in some cases, can be used as a defence.
Pedro Ghidoni de Pina
Neville de Rougemont & Associados
Algarve office contact: (+351) 289 895 420