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Fight these cases to the end 

 

N.B. This article deals with rentals on TOURIST designated complexes. It does NOT deal with the issue of rentals of apartments on ‘RESIDENTIAL’ complexes. The writer considers that the law on residential complex rentals is crystal clear, namely that short-term tourist rentals on a residential complex are NOT permitted under any circumstances.

There has now been a further development in respect of legal proceedings continuing against property owners and rental agents who received fines for renting their properties other than via the ‘sole appointed rental agent’.

On 16th May, a lawyer representing a large group of such clients apparently attended Court in Santa Cruz for a hearing in their appeal process. However, prior to the hearing, we understand that the Judge requested a private meeting with the said lawyer, together with a lawyer for the Canarian Government and two of the Canarian Tourist Inspectors.

At the time of going to press, we have not seen any video and/or transcript of the said meeting. However, reports published on web blogs, forums and a recent newspaper article (not in the Tenerife News) suggest that the Judge ‘commented’ to the parties present that he considered that the Canarian rental Law is valid and applicable against individuals (and presumably independent agents) conducting private holiday rentals. The Judge also allegedly ‘commented’ that previous Judgments of the Canarian Supreme Court, which had criticised and overruled the licensing provisions of the Canarian tourist rental laws, were not relevant to the case of individuals (and presumably independent agents) before him.

The Judge also allegedly commented that the government had a case that ‘could be developed during the hearing’. He also allegedly commented that the fines issued against the defendants were disproportionate.

It appears that the Judge then invited the lawyer in question to recommend to certain clients that they just accept defeat and settle their cases out of court by offering to pay a reduced fine in the sum of 5,000€, rather than arguing the legal issues and having the matter determined by judgment at a hearing. The Judge apparently recommended that they did this via a ‘class action settlement’ which could cover both this lawyer’s and various other lawyers’ clients, but which would be controlled by the lawyer in question.

At this stage, it does not appear that the Judge gave any legal analysis or explanation as to why he believes individuals (and presumably independent rental agents) are in breach of provisions of a law that were ruled in three separate Canarian judgments to be illegal and unenforceable.

It would seem from other reports about this meeting that this course of action may be considered by some. Whether lawyers decide to go ahead and recommend acceptance of the 5,000 euro fines in certain cases or decide to continue the fight remains to be seen.

Notwithstanding the Judge’s ‘comments’ made in a private meeting, our legal opinion and analysis remains unchanged. European Directive 2006/123/EC (also known as the ‘Bolkestein Directive’) is clear and unequivocal. It applies to the provision of all services in the European Union (including rental of tourist properties). It applies to all individuals, organisations, firms and companies. In terms of tourist rentals, there is no class or group exempt from the directive. Furthermore, there is no exemption applicable to the Canary Islands, a fact illustrated by each of the Judges in the 3 published High Court cases, where the provisions of Bolkestein were expressly upheld.

We are therefore at a loss to understand the legal basis upon which a Santa Cruz Judge believes that the European Directive somehow does not apply to individuals (and presumably independent rental agents) renting properties to tourists.

Regrettably, it is increasingly commonplace for national Judges to attempt to defend their own country’s laws in defiance of Europe. In countries like France, it has become a national sport. That is perhaps why so many cases from across the European Union get referred or appealed to the European Court of Justice.

Even if the Judge was to rule against clients in the first instance after a full hearing, that decision could be appealed if necessary, as far as the European Court of Justice, on the basis of a test case or class action. Given that the cost of such an appeal process would doubtless be spread among the particularly large number of clients being represented, the cost to each individual client of exhausting the appeal process would be minimal and certainly less than the 5,000€ fine that the Judge is allegedly suggesting that each defendant should now stump up whilst rolling over in defeat.

As such, we believe that any clients affected by this news should consider rejecting the proposed settlement offer. This will force the Judge to provide a detailed explanation for any legal conclusion he attempts to reach, which will leave the path open to a further appeal if necessary.

The above comments represent our analysis of the situation and the law and should not be construed as legal advice applicable to any individual case or circumstances. Tenerife Solicitors have no direct vested interest in providing the above opinion as we would not in any event accept instructions on cases that have reached such an advanced stage. We are simply motivated to ensure that justice is done in respect of a ridiculous law that has distorted local markets and has caused irreparable damage to the tourism industry in the Canary Islands for the past 16 years.