Keeping it legal: Get to grips with local rules when you rent out your overseas property

For years people have made money by renting out their overseas homes, many without realising they needed a licence from the local authorities. However, clampdowns on illegal rentals in some European countries mean owners could now be forced to register.

The economic downturn, and subsequent reduction in the number of tourists, has caused hoteliers in popular destinations across Europe to pressurise local authorities into closing down unlicensed premises. If caught, owners face fines of several thousand pounds.

"Hotels in Barcelona, are fighting for business," says Rita Fryer of specialist agency The Property Finders, "so action is being taken against owners of unlicensed rental apartments, with fines of up to £30,000."

To obtain a licence, owners must present a copy of their deeds and habitation certificate to the local authorities, they also need to inform their immediate neighbours and provide details of any agency marketing the apartment.

Unfortunately, the local authority has stopped issuing licences, so the only option is to buy a property with permission in place. "In Barcelona's old town there are an estimated 1,202 apartments used for short-term rentals but only 669 licences have been granted," says Fryer, "though many owners are giving up rentals because of the hassle."

Spanish law changes by region, so in much of Spain licences aren't necessary but in the Balearics and Canaries islands they are. However, the application process is so complex many owners give up and rent illegally.

While in Portugal new legislation was recently introduced to stop confusion surrounding lettings. Paolo Bonanni, of sales and rental agency Select Resorts, says owners must obtain authorisation from their local town council by presenting a habitation licence, tax documents and safety inspection certificates.

In some regions, Portuguese authorities have inspected the books of letting agencies to uncover owners who are illegally renting, punishing both parties. As a result, some agents will now only represent properties with the correct documentation.

Things are more straightforward in Greece where the necessary licence is issued by the local tourist board. It costs around £3,000, lasts five years and is proof your property meets required safety standards. Don't be put off by the extensive paperwork, owners caught without the document risk fines or even arrest.

Other countries are less stringent, with Italian and French authorities leaving landlords alone. However, Paris-based agent Miranda Bothe says there's currently "heated debate" in France about the legality of private lettings operating as commercial ventures. So change may soon be on the cards there too.

The onus may be on owners to stay within the law but it's generally agreed that legislation also needs to be clearer. "The authorities in holiday resorts can't have it both ways," says Paulo Bonanni, "if they want to encourage tourism they have to make it easier for everyone to work with the system."

The Property Finders: 0800 622 6745, www.thepropertyfinders.com; Select Resorts: 01202 765011, www.selectresorts.co.uk; Paris Property Finders: 020 7669 0108, www.parispropertyfinders.com

Letting abroad: An owner's guide

* Local tourist authorities should be able to advise what licences you need and where to apply, letting agents should also know the rules.

* Public liability insurance is a must in case someone is injured on your property. Any rental income, however little, must be declared to the tax authorities in either the UK or country of ownership.

* Renting to friends and family is generally fine, you only need licences or authorisation if you advertise online.