Latest Changes to for long term renting
This gives you important information for people renting out properties long term take note of the latest changes.
(This applies to long-term contracts not temporary contracts of 11 months)
Here are the main changes introduced in the Urban Letting Act, 1994 by Royal Decree 21-18.
This was passed by the Spanish Cabinet and came into force on the 19th of December 2018 to improve rental agreements for tenants.
LONGER DURATION OF THE CONTRACTS
The latest changes modifies the minimum term of the rental contract of a property to be used as permanent dwelling by the tenant.
It has now been extended from 3 to 5 years or 7 years if the property is rented through a company.
Although the terms of the contract are freely agreed by tenant and landlord, the law establishes a minimum duration.
So if the duration of the contract has been agreed in the past for a period lower, then the new requirements, then the landlord has to renew it at the new minimum requirement (5 or 7 years).
Therefore, the minimum legal term in which the tenant can continue in the house is extended.
Also the automatic renewal has changed. If after the lapse of the minimum duration of the contract neither party gives 30 days.
Then prior to the termination date, the rental is renewed for a further term of three years.
Under the latest changes this was previously only one year.
RENT CAN BE AGREED TO BE RAISED DIFFERENTLY THAN BY THE COST OF LIVING INDEX
The rent can be agreed to be increased at the end of each year in a different way than by the normal Cost of Living Index.
If no mention is made as to the possibility of increase of the rent, this cannot be increased during the initial term of the contract.
If it is mentioned in the contract to increase the rent at the end of each year linked to an official index, but not mentioned which one.
Then the one it will be taken against will be the Indice de Garantía de Competitividad which is approved by the Government every year.
THREE MONTH MAXIMUM DEPOSIT & EXPENSES
When renting a residential property there is a compulsory deposit to be paid by the tenant of one month’s rent.
However landlord and tenant can reach agreement to increase this but it cannot exceed more than 3 months deposit.
Unless it is a contract for a longer term than the minimum compulsory term (5 or 7 years).
Also the expenses of the preparation of the contract and the Real Estate commission only have to be paid by the landlord, if through a company.
Tenant and landlord can reach an agreement to improve or renovate the house during the duration of the lease and increase the rent.
This would not suspend the duration of the contract or the corresponding renewals.
In case of eviction there are provisions in place to temporarily (1 or 2 months) suspend the proceedings.
If the Administration appreciates that the tenants have a low income or show other vulnerable circumstances.
So, when the tenant is requested to pay, they are informed that they can see the social services for assistance.
In a community the owners can draw up conditions by a majority of 3/5 to limit or to have certain rules on Holiday rental activity.
These are lettings offered to the public through real estates or internet portals such as Airbnb, etc.
These lettings are excluded from the scope of the Urban Letting Act, 1964 and are governed by the specific legislation of the Regional Government where the property is situated.
See Holiday Rental regulations
TAX AID OR SURCHARGE
When an official rental contract is signed and properly recorded in the administration, the tenant is exempt from paying the Stamp Duty.
In the past Stamp Duty had to be paid within a month of the signing of the contract, although in the practice this has not been complied with.
The obligation to add to the rent in the social housing rentals, the payment of the local rates (IBI) is now removed.
On the other hand the Decree also introduces in the Law on Local Taxes the definition of “vacant property with permanent character”.
This for the purpose of allowing the Local Council to apply a surcharge on the Local rate receipt for these properties, of up to 50 percent of the amount of the tax to be paid.
If you require any further information, please contact us.