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Mar26

What changed in Spanish rental law?

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Changes for rental contracts as of 6 March 2019

What changed in Spanish rental law?

In 2013 the Spanish Rental Law (Ley de Arrendamientos Urbanos, LAU) became more flexible. Rental contracts could be terminated after three years, as this was five years before. The main reason for this was to stimulate the rental market and to moderate the increases in rent.

That being said, the flexibilisation of the rental law didn’t bring the expected results. Rent has increased the last few years and the expected increase in the offer of apartments has not been significantly changed. Reason enough for the Spanish Government to change the law again. By Royal Decree of 1 March 2019, 7/2019, the LAU changed again.

What are the main changes? In this article you will find some questions and answers.

The maximum period to rent a property was 3 years, before a landlord could terminate it. Did this change?

Rental contracts can now be extended or entered into up to 5 years. After 5 years the landlord can terminate the rental contract (exception: own use, see below). If the owner is a legal person, the contract can be enlarged up to 7 years. So, basically this means that parties are free to agree upon the duration. The standard period is 1 year, and it can be extended to 5 or 7 years, depending on whether you are a private person or a legal entity.

And what is the extension period?

After these 5 or 7 years, the rental contract can be extended up to 3 years. Basically, this means that if the contract will be extended without notification the contract will be renewed on a yearly basis until the 3 years have been reached.

Is there a specific notice period applicable?

There is. The landlord needs to communicate at least 4 months in advance that he doesn’t wish to extend the rental contract after 5 years. The tenant has a legal notice period of at least 2 months.

Example: The landlord enters into a rental contract on April 1, 2019. He can terminate this contract on April 1, 2024, but he has to give notice already before December 1, 2023.

Please note that the tenant still has a minimum legal notice period of 30 days if he would like to end the rental contract before 5 years.

Can you modify the annual rent?

If stipulated in the rental contract, the rent can be modified after the first year and then on an annual basis, but only by means of using the Consumer Price Index. Where and how to calculate the rent? See: www.ine.es

Under which conditions can you claim your property to live in?

Would you like to keep the option open to claim the property for own use during the first 5 years? Then, please insert a clause in the rental contract that you reserve the right to claim the property for own use. ‘Own use’ means for the landlord itself, first degree relatives, adopted children or wife or husband once there is a final court decision of separation or divorce. If not included in the contract, formally you can’t claim the property for own use. After that, you have to move in within a period of 3 months. If you don’t do that, the tenant can rent the property for another 5 years or claiming compensation.

Are there any limits to the additional guarantees you can ask as a landlord?

Limits have been placed on additional guarantees. Except the legal deposit (la fianza) of one month, a maximum additional guarantee can be asked of two month’s rent or a bank guarantee of two months. The total deposit (including the legal deposit) can therefore not be more than three month’s rent.

One exception: in case of long term contracts (I assume we are talking about rental contracts for more than 5 years). In that case the restriction does not apply.

Can a real estate agent ask every tenant to pay the agent's commission?

Once the landlord is a company, a real estate agent can't ask a commission of the tenant. Only if the landlord is an individual, the agent can ask commission of the tenant.

Is the tenant protected once the landlord sells the property?

Once the property has been sold, the tenant is entitled to continue the rental contract until the minimum period of 5 (or 7) years has been fulfilled. During this period, the buyer will be subrogated in the rights of the landlord, even in case the rental contract stipulates that the rental contract will end in case of selling the property.

Are there any exceptions that fall beyond the scope of the Spanish rental law (LAU)?

There are several exceptions, the most important ones are tourist rental and commercial rentals. However, a new exception has been included as well and that is the following.

If:

  • your property has a surface of more than 300 m2 or
  • the initial rent is more than 5.5 times of the yearly minimum salary,

it is excluded from the LAU.

5.5 times of the yearly minimum salary means for 2019: 12,600 € x 5.5. = 69.300 €

So, if the annual rent is more than 69,300 € (that is more than 5,775 € per month), your property is also excluded from the scope of the LAU.

In this case the rental contract prevails and otherwise Title II of the LAU and supplementally the Spanish Civil Code.

These changes apply to rental contracts signed as of 6 March 2019.

Questions, doubts or comments?

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+ 34 910 483 215