**UPDATE 22 January 2019**
On 22 January 2019, the Spanish Congress cancelled the Real Decreto Ley 21/2018 that came into effect on 19 December and also changed certain legal aspects on the lease contracts. To clarify:
- Any contract that has been signed between 19 December and 22 January will remain unaffected by this modification and will maintain its conditions, so tenants will not have to sign again any updated rental contracts with the following measures.
- The minimum rental term is established again as 3 years. Instead of the 5 (for individuals) and 7 years (for companies) that the Real Decreto Ley 21/2018 established.
- The conditions of forced extensions to the landlord will now return to 3 years (individual or company) and the tacit extensions will be back to 1 year maximum and not 3.
- The landlords have now the freedom to demand from the tenants the fianza that they consider appropriate, without any limits. The tenants will have to pay again the Impuesto de Transmisiones Patrimoniales (ITP) which the Real Decreto Ley 21/2018 declared them exempt from.
- As for real estate and contract legal fees, the law no longer requires that they should be approved by the lessor, if a company.
From 19 December 2018, a new set of measures regarding Spanish rental laws became active. The Ley de Arrendamientos Urbanos (LAU) offers extra security for tenants, and also gives homeowners greater powers to veto holiday home rentals. Most notably, average tenancy contracts will go from being three to five years in length, and seven years in cases where the landlord is a legal entity/business.
According to the new legislation, it will now also be easier for the landlord and lessee to reach an agreement to make improvements in a property before the end of the tenancy contract.
The law has not been amended retro-actively so is only applicable for rental contracts signed as of the date above, unless both parties agree to have an existing contract ruled by this new law.
The key changes are:
- Initial rental period
The rental period has been extended to five years instead of three (and seven years in the case the landlord is a legal entity) as was the case prior to 2013. During this period only the tenant can cancel the contract. If he or she does not give notice within at least 30 days of the contract renewal date, the contract is automatically renewed up until the five year period has been reached.
- Renewal period (plazo de prórroga tácita)
Renewal after the first five years will go up to a three year period from one year.
- Landlord notice
The same conditions apply as in the last law. If for example the landlord needs the property for immediate family, he or she can only claim the property back after a year of tenancy and must give at least two months’ notice.
- Selling a property
Registering the rental contract with the Registro de Propiedad will guarantee the tenant the same entitlements with regards to automatic and silent renewals if a property is sold.
The rental deposit remains at one months’ rent. This can be updated in line with any rent updates if agreed in the contract, once the period of five or seven years is up.
The fianza (additional financial guarantee) continues to be two months’ rent, unless the initial period is longer than five or seven years.
- Rent revision
A national index on any changes in rental costs will be applied unless agreed in the original contract and on the renewal date.
- Property improvements
Unless the contract states otherwise, after five or seven years depending on the contract length, if the landlord has made improvements to a property (but not regular maintenance), landlords can increase rents a month after the works have been completed and only if the landlord has informed the tenant in writing. He or she needs to provide details of the costs involved and a calculation of the new rent, although this cannot be increased by more than 20%.
- Maintenance costs and taxes
Both parties can agree that costs for maintenance, services and taxes related to the property are the responsibility of the tenant, but if they do then this must be added to the contract.
- Short-term rentals and communities of owners
Under the current Horizontal Property Law there must be a unanimous decision to allow or prohibit properties in the community to be registered for holiday lets. This has been amended to a 3/5 majority vote of owners. If there is a positive decision, amendments need to be made to either individual properties and/or any of the communal areas, and a specific community fee needs to be established, or the community fees of the individual property concerned adjusted. This requires another 3/5 vote and cannot be more than 20% of the total fees. These agreements are not retro-active.
- Evictions for non-payment of the rent
The new legislation puts in place protection for those in ‘socially vulnerable’ situations, whereby Social Services can intervene once a judge has issued the eviction order, putting the eviction on hold until alternative housing can be sorted. The length of stay depends if the owner is a private individual (one month) or legal entity (two months).
This is a ‘tenant’s tax’ that will no longer need to be paid by the tenant.
Spain’s top three cities have seen significant increases in rental prices since Q4 2011 until Q4 2018. Barcelona’s compound annual growth rate is 7%, Madrid and Valencia are both 6%.