UPDATE 1.3.2019 Amendment to Rental Law, re-negotiated, voted and made into law on the 1st of March 2019. In force as of publication in the State Bulletin, the 6th of March 2019. The version below is the one from December 2018 with the changes/additions that are valid as of March 6th 2019 in cursive script.
UPDATE: This amendment of the Rental Law has been voted down by a majority of Congress on the 22nd of January, the decision published in the State Bulletin yesterday the 24th of January. Contracts signed between the 18th of December 2018 and the 24th of January 2019 will be ruled by the amendment as outlined below (without cursive text), for contracts signed between January 25th 2019 and March 5th 2019, the law as it was before the latest amendment, will be valid.
For contracts signed as of the 6th of March 2019, the amendment as outlined below, incl. cursive changes/additions will be the valid version.
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The Ley de Arrendamientos Urbanos (LAU), so for non-tourist rentals. The amendment includes commercial properties and for habitual homes. The Royal Decree voted on last Friday the 14th of December, published in the State Bulletin on Tuesday 18th and valid as of Wednesday December 19th 2018. The law has not been amended retro-actively so this new Royal Decree is only applicable for rental contracts signed as of the date above, unless parties agree to have an existing contract be ruled by this new law.
The Royal Decree makes a difference in tenants being physical persons or juridical persons, we will only highlight the amendments as they are valid for physical persons. We will explain the difference in application for landlords, as coming across a juridical person (business) is more common for that party in a rental agreement. We will limit ourselves to the information with regards to renting of habitual homes ´viviendas´.
- The tenants protection period is now the same as before June 2013 when the current LAU came into force. Rental now 5 years instead of three (7 in case the landlord is a juridical person). During this period only the tenant can cancel the rental agreement, if he doesn’t give notice with at least 1 month before the renewal date of the contract, automatic annual renewals will take place up until 5 years total have been reached. The tenant may withdraw from the lease, once at least six months have elapsed, provided that it is communicated to the landlord at least thirty days in advance. The parties may agree in the contract that, in the case of withdrawal, the tenant must indemnify the landlord with an amount equivalent to a monthly payment of the rent in force for each year of the remaining contract. Time periods of less than one year will result in the proportional part of the compensation.
- Silent renewal after the first 5 years will go up to a three year period. The landlord must give at least 4 months notice when he doesn’t want the contract to continue, and the tenant 2 months if he doesn’t want to make use of this voluntary renewal. The 5 years will extend with one year at the time and the tenant can desist the contract giving notice at least one month before one of the yearly extension is up.
- Re giving notice from the side of the landlord, the same conditions eg: ´Needing the property for immediate family the same as last law in that the landlord can only claim the property back after at least one year of tenancy and must give at least 2 months notice. This clause is only for landlords that are private individuals, not businesses.
- Whether or not the rental contract has been registered with the Registro de Propied, the tenant will be guaranteed the same entitlements re automatic and silent renewals in case the property is sold.
- In contracts that are signed for longer than 5 years, or 7 years if the landlord is a business, parties can agree to include a clause that in case the tenant dies the entitlement to continue renting will not be applicable to his or her spouse and/or children. But honouring the tenant´s protection so when the death takes place within the first 5, or 7 years of the contract, they can continue renting until the end of that.
- Rental deposit remains fixed at one months rent, in cash and can be updated in line with any rent updates, if agreed in the contract, once the tenants protection period of 5 or 7 years has ended.
- Additional financial guarantees, apart from the deposit ´fianza´ is limited to 2 months rent, unless the contract is for an initial period longer than the tenants protection period of 5 or 7 years.
- Rent revisions by either tenant or landlord can only occur if agreed in the contract and on the renewal date. If no specific percentage is mentioned in the contract, a national index will be applied. A different one for rents under and over the amount that would meet the requisites for rent subsidies, as mentioned in the Plan de Vivienda of the National Government. Calculator for general IPC index HERE.
- Unless the contract states otherwise, after 5 or 7 years, if the landlord has made improvements to the property, exceeding those considered as regular maintenance, a rent increase can take place in the month after the works have been completed and the landlord has informed the tenant. The landlord needs to inform the tenant in writing, providing details of the costs involved (copies invoices) and calculation of new rent to pay, never increased by more than 20%. The obligatory renewals and silent renewal period remain unchanged.
- Parties can agree that costs for maintenance, services and taxes related to the property are the responsibility of the tenant, but if they do, a specification must be added to the contract at time of signing. And annual increases, if agreed upon by parties in the contract, can never be higher than the rent increase as mentioned before, except for taxes.
- Fee for rental agency and legal fees for rental contract are for the landlord, but only if he is a juridical person, so a SL or a business. Unless of course the tenant has taken the initiative to engage the services of an agent to find him a property to rent.
- Re tourist rentals and communities of owners, while under the current Horizontal Property Law there must be a unanimous decision to limit or condition properties in the community to be registered for holiday lets, now this has been amended to a 3/5 majority vote of all owners, representing on their turn 3/5 of the ‘cuotas de participación’. If, as a result of a positive decision, amendments need to be made to either individual properties or any of the communal areas, and a special community fee needs to be established, or the community fees of the individual property concerned adjusted accordingly, this would require another 3/5 vote and cannot amount to more than 20% of the fee. These agreements will not have a retro-active effect.
- Properties in communities of owners, will be ruled by the Autonomous Tourist Rental Laws, irrespective of the way they are marketed/promoted.
- Re evictions for non-payment of the rent, this new Decree puts in place protection for those in ´socially vulnerable´ situations, wherein Social Services can intervene once a judge has issued the eviction order, putting the eviction on hold till alternative housing can be arranged for. During one month if the owner is a private individual, for two months if the owner is a business.
- The very little known ´tenant´s tax´ ITP will be eliminated. More info HERE.
- Re social housing, the obligation to recoup IBI from the tenant, will disappear.
- Townhalls will be given the freedom to put in place a bonification of up to 95% of IBI for those with limited rents, valid for private owners of ´protected housing properties´ that they are renting out at rents that are limited by Town Hall.
- When a tenant dies, the possibility of subrogation will be shielded in favour of ´vulnerable´ people, like minors, disabled or those over 65.
- As an incentive to motivate owners of empty properties to rent them out, this Decree offers the possibility to burden those with higher IBI.
- With regards to accessibility in communities of properties, this new Decree amends the Horizontal Property Law to enable communities to aument their reserve funds with 10% over three years, as an incentive to spend it on improving access for disabled. And communities are obliged to arrange for and execute works to improve accessibility, no matter the costs, if they are funded for at least 75% by government subvention.
Disclaimer: this is a summary of the new Royal Decree, with information we deem pertinent for our members, but does not pretend to be complete or exhaustive. The parts in cursive text have been taken from the publication from the Consejo de Ministros 1.3.2019. We will check once the amendment has been published in the State Bulletin BOE.
This Royal Decree is the result of a collaboration of several Ministries at national level and only the first of a series of Decrees to come, but those will primarily deal with promoting social housing and developing housing projects for those on low wages.
Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.
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