On Wednesday 3rd of April Spanish Congress (actually, the Diputación Permanente) narrowly ratified Royal Decree, of 1st of March 2019 by only two votes. As explained in previous articles published in SPI (Spain’s New Rental Laws in 2019), this decree significantly changes long term rental laws in Spain, and even makes some notable changes to holiday lettings too. Out of all six ‘urgent’ decrees ratified on Wednesday, this was the one that faced the toughest opposition, with 31 votes against it (out of 65).
Any long term contract signed on or after Wednesday 6th of March 2019 is ruled by it. The changes are significant and particularly affect landlords renting out properties as legal entities. With an aim of not boring anyone to tears, a very brief recap on what’s changed leaving out all the juicy minutiae. Estate agents and landlords should be made aware of the changes.
It goes without saying that these changes will have a huge impact on the rental market, and everyone involved should be acutely aware of what they are signing going forward. If you do not fancy locking yourself up in a 5, 7, 8 or 10-year lease agreement, read up.
Changes to Spanish rental laws in 2019
Reference is made to an SPI 2016 article Urban Rental Law in Spain – Spain’s Tenancy Act (Ley de Arrendamientos Urbanos, LAU). It takes for granted legal concepts and will make no effort to explain them; if you are at a loss for example on mandatory and silent renewal periods, you should read the above article to understand where It is coming from.
It gently reminds readers that luxury rentals are excluded from being ruled by the LAU and are not subject to all writen below. Luxury rentals are governed by their own clauses. A luxury rental is defined as a property over 300 m² or which monthly rental exceeds 5.5 times Spain’s minimum wage (or 5,775 euros/month).
It is strongly advised to read in tandem the above-mentioned article with the brief bullet points collated below to get the big picture on what’s changed in 2019.
- Physical landlords: 5 years mandatory renewal period on long-term rentals (plus 3 years silent renewal periods). Was three years plus one.
- Legal entities acting as landlords: 7 years mandatory rental period on long-term rentals (plus 3 years silent renewal periods). Was three years plus one.
- Legal entities acting as landlords: additional bank guarantees demanded by a landlord on long-term rentals may not exceed a two-month deposit.
- Legal entities acting as landlords: landlords – by law – will pay the commission to estate agencies on tenancy agreements and legal costs of drafting up a contract.
- Inflation update: all contracts will now be updated to bring them in line with inflation, referred to the IPC index as benchmark reference during the first 5 years.
- Non-renewal (for silent renewal periods only): landlords must now give a 4-month notice, tenants 2-month notice.
- ‘Necessity clause’: must now be expressly worded into the contract to be triggered by a landlord. This clause legally allowed landlords to cancel long-term contracts ahead of the agreed duration (for personal use, for family use, separation, divorce etc).
- Selling property: property buyers must now respect the whole duration of pre-existing long term lease agreements, even if they are not registered at the Land Registry.
- Transfer Tax: payment of Transfer Tax by tenants on signing rental agreements has been removed.
- Subrogation: if the tenant dies, and his next of kin are in a vulnerable position (under aged children, physical or mental disability and over 65-year-olds) they can take over his legal position as tenant throughout the whole duration of the contract.
- Holiday lettings: Spain’s Horizontal Act is amended allowing Community of Owners to vote by a simple majority of 3/5 (60%) to ban outright holiday rentals within a community.
- Holiday lettings: Spain’s Horizontal Act is amended allowing Community of Owners to increase the fees assigned to a landlord who markets his property as a holiday letting (capped at 20%).
Thanks to Spanish Property Insight.