Government has approved a new rental decree that lengthens contracts from 3 to 5 years (or 7 if the landlord is a company) and prevents rent increases within the contract above the CPI. It will be the third regulation regulating the current rent in less than three months.
Here is what you should know if you have a rental agreement or are considering signing up soon:
What law is my contract subject to?
The simple answer is that rents in Spain comply with the Law of Urban Leases (LAU) with the articles that are in force at the time of signing the contract. Until last December 19, this law was governed by a reform that approved the PP in 2013 and that reduced the duration of contracts to three years. On December 19, however, a decree of the Government that reformed the LAU came into force and that on January 22, Congress rejected, as the BOE published on January 24. Between December 19 and January 23 (legal sources are inclined to think that the repeal is not effective until it is published in the BOE, although Congress voted a day earlier) contracts are governed by what that decree said (You can see here the main measures).
As of January 24, the law returned to the 2013 reform until the decree that the Council of Ministers approved Friday came into effect. And when will it take effect? Well normally one day after its publication in the BOE. Government sources say that it is most likely that this publication will take place this Saturday, so the decree would start on Sunday and the contracts signed on Monday should adapt to what it says.
How long will my contract last?
None of the two decrees approved in the last month contained a retroactivity clause because it would raise legal problems. So again it depends on when you signed it:
-If your contract is prior to December 19 or after January 23, the minimum duration is three years. If these three years are concluded, neither party indicates that it wants to terminate the contract, this is extended for another year (tacit extension).
-If you signed between December 19 and January 23 or you are going to sign once the new decree comes into effect, your contract has a minimum duration of 5 years if the owner is a natural person. If the property belongs to a legal person (that is, to a company) the minimum duration is seven years. The extension if neither party says they want to end the contract is three years in both cases.
For contracts that are signed with the decree approved this Friday, it is necessary to take into account a novelty: it is not enough a month as until now for the landlord or the tenant to communicate, at the end of the contract or the tacit extension, that they want to put an end to it . Now the landlord must communicate four months in advance and the tenant with two.
Can the landlord raise the rent what he wants?
In contracts signed before the new decree, the annual rent update is adjusted to what the contract establishes (usually the CPI, but there are other formulas). In the absence of a benchmark, the Competitiveness Guarantee Index is applied.
However, the new decree establishes a proviso: the annual update within the contract can not in any case exceed the CPI.
What if I'm going to sign a new contract?
The decree does not touch article 17 of the LAU, as demanded by Podemos. That article establishes that the price of a rent is that "freely agreed by the parties." Therefore, there is no formal limitation to the landlord asking what he wants for his flat.
To bring greater transparency to the market, what the decree does is to establish a reference price index that should be launched in eight months and that annually will say what is worth a rent up to the detail of neighborhoods and census sections. This index, which in the budget pact last October between the Government and Podemos was established as a basis for communities and municipalities to limit prices, has only an informative value so that, within the current powers, administrations use it . In the future, the Government has indicated that they are already studying a series of fiscal measures to encourage a fall in prices. In any case, it should be applied in the next legislature.
Can the landlord ask for an endorsement?
Yes, but with limits. The new decree establishes that the guarantees or guarantees in addition to the bond requested by the owner can not assume a disbursement equivalent to more than two months' rent for the tenant. To this the obligatory bond is added, that the decree does not modify and it is maintained therefore in a month. So, at the signing of the contract, the tenant would need to have at most the amount equivalent to four months of rent (current month, bond and two months maximum of complementary guarantee). But to this can be added real estate expenses.
Who should pay the real estate?
Although the law so far did not establish it, it was an unwritten rule in many cities that the tenant paid the real estate expenses (normally one month's rent) if the apartment had been found through an agency. The new decree establishes a difference again at this point depending on whether the lessor is a natural or legal person. In the first case, things continue as they are, so you can demand the inqulino to pay for it. But if the apartment is owned by a company, it must always take care of real estate expenses without exception.