The rental contracts that are signed as of this Wednesday will already be subject to the new rules established by the Royal Decree-Law on Housing approved by the Council of Ministers last Friday and published on Tuesday in the Official State Gazette. The text offers few surprises regarding what was announced at the end of last week although it does include details unknown until now. One of them refers to the extensions of the rents. Until now it was known that the new contracts would be longer (five years when the landlord is an individual and seven when it is a legal entity) and that the extensions would be three years. That supposed, de facto, to return to the situation before 2013, when the PP government approved some rules that shortened the leases (three years of contract and one of extension). However, the new decree also presents a novelty with respect to the original rule of 1994 and is that it is not established that the three-year extension is renewed by annual terms.
This means that once the contract period has elapsed (five or seven years), if 30 days before the end date, neither party indicates its intention to terminate it, it necessarily lasts three more years. The first drafted of the Law of Urban Leases of 1994 also established those three years, but specified it was a maximum term and that was done "by annual installments". Thus, every 12 months the owner of the property could decide if it ended the contract, something that now will only be possible after 36 months. From the point of view of the tenant who wants to leave an apartment, the rule has little impact because de facto can leave when the first year of the contract has elapsed.
Another detail unknown so far is that larger and more expensive floors are excluded from the LAU application. That is to say, that the two parties can agree on clauses outside this norm, provided that the leased property exceeds 300 square meters or that the rent agreed for the first year exceeds 5.5 times the minimum interprofessional salary of one year. This, taken into practice, means rentals of more than 4,722 euros of monthly rent.
In addition, in the initial part that justifies the urgency of the decree, the Government points to tourist rentals as one of the causes that are causing an increase in rents. Despite this, the text does not include any measure that directly points to the regulation of prices, as requested by Podemos and publicly demanded last Friday the leader of that party, Pablo Iglesias, to support him. The decree has a one-month deadline for it to be validated in Congress, where it will foreseeably be processed as a bill to introduce amendments in the negotiation between the political forces. At the moment, these are all the novelties that will take effect this Wednesday:
Duration of contracts
The term of the current three years is extended to five or seven, depending on whether the landlord is an individual or a company. If after that period none of the parties communicates (with 30 calendar days in advance) their willingness to terminate the agreement, the contract is extended for three years, instead of one year as currently.
Unless there is an express agreement that includes another index (most contracts expressly refer to the IPC), the update will continue to be made with the Competitiveness Guarantee Index (IGC). This is generally more favorable than the CPI and also only applies in values between 0 and 2%. However, the decree establishes an exception for "reduced rent leases" and is that these rents could never be updated above the CPI, even if the IGC exceeded it. In this way, it is guaranteed that inflation does not harm the most vulnerable tenants. Regarding this "reduced income", the decree clarifies that it will be "the one that is below the established one, for the whole of the State and with a general character, in the Royal Decree that regulates the current state housing plan for the purposes of have the possibility to qualify for a rental assistance program. "
Reforms of the floors
The new rules allow these to be made also during the term of the contract, by agreement between both parties, and then can be charged more rent to the tenant. This process would not affect the original terms of the contract and it is specified that they have to be improvement works and not those that the owner must do to properly preserve the property as required by law.
Real estate expenses and guarantees
The lessor, when it is a legal entity, will be responsible for real estate expenses and formalization of the contract. This will not apply if the person who has induced these expenses is the tenant. In addition, the guarantees that the owner requests at the beginning of the contract, and that are independent of the month of deposit, may not exceed the amount of two monthly payments.
Sale of blocks to companies or funds
The right of pre-emption and retraction with respect to the tenants is not modified, but the decree does include a novelty when it is a company that buys real estate en bloc. In this case, the housing laws, which are not state or regional competence, may establish an exception for the Administration to exercise the right of pre-emption and retraction over the entire property. That is, if a landlord sells all the floors of a block to a fund, the tenants do not have preference to buy their flats (as it happens with the individual operations), but the Public Administration could have preference over the fund to buy the entire block (provided that the locally applicable regulations specify that preference).
The rule clearly excludes them from the Urban Leasing Law and refers to the sectorial tourist regulations to regulate them. In addition, by means of a change in the horizontal property law, it allows neighbors communities to prohibit them with the favorable vote of 3/5, a measure that can not be applied retroactively and therefore does not affect current tourist flats. Also with the agreement of three fifths of the community of neighbors, it can be approved that the tourist flats that are in the property pay a surcharge of common expenses or special quotas. The increase in expenses that these floors support can not exceed 20% of what the rest of the neighbors pay.
Other changes in the horizontal property law
In addition to the LAU, the decree modifies four other rules. One of them is the one that regulates the communities of neighbors. From now on, the compulsory reserve fund of the communities will be 10% of its last regular budget (now it is 5%). The communities will have three years to carry out this increase, although sources from the college of administrators of farms in Madrid point out that it has little impact either because of the amount or the fact that it is an obligation that nobody currently monitors. In addition, accessibility works (ramps, elevators, etc.) are encouraged in the communities, which will be compulsory when there is public assistance for more than 75% of the amount of these reforms.
Evictions of tenants
The evictions of tenants who can not pay rent are subject to new rules for a change in the Civil Procedure Law. When the payment request is made to the defendant, he / she will be informed that he / she can go to the social services so that they can determine if the tenant is in a situation of vulnerability. If affirmative, the process is suspended one month (two if the landlord is a company) to find a solution. After that month, even if an alternative to the tenant has not been found, the process to expel him from the property resumes.
Changes in taxes
The tenant must continue to pay the IBI if specified in the lease, but in the case of a "rental of residential property with limited income by a legal rule", the City may decide not to pass the payment of that tax . On the other hand, when they determine that there is an empty property without cause for it, they can pass a 50% of IBI on that property. In addition, the obligation to pay the Transfer Tax and Stamp Duty on lease contracts is eliminated, an obligation that almost nobody currently satisfies.
New rules for local spending
The decree also modifies the budgetary rules of the City Councils and includes the promotion of housing between the cases in which they are allowed to spend their fiscal surplus.
A transitory provision allows adapting current contracts to the new rules, if there is agreement between the parties. Otherwise, those who signed before this Wednesday will be subject to the previous rules and deadlines.