The latest changes in Spanish Housing Law

The Spanish Government has recently approved some legal changes to housing rental contracts: both for long term or short term/touristic rentals.

One of the changes in long term rental contracts is that upon renewal, the extension of contracts’ duration is for 5 years (instead of the previous 3 years) or 7 years if the landlord is a legal entity. During this period, third-party buyers will have to honour rental contracts in place – this measure was taken to make sure that investors acquiring leased properties honour the contracts in place at the time of purchase. As for automatic renewals, the increase was from 1 year to 3 years. Sometimes landlords propose eleven-month contracts to make it look like a temporary rental and thus avoid the obligation of extension up to 3 years, but if the property is being used as permanent residence, even if the contract says otherwise, the Law on Urban Rentals applies and the tenant has the rights to request the renewal.

On another note, the Law on Urban Rentals gives the tenants the possibility to withdraw from the contract after the first six months. The notice given in the case of one of the parties does not intend to go on with the contract after its legal term was increased to 2 months for the tenant and 4 months for the landlord.
The initial deposit asked to the tenant as a guarantee of payment of the rent, associated expenses and conservation of the property in good condition is still limited to 2 months of rent. The Law onUrban Rentals contemplates a distribution of the expenses between Landlord and Tenant, but those should be well detailed in the contract. The landlord usually pays taxes such as the IBI, the owners’ community fees and major property conservation expenses while the tenant should be responsible for smaller repairs derived from the ordinary use of the dwelling and local fees, like waste tax (where applicable).
For new contracts only and with no retroactive effects, rent increases will not be allowed to surpass the Consumer Price Index (CPI).

Before the end of the year the government will also have developed a detailed index system at a national level to monitor the housing market and support it financially. This benchmark index will be updated annually and is supposed to be compatible with any other indexes drawn up by each autonomous community. It is important to note that none of these instruments shall be used to set up rental price regulation systems; they should only set limits and support the process.

Regarding the Property Tax, it was initially proposed that for properties under long term rental contracts, this tax would have a reduction of 80%. However, in the end that was not legally established, only that for social housing the Property Tax has no obligation to be passed on to the tenant; and that local authorities will be allowed to decide on their own local housing policy according to their specific fiscal framework. When it comes to touristic rentals, they shall not be regulated by the Law on Urban Rentals, but instead, by the Tourism Law. As earlier approved, now a majority of three fifths of the owners in a community can limit or prevent the touristic rental activity in residential buildings and there is the possibility of agreeing to a greater contribution of these to the general community expenses (up to 20% more).

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