Spain’s Congress repeals new rental law. Marbella-based lawyer Raymond Nesbitt tries to shed some light on a matter that is clear as mud.
Blog post copyrighted © 2019. Plagiarism will be criminally prosecuted.By Raymundo Larraín Nesbitt Lawyer – Abogado 23rd of January 2019
Here was I thinking that only British politicians had lost the plot over Brexit – silly me – when it turns out their Spanish counterparts have been working their socks off, day in, day out catching up on the madness!
The Spanish Congress repealed yesterday the government’s much-vaunted new law on rentals I covered in January’s article Changes to Spanish Rental Laws. In other words, this new law was in force for only 35 days. This is the fourth time in Spain’s young four-decade Democracy that a law is repealed at Congress shortly after being passed on by the government as a Royal Decree.
The new law of 19th of December was introduced to bring stability into the rental market and (hopefully) lower long-term rental prices to protect vulnerable collectives. It has spectacularly achieved neither, resulting in the opposite effect.
There is nothing that investors loathe more than legal insecurity. Moving goal posts mid-match sends shivers down their spines. It tarnishes the image and faith the public has deposited in public institutions and politicians *cough*. If the ruling political party fails to secure the needed political support from its closest allies to enact its own laws, out of responsibility, it should refrain from publishing them in the Official Law Gazette as it generates insecurity and instability when they are repealed shortly after; an outcome undesired by everyone.
I have written this short piece to summarize what’s transpired. Politicians give lawyers so much extra work.
So, are we back to square one, nothing has changed?
Yes, and no.
No, nothing has changed because from today onwards all the previous regulation still applies to all long-term contracts (we are back to where we were, business as usual). So, these contracts are back to the previous 3 years mandatory rental renewal plus one-year tacit renewal (three plus one). Landlords, both physical and legal persons, may request additional guarantees in excess of two months’ rental, just as before i.e. a 12-month bank guarantee.
And yes, because all those long-term tenancy contracts that were approved whilst this short-lived law was in force are now ruled by it. Any long-term tenancy agreement signed between the 19th of December 2018 and the 22nd of January 2019 is ruled by Royal Decree 21/2018. This is a major problem given how most long-term tenancies in Spain are normally signed on the 1st of January of each calendar year. Thousands upon thousands of contracts will now fall under this new ephemeral regulation and (unfortunate) landlords will be stuck with tenants in some cases for 8 or 10 years because of it with nothing to show for it. Other luckier landlords, who signed on the next day, will get away with only 3-year contracts instead.
Why was it repealed?
As I pointed out in January’s article, the government’s hard left-wing allies had agreed with it to limit rental prices in large urban areas. The idea was to empower town halls to set unilaterally by decree rental prices by capping them. However, in one of those rare God-given moments of lucidity, the government, making use of common sense, decided at the eleventh hour to best remove this from the new regulation as it was ‘overreaching’. This greatly angered its close political allies who took it upon themselves to teach the government a lesson several weeks after by way of not approving the decree at Congress yesterday, as was expected by everyone.
As I wrote, I find the idea of setting rental prices by decree a very dangerous and misguided idea that could seriously blemish the rental market. It sets us back by several decades and even brings into question what political model are we in fact following in this country. Because clearly, to my mind, in a Democracy the government has no business in allocating prices of goods and services offered by private individuals. I may be mistaken, I’m no political expert, but I think this belongs to the sphere of a planned economy and we all know how that little social experiment ended up.
But surely, we are out of the woods now, yes? Well, I’m afraid not.
The government will lick its wounds and lost pride but will shortly resume negotiations with its hard-left-wing political allies to pass on a similar law that will be geared – again – to limit rental prices in large urban areas and curtail landlord’s rights in benefit of bolstering further the rights of long-term tenants, deemed as the weak link in need of protection (‘man is the only animal that trips twice over the same stone’ yada yada). This could take weeks or months; no one knows for sure, but it is pencilled in the political agenda.
Just when you think politicians cannot possibly stoop any lower, they have the remarkable knack of proving you wrong finding new lows. I need a coffee break.“Politics: the art of creating new problems where none existed.”
Larraín Nesbitt Lawyers, small on fees, big on service.
Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at firstname.lastname@example.org, by telephone on (+34) 952 19 22 88 or by completing our contact form.Legal & tax services available from Larraín Nesbitt Lawyers:
- Rentals (contract drafting)
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- Registration of Holiday Homes (Andalusia)
- Holiday Rental Accounting Service (HRAS)
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- Non-Resident Taxes in Spain – 8th December 2015
- Renting in Spain – Landlord´s Taxation – 8th of January 2017
- Holiday Home Taxation in Spain – 8th of July 2017
- Non-Resident Income Tax – 8th December 2017
- Holiday Rental Taxation in Spain – 8th July 2018
- Holiday lettings: with or without VAT? – 21st June 2018
- You are taxed at source on renting out in Spain – 30th November 2018
- Property portals and rental platforms to pass on landlord details to the Spanish tax Authorities. Are you prepared? – 8th January 2019
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