Congress ratifies new rental laws for Spain in 2019

Lawyer Raymundo Larraín gives us a short briefing on what’s changed in Spanish rental laws in 2019.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted. 

By Raymundo Larraín Nesbitt
Abogado – lawyer
5th of April 2019

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). The only decree that in truth was urgent, in my opinion, was the one dealing with Brexit.

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, I will do 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

I will be taking as reference my 2016 article  Urban Rental Law in Spain – Spain’s Tenancy Act (Ley de Arrendamientos Urbanos, LAU). I will take 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 I’m coming from.

I gently remind readers that luxury rentals are excluded from being ruled by the LAU and are not subject to all I write below. Luxury rentals are governed by their own clauses. A luxury rental is defined as a property over 300 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%).

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Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. No delusional politician was harmed on writing this article. VOV.

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About Raymundo Larraín Nesbitt

After completing his dual law degree in Madrid (ICADE) in 2003 Raymundo went on to work for prestigious Spanish and English law firms in Spain before moving to the UK for several years to work for a British multinational. He is a prolific writer of legal & financial articles in English, with well over 140 articles published and widely used in the Spanish real estate sector. Raymundo now runs his own law practice in Marbella, where he advises local and foreign clients on all legal matters with a focus on conveyancing and non-resident taxation. He is regularly quoted by the international press as a reliable source in his field of expertise.