Spain has recently introduced a new property rental law that is came into effect in May 2023. The rental market in Spain has been a hot topic for quite some time, with concerns around affordability, landlord-tenant relations and security of tenure. This new law aims to address some of these issues while also providing a balanced approach that benefits both landlords and tenants. The main changes include extended rental contracts, increased regulation of rental prices, and improved protection for tenants against eviction. The introduction of this new law marks a significant turning point for the rental market in Spain and is sure to have an impact on both landlords and tenants alike.
Cap on the renewal of current rental contracts
The cap for increasing the rent amount on leases in Spain will remain at 2% until 31 December 2023, 3% in 2024 and from 2025 the new rent index will apply. This sets a benchmark for rental contracts to make it more stable and lower in terms of changes in CPI and to limit rent increases on annual contract renewals.
It is also stated that tenants can benefit from an extended renewal of their existing contract on an annual basis and for a maximum of three years.
It is the owner’s responsibility to pay the agent fees
The agreement also states that the real estate fees and expenses associated with renting the property will always be paid by the owner and not the tenant. Normally the agent have requested fees ranging from half a month to 2 months of the monthly rental price of the property.
How the rent tension area is recognised
Another important new change is the declaration of the rent tension zone, i.e. the so-called stress areas. The conditions that an area had to meet in order to be recognised as such for three years, renewable each year if circumstances persist, have been reduced.
From now on, only one of these two conditions needs to be met: the cost of housing is more than 30% of household income in the area (plus expenses and supplies) or prices have increased by more than 3 percentage points of the CPI in the last five years.
Extension of the definition of large property owners
The number of dwellings required to be considered a large property owner or large landlord, whether an individual or a legal entity, has been reduced from 10 to 5 properties and to be owned by the same owner in this stressed area.
New rental contracts and the cap to be applied depending on the landlord
The application of caps on Spanish rental prices in “stressed areas” will be different depending on whether you are a small or large landlord. For a private landlord, indexation will be applied to the previous rent, so that only the increase at that time can be applied. A price index will be applied to large tenants, which will not exceed the new rental index created by each Autonomous Region.
New housing for rent in stressed areas
If the property has not been rented in the last five years, the reference price limits apply.
Contracts will not be able to exclude the application of the Housing Act
The clauses allowing the non-application of the measures contained in the law in the event of an agreement between the parties are eliminated.
It is forbidden to increase the rent by introducing new expenses that oblige tenants to pay council taxes, garbage fees etc. that haven’t been previously agreed.
Boosting subsidised housing for rent at limited prices
The percentage of land set aside for subsidised housing is increased from 30 to 40% on land for development (new development) and from 10 to 20% on unconsolidated urban land (renovation of development).
Mandatory eviction date and time
Evictions without a date and time are prohibited. New extensions also include delaying the process for more than two years, and mandatory access to out-of-court settlement procedures for vulnerable people.
In addition, the Autonomous Communities of Spain will be able to formulate their own mediation mechanisms and alternative housing options at their discretion, forcing the large eviction owners to submit to them.
For the first time, the possibility of using public housing funds to provide alternative housing to people at risk of eviction through social rent subsidies, relocation of vulnerable situations or other similar measures are recognised.
Conclusion
The new property rental law in Spain 2023 introduces significant changes aimed at balancing the rights and interests of both landlords and tenants. By setting limits on rental price increases and extending eviction protection to vulnerable groups, the law seeks to provide stability and security in the rental market. Additionally, the implementation of new regulations to ensure transparency in lease agreements and the establishment of arbitration systems will contribute to the resolution of disputes and foster fairer practices. While there may be challenges and adjustments in the initial stages, it is hoped that this new law will ultimately create a more equitable and sustainable rental market in Spain.
