MADRID – The long-awaited Rental Law in Spain has finally been approved. This has put an end to the speculation surrounding the negotiations of the past three years. The law extends the rent ceiling to all landlords.
The law also lowers the limit to five homes to be regarded as a large landlord. Furthermore, the new law now provides for the regulation and monitoring of rents in stressed market areas. This is regardless of whether the properties are owned by large or small landlords, for both existing and new leases.
The rental ceiling varies depending on the type of rental agreement and especially on the profile of the landlord. For small landlords with five properties in a stressed zone, the ceiling will be determined by indexing the previously applicable rent. The agreement also includes a series of bonuses for these landlords to encourage them to rent out their properties.
For large landlords, the ceiling is determined by applying a reference index that is now being developed and will take effect on 1 January 2025. Until then, the current limit of 2% will apply in 2023. Meanwhile in 2024 this will increase to 3% for all existing leases, regardless of the size of the landlord.
New definition of large landlord
The law also lowers the definition of a large landlord from 10 to 5 properties. Thus, landlords who own 5 or more properties in a stressed area are considered large landlords. Specific measures and specifications will apply to these large landlords.
Stressed market areas
In addition, the new law expands the statement of stressed market areas. It revolves around two conditions that need not be met at the same time. In contrast to the project approved by the Council of Ministers, it is now sufficient for one of the two situations to be met to declare the area stressed.
The condition is that the average cost of the mortgage or rent plus basic expenses and supplies exceeds 30% of the average household income, or that the purchase or rental price of the property has risen by at least 3 points above the CPI in the five years preceding to the statement of the stressed area.
The threshold for the increase above the CPI to indicate stressed areas is lowered from 5 to 3 points.
Specific costs are always for the landlord
In terms of tenants, real estate costs and fees incurred by renting a property will always be paid by the landlord. Until now, this obligation only applied to large landlords.
To prevent landlords from looking for alternatives to compensate for these costs, the text also prohibits rent increases for new expenses that require tenants to pay common costs, waste costs or other costs that cannot be attributed to the tenant and that have not been previously agreed upon.
Loophole for fraud closed
The agreement eliminates clauses that allowed the non-application of the measures in law if there was an agreement between the parties. This closed another possible fraud loophole and protected tenants and those seeking a new lease.
As for evictions, the new law prohibits evictions without a predetermined date and time. It also includes new extensions, allowing tenants to stay in the property for up to two years under certain circumstances, giving them more time to find alternative housing.