This year has definitely made its mark when it comes to changes in law and this month is no exception. Get comfortable while I inform you of the modifications that have been made to urban rental laws (more specifically to long-term lets).
The Spanish property market has suffered greatly since 2008 and is characterized by a large volume of property for sale against a poor rental market. On average in Spain only 17% of property is rented out in comparison to approximately 30% throughout the rest of the European Union.
The Negatives:
- A poor rental market affects the availability and the mobility of potential employees since the majority are tied to mortgage loans and are unable to move to places where there are better employment possibilities
- Insufficient rental properties on the market and/ or prices that are not competitive enough due to high mortgage repayments
Objective:
- The revised law has been drafted under Law 4/2013, 4th June, modifies Law 29/1994, 24th November and came into effect on the 6th June 2013
- The modifications have been made to create greater flexibility and to revive the sector
The Changes:
- Freedom for the Landlord and the Tenant to sign individual pacts that may not be contemplated by law or may be regulated in a different way.
- The duration of the rental period has been reduced from 5 years to 3 years. Even though the parties may establish a lower rental period, if it is inferior to 3 years, it will be automatically renewed for yearly terms until the 3 year period has been reached, unless the tenant informs the landlord of their intention not to renew the contract at least 30 days in advance. This modification allows the landlord and the tenant more flexibility to terminate the contract if important changes were to arise in their personal circumstances.
- The landlord can recover the rented property as long as it is to be used as their primary residence (this doesn’t include evicting a paying tenant to give the property to another family member). Special conditions apply, one of which is that at least one year of the rental period must have expired before the property can be taken back by the landlord.
- Allowances for the tenant to cancel the rental agreement at any given moment as long as at least 6 months of the rental contract have been fulfilled and a minimum of 30 days notice is given. A compensation clause has also been established for these cases, namely, one month’s rent for each year remaining on the contract which can be divided to compensate remaining periods under a year.
- Both parties can pact the rate of increase in the monthly rental amount to come into effect each time the contract is renewed but if this is not specifically agreed in the contract, official Consumer Price Index rates will apply.
- The creation of a Central Registry that landlords can consult to see whether potential tenants have a history of non-payment or if they are currently involved in legal proceedings for eviction etc. This allows them to reduce the risk of renting their property to undesirable tenants. The details of those who have been included in this registry will remain visible for a maximum of 6 years, upon which they will be automatically cancelled from the system, however, the tenant can request the cancellation of their details once legal proceedings have been finalized and the debt paid.
These are the primary changes that will hopefully kick start the rental property sector if everything goes to plan and see a smaller number of properties for sale and a greater number available to rent. Spain has become notorious for property repossessions and home owners who are struggling to meet their payments while at the same time there are thousands of empty or unfinished developments scattered all over the country; perhaps these new measures will have an impact in that area. Only time will tell…
