Spain: Easy guide to Understanding the Lease Regulation

Understanding the Lease regulation in Spain

The regulation for renting a property may vary a great deal from country to country. My Lawyer Abroad International Lawyers Network offers you all of the expertise and experience required so that you, whether as a seller or buyer, can feel secure and satisfied throughout the entire process of your Spanish property transaction.

The Ministry of Development together with the Association of Property Registrars publish from time to time simple and brief explicative guides with the purpose to help individuals when buying or leasing a home in Spain.

The housing lease contract is regulated by Law 29/1994, of November 24, on Urban Leases (LAU), which means that such contract is intended to meet the need for permanent housing of the lessee, his spouse or his
dependent children These contracts, in accordance with art. 4 are governed by the covenants, clauses and conditions voluntarily agreed by the parties, within the framework of what is established in said law and, additionally, by the Civil Code. However, there are some rules that are mandatory, such as those related to the scope of the Law (Title I), the bond and the formalization of the contract (Title IV). In addition, those clauses that, despite having been agreed by the parties, or in the absence of an agreement between them, harm the lessee or the sub-tenant, in the terms established by Title II, will be considered void and not considered.
The LAU does not regulate the tourist housing contract, which is governed by its own regulations in this area (in general, autonomous). Recently, the Royal Decree-Law 7/2019, of March 1, on urgent measures regarding housing and rental has increased control of the community of neighbors over the operation of a building as a tourist home. Currently, the agreement of three fifths of the owners of a community of neighbors is enough to prevent a house from being used for tourist rental purposes and, in addition, the community can charge the apartment or apartment for tourist use until 20 percent of the annual expenses of the community, in parallel to the quota that corresponds to each owner, although this type of agreements will not have retroactive effects on those homes that are already destined for this activity, and have their respective authorizations administrative in force. To these limitations at the community level of owners, all those that exist by virtue of autonomous legislation or specific municipal ordinances are joined.
Nor is the room rental agreement governed by the LAU, although the rules applicable to the sublease of a room of a rental apartment are contained therein. Subletting of rooms as a permanent residence is legal provided that the lessor has the prior consent. The lessee must make a contract with each sub-tenant specifying the rented areas and the required rules of living together. The sublet will have the same duration as the initial lease
signed between the owner and the tenant and the price may not exceed the agreed for the lease.
Finally, the LAU identifies as leases other than housing, and therefore with its own legal regime within it, those held by season (summer, for studies, or any other), and those whose purpose is to exercise an activity:
industrial, commercial, artisanal, professional, recreational, welfare, cultural or educational, that is, traditional business premises and similar.

GUIDANCE CONTENT FOR THE PREPARATION OF A HOUSING LEASE AGREEMENT

Below are some basic clarifications to understand the clauses that usually appear in contracts and some examples thereof. Regardless of the contract model used, many of the questions that may arise could be resolved with the mention of the legal regulation provided in the following sections.

1.- THE CONTRACTING PARTIES
They are the lessor and the tenant, who can act on their own behalf or through duly accredited representation. The landlord, colloquially known as “landlord” is the owner of a home that transfers its use to another in exchange for money. The lessee, also known colloquially as “tenant” is the person who has the right to use a property belonging to another paying a remuneration for it. Both the lessor and the lessee can be natural or legal persons.
The two parties, lessor and tenant, must be perfectly identified in the contract and, especially in the case of the tenant, all members of the family unit that will live in the leased property. This will avoid problems of interpretation of the existence of possible subleases of rooms not expressly authorized and in writing by the lessor.

2.- OBJECT OF THE CONTRACT
The rented home must be clearly identified (full address and surface) and its more specific characteristics, such as the annexes (garage, storage room, etc.), as well as making it clear whether or not these are included in the contract. The cadastral reference and the registration in the Property Registry must also be recorded. If the house is rented furnished, it is recommended to attach an inventory of the furniture to the contract.

3. RENTAL DURATION
The duration will be that freely agreed by the parties according to their needs. If nothing is said in the contract, it will be understood that the duration is one year (art. 9.2 LAU).
However, RDL 7/2019 has established that, if the term initially agreed was less than five years – when the lessee is a natural person – or seven – if it were a legal person – the contract will be automatically and obligatorily extended for annual terms until arriving at those 5 or 7 years, respectively.
This extension will not occur if the tenant communicates to the lessor at least 30 days before the end of the agreed term or any of its annual extensions its intention not to renew.
It is advisable to collect in the contract when the term begins: if from the day of the date of the contract (signature), or from the occupation of the house if it were later than that day.

4. FACULTY OF RECOVERING HOUSING BY THE LESSOR
(The inclusion of this clause is optional).
It will be included in the event that the lessor natural person foresees that he will need housing for himself or his relatives in the first degree for the next 5 years.

5. FACULTY OF WITHDRAWAL BY THE LESSEE
(The inclusion of this clause is optional).
The LAU recognizes the possibility of withdrawing from the contract, once at least six months have elapsed and provided that it is communicated to the lessor at least thirty days in advance. The parties may agree in the contract that in these cases the lessee indemnifies the lessor with an amount equivalent to a monthly payment of the rent in force for each year of the contract that remains to be fulfilled. Time periods of less than one year would result in the proportional part of the compensation (art. 11 LAU). The exercise of this action by the lessee shall not harm the spouse who lived with said lessee, if he had not expressed his agreement, so that the lease would continue to benefit the same (art. 12.1 LAU). The same rule applies in the case of separation, divorce or annulment of the tenant’s marriage (art. 15 LAU).

6. TACIT EXTENSION
Although the tacit extension is not expressly agreed upon, it will be applicable in the terms established by law, but it is advisable that it be included in the contract as a specific clause.

7. PAYMENT
The rent will be freely stipulated by the parties and this may include certain expenses. In particular, it is important to specify whether the general expenses for the adequate maintenance of the property, its services, taxes, charges and responsibilities that are not susceptible to individualization and that correspond to the leased dwelling or its accessories, as well as who will correspond the community.

During the first five years of the contract, these expenses may only be increased, by agreement of the parties, annually, and never by a percentage greater than double that in which the rent may be increased. In addition, and as a novel rule, RDL 7/2019 imposes on the landlord, when it is a legal entity, the costs of real estate management and formalization of the contract.
As for the payment, it will be monthly, unless otherwise agreed and will be made on the first seven days of the month, in the place and by the procedure agreed by the parties or, failing that, in cash and in the leased dwelling. The lessor is obliged to deliver a payment receipt to the lessee, unless it has been agreed that it should be carried out through a procedure that allows proof of compliance with this obligation (for example, bank transfer) and may not require advance payment in any case of more than one monthly rent.
As a special rule, the parties may agree that, during a certain period of time, the obligation to pay the rent can be totally or partially replaced by the tenant’s commitment to reform or rehabilitate the property in the terms and conditions that both agree. (Art. 17 LAU).

8. PAYMENT UPDATE
(The inclusion of this clause is optional)
Unless there is an express agreement between the parties, the rent is not updated.
However, it is usual for this clause to exist, and in this case, it should be remembered that:
– During the term of the contract, the rent may only be updated by the lessor or the lessee, in the terms agreed by the parties, on the date on which each year of the contract is fulfilled.
– The parties may agree on the methodology to update the rent. If they do not do so, the income for each annuity will be updated by reference to the annual variation of the Competitiveness Guarantee Index at the date of each update, taking as the reference month for it the one corresponding to the last index that was published on the update date of the contract.
– The increase produced as a result of the annual update of the income may not exceed the result of applying the percentage variation experienced by the Consumer Price Index at the date of each update, taking as the reference month for it the one corresponding to the last index that was published on the contract update date. That is, this CPI has a maximum character, even if other methods have been established to update the rent.
– The updated rent will be payable to the lessee from the month following that in which the interested party notifies the other party in writing, expressing the percentage of alteration applied and accompanying, if the lessee required, the timely certification of the National Institute of Statistics. The notification made by note on the receipt of the monthly payment of the previous payment will be valid (art. 18 LAU).

9. WORK OF THE LESSEE IN THE HOUSING
The lessee cannot carry out works that modify the configuration of the dwelling or its accessories without the written consent of the lessor. In a special way there is a prohibition to carry out works that cause a decrease in the stability or security of the home. If works are carried out without the aforementioned consent, the lessor will have the right to terminate the contract, in addition to requiring the tenant to replace things to the previous state or to keep the modification made without it being able to claim compensation for the expenses incurred. If the works carried out cause a decrease in the stability of the building or the security of the house or its accessories, the lessor may immediately demand the replacement of the things to the previous state (art. 23 LAU).
Special mention must be made to the works that tenants need to perform inside the home so that it can be used properly and according to disability or age over seventy years, by them or by their spouse, the person or relatives with whom you live permanently. Provided that such works do not affect common elements or services of the building or cause a decrease in its stability or security, it will be sufficient to notify such circumstance in writing to the lessor.
But according to art. 24 LAU, in these cases, the lessee will be obliged to replace the home to the previous state, if required by the lessor, when the contract ends.
All small repairs required by wear and tear for the ordinary use of the home will be the responsibility of the lessee (art. 21 LAU).

The jurisprudence demonstrates the extent to which there are discrepancies between lessors and lessees in relation to this concept. However, there is usually a consensus that this article intends to cover the daily damages that are linked to the ordinary maintenance of a house, such as the clogging of a drain, the repair of a cistern, or the breaks caused by habitual use and permanent things, as would be the case of a breakdown in the blind collection system.

10. LESSOR’S WORKS
The lessor is obliged to carry out, without the right to raise the rent, all the repairs that are necessary to keep the house in habitability conditions to serve the agreed use, except when the deterioration of the repair in question is attributable to the lessee (One would be talking about relevant material damages caused by the lessee, guilty or negligently, not mere repairs related to the ordinary maintenance of the house). For these purposes, the lessee will inform you, in the shortest possible time, the need for such repairs and may make those that are urgent to avoid imminent damage or serious discomfort, prior notification to the lessor. In this case, you may immediately request the amount (art. 21 LAU). The lessor’s obligation to repair has its limit in the destruction of the home for cause not attributable to it.
A special case is that of conservation works that cannot be reasonably deferred until the end of the lease. In such cases, the lessee is obliged to bear them, no matter how much they are annoying or even when they mean depriving him of a part of the house. In the latter case, if the works last more than twenty days, the rent must be reduced in proportion to the part of the house that the tenant cannot use. To carry out the works referred to in this paragraph, the lessor is obliged to notify the lessee in writing, at least three months in advance, the nature of these works, the start date, their duration and the foreseeable cost. During the period of one month from said notification, the lessee can withdraw from the contract and in such case the lease will be extinguished within two months from said withdrawal. During those two months the works cannot begin.

The withdrawal has as limit that the works do not affect or irrelevantly affect the leased housing. Just as the lessee who supports the works is entitled to a reduction of the rent in proportion to the part of the house of which he is deprived because of them, he can also demand compensation for the expenses that the works require him to carry out (Art. 22 LAU).
The realization by the lessor of improvement works, after five years of the contract, or seven years if the lessor were a legal entity, will give him the right, unless otherwise agreed, to raise the annual income in the amount resulting from apply to the capital invested in the improvement, the legal interest rate of the money at the time of completion of the works increased by three points, without exceeding the twenty percent increase in the current income at that time.
For the calculation of the invested capital, the public subsidies obtained for the completion of the work must be discounted.
The increase in income will occur from the month following the one in which, once the works are finished, the landlord notifies the tenant in writing of the amount of that, detailing the calculations that lead to its determination and providing copies of the documents that result The cost of the works carried out.

11. BOND
Both the legal bond and, where appropriate, the supplementary guarantee, are established as a guarantee of the legal and contractual obligations of the lessee.
The deposit is an amount equivalent to a monthly rent and must be paid to the conclusion of the contract, mandatory and in cash. During the first five years of the contract, or during the first seven years if the lessor were a legal entity, the bond will not be subject to updating. However, each time the lease is extended, the lessor may require that the bond be increased, or the lessee decreases, until it becomes equal to one or two monthly payments of the current rent, as appropriate, at the time of the extension.

Other elements of interest related to the bond are the following:
– The balance of the deposit in cash that must be returned to the lessee at the end of the lease accrues the legal interest after one month from the delivery of the keys without having made said refund effective (Art. 36 LAU).
– The lessor is obliged to make the deposit of the legal bond according to the applicable regional regulations (Records of bonds of lease contracts where they exist), and will deliver a copy of the deposit of said deposit to the lessee, at the request of
this. This action is very relevant for the lessee in the event that he wishes to benefit from tax incentive programs linked to rent, since the Autonomous Communities will require said deposit in legal form to recognize said incentives.

12. ADDITIONAL GUARANTEES OR COMPLEMENTARY TO THE BOND
(The inclusion of this clause is optional)
The additional or complementary guarantees to the deposit in cash can be agreed by the parties, but the value of this additional guarantee may not exceed two monthly rent in the housing lease contracts of up to five years, or up to seven years if the lessor were a legal entity (art. 36 LAU). This concept could include the so-called “rental insurance”, which are products designed for owners and landlords to be covered in the event of default and which also usually include legal advice and / or coverage against damage due to vandalism and / or theft. Although they can be paid, both by the owner and by the tenant, it is important to remember that, in the event that the tenant pays for it, the regulations derived from RDL 7/2019 limit the maximum cost of additional guarantees per month to two monthly payments. of bail. This limit is also applicable to the “bank guarantee” that has been common in many leases. Through them there is a payment commitment acquired by a financial entity, in the event that the tenant does not meet the agreed monthly payment.

13. TERMINATION AND RESOLUTION OF THE CONTRACT
The general rule is that the breach by any of the parties of the obligations resulting from the contract will entitle the party that has fulfilled theirs to demand compliance with the obligation or to promote the termination of the contract in accordance with the
provided in article 1,124 of the Civil Code. However, there are also other causes, such as the two listed below:
– When carrying out conservation works or works agreed by a competent authority that make the dwelling uninhabitable. In this case, the lessee has the right to suspend the contract or withdraw from it, without any compensation in favor of the lessor (art. 26 LAU) and
– When the loss of the leased property occurs due to cause not attributable to the lessor or by the firm declaration of ruin agreed by the competent authority.
The LAU also speaks of cases in which the contract can be resolved, which are also a form of disappearance or termination.

In the case of the lessor, he has the right to terminate the contract in full by the following causes:
a) Due to the lack of payment of the rent or, where appropriate, of any of the amounts whose payment has been assumed or corresponds to the lessee.
b) Due to the lack of payment of the amount of the deposit or its update.
c) For the sublease or the non-concession assignment.
d) For the realization of damages caused maliciously in the farm or of works not consented by the lessor when the consent of this one is necessary.
e) In cases where annoying, unhealthy, harmful, dangerous or illegal activities take place in the home.
f) When the dwelling ceases to be primarily destined to satisfy the permanent need for housing of the lessee or of the person who actually occupied it.

For its part, the lessee can also terminate the contract for the following reasons:
a) The non-performance by the lessor of the repairs referred to in article 21.
b) The de facto or right disturbance that the landlord makes in the use of the home.

OTHER MATTERS OF INTEREST

1.- THE SALE OR LOSS OF THE HOUSING BY THE LESSOR. CONSEQUENCES.

If this occurs during the first five years of the contract, -or seven years if the lessor were a legal entity-, the lessee will have the right, in any case, to continue in the lease until they are fulfilled, without prejudice to the power of non-renewal provides for article 9.1. (art. 13 LAU). In the case of contracts of agreed duration of more than five years, or seven years if the lessor was a legal entity, if, after the first five years of the same, or the first seven years if the lessor was a legal person, the lease shall be extinguished, unless it is registered in the Property Registry.
Therefore, the purchaser of a leased home will be subrogated in the rights and obligations of the lessor during the first five years of the contract, or seven years if the previous lessor was a legal entity, even if the requirements of article 34 of The Mortgage Law. And if the agreed duration is greater than five years, or seven years if the previous lessor were a legal entity, the acquirer will be subrogated for the entire duration agreed, unless the requirements of article 34 of the Mortgage Law concur in it. In this case, the acquirer must only bear the lease for the remainder of the period of five years, or seven years in the case of a legal person, and the seller must compensate the lessee with an amount equivalent to a monthly rent. in effect for each year of the contract that, exceeding the quoted term of five years, or seven years if the previous lessor was a legal entity, remains to be fulfilled. Notwithstanding the foregoing, when the parties have stipulated that the alienation of the dwelling will extinguish the lease, the acquirer must only bear the lease for the remainder of the term of five years, or seven years if the previous lessor was Legal person referred to above.

2.- SUBROGATION.

In case of death of the lessee, they can be subrogated in the contract:
a) The spouse of the tenant who lived with him at the time of death.
b) The person who had been living with the tenant permanently in an analogous relationship of affection to that of the spouse, regardless of their sexual orientation, for at least the two years prior to the time of death, unless they had had descendants in common, in which case mere coexistence will suffice.
c) The descendants of the lessee who at the time of his death were subject to their parental rights or guardianship, or who had habitually lived with him during the preceding two years.
d) The ascendants of the tenant who had habitually lived with him during the two years preceding his death.
e) The tenant’s brothers in whom the circumstance provided in the previous letter concurs.
f) Persons other than those mentioned in the previous letters who suffer a disability equal to or greater than 65%, provided they have a relationship of kinship up to the third collateral degree with the lessee and have lived with it during the two years prior to death.
If at the time of the tenant’s death there are none of these persons, the lease will be extinguished and if there are doubts between them, the order established above will apply.

3.- THE PROTECTION AGAINST THE EVICTIONS.

RDL 7/2019 has established a protocol for action by the administration that gives greater protection to vulnerable people and families in situations of eviction.
With respect to the landlord, the non-payment of the agreed monthly payment or of pending receipts entitle to claim the termination of the contract and the eviction of the delinquent tenant. The eviction process begins with the filing of a claim of default before the trial court. Once the claim is accepted, the court notifies the tenant of the start of the process, gives it ten days to respond and sets the date and time of the oral trial, and the launch. Between the interposition of the demand and the launch can take from three to six months.
As regards vulnerable persons and families in eviction situations, the systematic notification of eviction procedures to the competent social services is established. In this way, they can analyze each case and provide housing solutions or alternatives to the launch. In addition, with the new regulations are processed by verbal trial – where the exercise of defense is cheaper than in ordinary trials – all those tenancy processes whose amount does not exceed € 6,000 and the evictions with an open date are terminated.

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