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Changes to the spanish urban rental law

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  • Changes to the spanish urban rental law

    CHANGES TO THE SPANISH URBAN RENTAL LAW

    As many of us know there are a plethora of properties in Spain empty without tenants. Why??

    Some of the reasons are

    - the imbalancebetween the rights of the Tenant and those of the Landlord which make the latter wary of taking the risk of putting the property on the rental market.
    - lack of market knowledge. Many landlords set unrealistic rental levels now in the hope of recouping investments made during the real estate boom years.
    - lack of competition in the rental marketplace.
    - lack of professionalism in the rental market by some, resulting in landlords not taking advantage of the most effective marketing channels.
    In May the government issued a draft law to restructure the whole real estate market. Here are the main points:

    For Landlords

    Tax breaks for rental incomes of non-residents. Exemptions of 60% on rentals for income declarations of non-resident landlords. This will increase to 100% if the non-resident landlord is resident in the EU and the tenant is less than 30 and has a total income higher than reference salary used for the calculation of grants and unemployment subsidies (IPREM)).

    After one year, the landlord will be able to recover the property by giving a two-month notice to the tenant with the condition that the landlord or one of his close relatives will move in and use it as main residence.

    Easing of the eviction process. It will be possible to quickly terminate the rental agreement on grounds of non rental payment. This will be done by using a court injunction and thus avoiding an order from court. Presently it takes several months to evict the tenants because of the need of a order from the court. Additionally a new judicial process will be set giving the tenant 10 days to pay outstanding rentals.

    Agreement between the parties on rental increase. Presently the rent is updated annually using the IPC (Indice de Precios al Consumidor in English - Consumer price index). It will be possible for the landlord and tenant to agree on the way the rent will be updated every year.
    Agreement between the parties on preferential purchase rights. Presently the tenant has the preferential purchase rights for rental contract of less than 5 years. It will be possible to agree to ignore this.

    Presently buyers of a property with existing tenants are forced to keep that tenant for at least 5 years whatever the duration of the contract. This will no longer be a legal obligation if the contract is not inscribed in the land registry. However, if the contract is inscribed the buyer will have to keep the tenant according to the contract duration.

    Reduction of compulsory rental contract extensions. Compulsory contract extensions will be reduced from 5 years to 3 years, while the tacit renewal is shortened from 3 years to one year.

    For tenants

    Freedom for tenants to terminate the rental contract. The tenant will be able to terminate the contract without any penalty just by giving a one-month notice, after six months.

    Tenant protection in case of property purchase. If the contract is inscribed in the land registry, the buyer of the property will be forced to abide to what is stated in the rental contract.

    The impact

    The effects that these measures will have on the Spanish rental market which are designed to stimulate it are unclear and just by changing the law may not solve all the problems.

    But hopefully, it will nevertheless encourage landlords to transfer properties from the depressed sales market to the rental sector. We will let you know when we know more and in the meantime, if you wish to let your property, WITH PROPER PROFESSIONAL ADVICE on the best way, contact Susie at Comaskey Properties valuespain@gmail.com; or on 966773453. She is extremely successful at finding good tenants with proper contracts drawn up.
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