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Important reform to Urban Lease Law in Spain. New duration periods.

Update to our article posted on the 23rd of January 2019. Subsequent repeal to the reform on Urban Lease Law in Spain.

We are updating this article due to the publication of the Directive on January 22nd 2019, to repeal Royal Decree-Law 21/2018 of 14th of December on Urgent Measures regarding Housing and Urban Lease Law.

In this regard, it should be taken into account that the repeal to the Royal Decree-Law 21/2018 results in its validity and sustainability to all effects during the period as from the 19th of December 2018 to the 22nd of January 2019, thus contracts signed during this period shall remain fully in force according to Law.

At MSG LEGAL as highly experienced lawyers specialising in Property Law, we are at your disposal to advise and assist you with any doubts you may have regarding the interpretation of lease contracts signed between the 19th of December 2018 to the 22nd of January 2019.

 

On the 14th of December 2018 (under Decree 21/2018) specific amendments were made to the regulations in force governing urban leases in Spain (Law 29/1994), hereinafter LAU. Here at MSG LEGAL as Property Lawyers experts we would like to provide you with our professional opinion regarding the possible scenarios that could arise from these amendments.

 

Property Solicitors. New Spanish Law modifying Legislation on lease terms.

 

The main measures, and those by which all leasing contracts signed as from the 19th of December 2018 shall be governed, are the following:

Duration of contracts for properties intended as the main residence of the tenant

In general, they shall (with the lessor’s consent) be of a longer duration.  The minimum legal period in which the tenant may remain in the leased property shall increase (technically called Mandatory Extension):

  • In the case that the lessor is Natural Person, the term of contract shall be increased to a minimum period of five years (previously three years)
  • In the case that the lessor is a Legal Person (a business or company), the term of contract shall be increased to a minimum period of seven years (previously three years)

Likewise, the duration of the denominated tacit renewal shall be increased.  Tacit renewal means that once the legal duration of the contract has finalised, independently of whether the term of contract is of 5 or 7 years, if neither of the two parties formally notifies the other of their intention to renew (Art.10 LAU), the lease contract shall be compulsorily extended to a further term of three years (previously one year).

As explained above, this modification shall be applied to property leases intended for main residence, that is to say, property leases for the purpose of use as a permanent home for the tenant, and in practice the term of rent established in the contract shall be immaterial. Irrespectively of the term of contract agreed, it shall be possible to extend the lease up to a maximum period of five years, if the tenant so desires.

Deposit and additional Guarantees

The lessor shall not be able to demand more than three monthly rental payments from the tenant in concept of the deposit and additional guarantees.  That is to say, given that the legal deposit amount for leasing a dwelling shall be no more than the equivalent of one monthly rental payment, if the lessor opts to request an additional guarantee, this shall not exceed the equivalent of two monthly rental payments. Therefore, the sum of the deposit plus the additional guarantee shall not exceed three monthly rental payments. Previous to the amendment there was no limit established for a maximum amount of the additional guarantee.

Evictions due to unpaid rent or breach of contract

Once a judgement has been obtained for the eviction procedure, it is possible to suspend the sentence for a period of one month (that is to say, to oblige the tenant to move out of the property) if the tenant should be found to be in a particular situation of vulnerability.

Expert advice

Decree 21/2018 also establishes an important amendment which directly affects owners of properties designated for holiday rental.  Specifically, the Horizontal Property Act, and in particular it stipulates that the Association of Property Owners, by means of a 3/5 majority vote of the total number of property owners, shall be able to restrict such activity or increase the Association fees corresponding to the dwelling in which holiday rental is carried out.

At MSG LEGAL as highly experienced lawyers specialising in Property Law, we are at your disposal to advise and assist you, whether in capacity as a lessor, as a tenant, or as an owner of a property designated for holiday rentals, and we can resolve any doubts that you may have following the implementation and entry into force as from the 19th of December 2018, of these important amendments to the property leasing regime in Spain.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

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