Spain brings in decree to protect rental tenants

Spain: A government decree regulating rentals has come into effect, which aims to improve protection for tenants as affordable housing is increasingly difficult to find.

The decree was approved by the Spanish Socialist Party (PSOE) cabinet of Prime Minister Pedro Sanchez.

Furthermore, the decree extends the duration of the rental contract from three to five years (or seven if the landlord is a company), and prevents annual rent increases which exceed the consumer price index (CPI) within that period. The updated rules do not put a cap on how much monthly rent a landlord can ask for, as the anti-austerity party Podemos had lobbied for.

Deputy Prime Minister Carmen Calvo said last week that the decree was “an action plan for an unacceptable situation,” and added that the measures would be aimed at helping young people in particular.

It will, like all government decrees, have to be ratified by Congress within a month.

However, this is complicated by the fact that parliament has been dissolved ahead of a snap election next month, meaning a permanent congressional committee will be asked to come to the decision.

The PSOE executive has already been endorsed by left-wing group Podemos and the Catalan nationalist party PdeCAT. The Basque Nationalist Party (PNV) is expected to back the decree as well.

The major changes will only apply to lease agreements signed on March 6th and later. Earlier agreements will continue to be covered by the previous legislation, although older contracts may be upgraded if both parties agree on it.

The key aspects of the decree are:

Contracts are to be extended: The minimum length of a contract has been extended from three to five years (or seven if the landlord is a business) and the period of tacit renewal has been extended from one to three years, to provide greater stability for tenants. After the mandatory renewal period, landlords must give four months’ notice to end the contract and tenants must give two, rather than two months and one month.

Rent hikes are limited to CPI: While earlier contracts could establish their own provisions for annual reviews, the updated decree prevents annual rent increases exceeding the consumer price index (CPI) within the contract period.

A price benchmark system has been introduced: The decree is introducing a state benchmark index for rental prices that will be used to monitor changes in the market and determine whether an asking price is adjusted to the market situation. The index will provide the average price in any given location in Spain.

There will be a limit on property costs: In addition to a one-month deposit, property owners can only ask a tenant for additional guarantees that are equivalent to two months of rent. If the landlord is a legal entity, they must cover any real estate agency expenses.

More security for tenants. The decree recognises contracts registered with the property registry as well as those that have not been registered. In short, if someone buys a property that is already rented out, they must respect the tenant’s lease agreement.

Evictions. All eviction processes must first go through the social services to determine whether a tenant is in a unstable situation. If so, the eviction process will be pushed back a month to help the tenant find a new place to stay and judges must also communicate the exact date and time that the eviction will take place.

Vacation rentals. The decree says that a building’s apartment owners may collectively agree to impose limits on the use of units for the purposes of short-term rental tourist accommodation. The measure comes amid increasing public debate over the impact of online platforms such as Airbnb muscling in on city centres and affecting the price of housing.

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