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Date Published: 28/04/2023

ARCHIVED - Spanish housing law approved: how will it affect landlords and tenants?

ARCHIVED ARTICLE -

Renters will no longer have to pay estate agent fees in Spain and prices will be limited in high-demand areas

<span style='color:#780948'>ARCHIVED</span> - Spanish housing law approved: how will it affect landlords and tenants?

Spain has approved its radical new housing law on Thursday April 27. The bill still needs to pass through the Senate but, barring any last-minute changes, it’s likely to enter into force before the elections at the end of May.

The law modifies the caps on rent increases, abolishes estate agent fees for tenants and changes how squatters can be evicted. On the other hand, a motion to limit the number of tourist rentals on offer in the busiest and most stressed destinations never got off the starting block, and will not be enforced for the time being.

Rent increases

A little over a year ago, the Spanish government approved a law that stopped landlords from increasing the price of rent in line with inflation and set a ceiling of 2% for rent hikes throughout 2022 and 2023.

With the modification, this limit will be set at 3% for 2024 and from the following year, a new index will guide the amount rents can be increased by, but it will in no way be linked to the CPI inflation tracker.

Rental contracts in Spain are usually signed for one year and can be extended up to five if the landlord is a private owner and seven if it’s a legal entity. For the duration of the contract, tenants can’t be evicted unless the owner proves they need the house for themselves or a relative.

The amount of rent payable can only be increased on an annual basis, and then only if this is expressly stated in the lease.

Estate agents

It’s common practice in Spain for tenants to be asked to pay a month’s rent in advance, a month’s rent as a deposit and another month as security to the estate agent. Under the new law, real estate companies won’t be allowed to charge tenants and owners will have to absorb any additional costs.

In addition, it will be prohibited to force renters to pay for community fees or municipal taxes.

Squatters

Perhaps the most controversial aspect of the law, owners who take legal action to remove squatters from their properties must be able to show that the home is not the habitual residence of the unauthorised tenants. In the case of large holders (those who own five or more rental properties), the landlord must present information on the situation of vulnerability of the squatter in the demand for eviction.

While these new procedures are designed to protect the most vulnerable in society, many detractors believe the move will simply increase legal uncertainty when it comes to recovering a squatted property and delay the final outcome.

Stressed areas

Rent prices will be capped in so-called ‘stressed areas’, where the demand for a home greatly outstrips supply. To avoid penalising homeowners, the government will implement a series of bonuses: landlords will receive a tax deduction of up to 90% if they reduce the rest by at least 5% compared to the previous lease, and up to 70% if they rent the property to a young person between 18 and 35 years of age. This bonus will also apply if the house if leased under a social rental scheme.

The most affected areas will be Catalonia, Madrid, the Basque Country, the Canary Islands, the Balearic Islands and cities like Malaga, Seville and Valencia. However, there may be others that join this list, such as Toledo or Guadalajara.

Penalties for empty properties

To ensure there are enough homes on the open market, city councils will be allowed to financially penalise owners of empty properties through a surcharge on the Real Estate Tax (IBI) of up to 150%.

A property will be considered to be "permanently unoccupied" when it remains empty "continuously and without justified cause for a period of more than two years", provided that its owner has four or more houses.

In the event that the house has been empty for two years, the surcharge on the IBI may amount to 50%, while it may reach 100% when the owner has more than three unoccupied properties. The top fine of 150% will be applied "to owners of two or more properties for residential use that are unoccupied in the same municipal area."

See also: Spanish government commits to providing 50,000 more affordable homes

Image: Pixabay

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