Rental Agreements in Spain15/08/2013
A new bill was recently passed and enacted in Spain significantly amending lease agreements on real estate. This Law has been considered for some as quite necessary in Spain in order to adapt leases to a very active market.
The main goal of the new regulation is to protect the landlords, as the previous Law was very protective towards the tenants, sometimes even in situations of non-payment of rent.
The most relevant points of the new set of rules thus approved can be summarized as follows:
- The parties (landlord and tenant) have more freedom now to come to terms and conditions in the agreement, such as minimum term for the contract.
- For the first time “electronic address” is accepted as valid communications and to give notice between the parties.
- An important modification is that the tenant does not lose his status in the lease even if he does not have his permanent address or main residence in the rented property, when his spouse or children continue residing in the referred property. Also, if the lessor sells the property (independently and regardless of the option to buy that the lessee will keep) the new proprietor will have the right to cancel the contract or continue with the rent, with the original terms and conditions.
- Another important point is the term of the contract. This has always been an issue in lease contracts, as the tenants, under the previous Law, could very easily ensure a minimum of five years guaranteed tenancy. The parties now have the right to agree initially any term they wish. The tacit extension of the contract once it reaches the terms initially agreed is also limited to one year at a time after the lease comes to its term (previously the automatic extension was for three years).
- The tenant can quit the contract (regardless of the actual term agreed) anytime after the initial six months, only by giving a one month notice to the landlord.
- Another point, which regularly creates issues between the parties, is works, reparations and / or refurbishments made to the rented property. The new Law allows the parties to agree about the supporting of costs and disbursements, even cancelling the monthly rents to compensate for the said costs.
- The parties are now free to agree that the yearly increase of the rents could be linked to any official reference. If no clause previews this increase, the Spanish RPI will apply by default.
- In relation to the termination of the contract, the term given to the tenant after a default in the payment is of 10 days (it was 30 days previously), after which, if the rent remains unpaid the contract is deemed null and void and the eviction commences. In cases of termination of the contract, the landlord can request the contract be cancelled and null and void if the tenant carries unauthorized works in the property.
The new Law states that its main purpose is to reactivate and increase the number of leases after the crisis and its effects on the real estate market, namely in the holidays and second residencies for foreigners.
According to the latest housing statistics published last week by the Spanish Ministry of Development on the Government website, La Moncloa, 345,471 homes were sold in Spain between July 2012 and June 2013, representing an increase of 2.3% over the previous twelve months.
The statistical results of residential property transactions made before a notary show that in the second quarter of 2013, a total of 80,722 homes were sold in Spain, representing a decline of 4.2% compared with the second quarter of 2012.
With regard to the territorial distribution of these transactions, five regions recorded positive year-on-year results, and 12 registered declines. Prominent among the highest increases were the Canary Islands (16.2%), Catalonia (12.1%) and Murcia (9.5%), while the most significant declines, year-on-year, were registered in Extremadura (-38.4%), Navarra (-33.6%) and the Basque Country (-33.1%).
By province, 17 registered year-on-year increases, with Girona (36.0%), Huesca (32.7%), Palencia (30.7%) and Malaga (21.2%) heading the list. 34 provinces registered negative results, the most pronounced being those for Guipúzcoa (-53.1%), Toledo (-43.8%), Álava (-42.6%) and Badajoz (-39.2%).
For municipalities, those recording the highest number of sales were Madrid (5,269), Barcelona (2,813), Valencia (1,561) and Seville (1,228).
Among the provincial capitals and municipalities with more than 100,000 inhabitants, noteworthy because of growth were Huesca (94.4%), Girona (82.4%), Logroño (79.5%), Barakaldo (75.2%), Leganés (65.2%) and Teruel (61.9%). As for the biggest declines, these were registered for Getafe (-68.0%), Caceres (-52.0%), Badajoz (-51.7%), Vitoria (-45.8%), Toledo (-45.3%) and Cadiz (-44.4%).
The number of transactions for new housing amounted to 14,056, representing 17.4% of the total transactions in the second quarter of 2013, while there were 66,666 transactions for second-hand housing, accounting for 82.6% of the total.
Housing transactions made by foreign residents in Spain has experienced year-on-year growth for eight consecutive quarters, and increased by 28.4% compared with the second quarter of 2012, reaching a total of 12,546 purchases. In addition, purchases made by non-resident foreigners totalled 1,086 in the quarter, which also represented year-on-year growth for eight consecutive quarters.
Taken together, the purchases made by foreigners (residents and non-residents) account for 13,632 of the transactions, which represents 16.9% of the total, and the highest percentage recorded in the historical series (2006-2013).
By province, those registering the most purchases by foreign residents were Alicante (3,543), Malaga (1,771), Barcelona (1,008), Tenerife (921) and Girona (767)
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