Decree-Law 7/2019 on housing and rental of urgent measures

New lease law

Spain faces important changes in terms of housing, evictions and rents regulations. After a lease law which lasted 35 days, a new law has just been established. In March 2019 the Spanish Government approved the new decree-law 7/2019 (the full text) which introduces amendments to the law 29/1994 of November 29 regarding certain provisions of residential lease contracts. The law refers to the areas such as the minimum lease term, additional guarantees, subrogation in case of death of the tenant, as well as the expenses of real estate management and formalization of the contract and was validated on the first week of April.

Residential lease contracts – minimum duration

One of the most important amendments refers to the minimum term of the rental contracts, since it is extended to five or seven years, depending on whether the lessor is an individual (in which case the maximum duration is 5 years) or a legal person (in which case the contract is signed for 7 years). In addition, if the two parties are interested in extending the contract, the term may be extended each year but can’t extend three years. On the other hand, the decree also regulates the time of notice in case of termination of lease agreements. The tenant has now two months and the lessor 4 months.

Update of income and recoverable expenses

The updating of the income and expenses that are subject to payment implies certain restrictions that will be incumbent upon the owner, especially when it comes to increasing the amount of the monthly rent. With the new decree, the rental update every year will only be possible if it’s expressly specified in the contract. However, the rental fee cannot be arbitrarily determined by the owner and cannot exceed the CPI indicator (the consumer price index) unless the landlord performs significant works which improve the housing conditions and increase the value of the property.

Security deposit, real estate management expenses and formalization of the contract

The amount of the deposit has also been regulated. Now, it can’t exceed two monthly payments. Regarding the expenses for the management and formalization of the contract, they will be covered by the lessor provided that he is a legal person.

Contract Termination in case of Property Sale

There are two important changes: in case of contracts signed for a short term, the purchaser interested in buying a home will be obliged to respect the minimum term of the contract, even if it is not registered in the Property Registry. However, in the case of long-term contracts, the purchaser does not have to respect the term only in cases where the contract has been registered in the Property Registry.

Subrogation of contract to other relatives

In general, when granting a rental contract, it is formally agreed who will occupy the property. In case of death of the tenant, the contract cannot be subrogated if it hasn’t been previously agreed in the contract.

Right of first refusal and retraction

The housing legislation may establish a right of first refusal and retraction in favour of the body designated by the competent Administration, in cases in which all lessor’s apartments in the same building are being sold or the owners of the flats sell their property jointly to the same buyer. This is the case, for example, of the city of Barcelona since December 20, 2018.

Community of owners

Where the common civil law (Civil Code) applies, the changes occur with respect to the increase of the reserve fund to 10%, which must be covered in the following three years. Specifically, it establishes the need to collect and allocate the reserve fund of the community of owners to cover the investments. It should be noted, for example, that it is mandatory to carry out accessibility works if public aid reaches 75%. Also, the approval of 3/5 of the owners will be required to restrict tourist rental or to increase the participation of tourist housing in the share of common expenses, establishing a maximum of 20%.

The eviction procedure

Regarding the eviction procedure, the amendments will only affect vulnerable households and people in a difficult economic situation. In such cases the eviction procedure will be suspended until the social services have intervened. The maximum period of the procedure suspension is one month or up to 3 months if a solicitor is a legal person.

State system of rental rates

In a period of approximately eight months, a new state system of reference indices for the rental price of housing will be launched in order to regulate the rental situation and guarantee affordable prices.

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