Rental: The seven fundamental changes of the new LAU
The Government has approved a Royal Decree Law on urgent measures in the area of housing and rental that modifies, together with other regulations, the Law of Urban Leases (LAU).
The new revision aims to strengthen the tenant’s rights to face the increase in prices and the shortage of affordable housing. However, the standard has finally not included any measure to legally limit the rental price.
The LAU regulates in its article 9 the minimum term of the leases. Although the years of rental are freely agreed by the parties, tenant and landlord, the law establishes a minimum duration. In this way, if the contract is agreed for a period lower than the legal minimum, the tenant may demand that it be extended until reaching this ceiling.
The new regulation modifies this minimum term, extending it from 3 to 5 years, or 7 years if the lessor is a legal entity. Therefore, that cap on which the tenant can continue in the house is extended.
With regard to Article 10, regarding the extension of the contract after its expiration, it is also subject to modification. Until now, if the expiration date of the contract or any of its extensions (up to a maximum of 3 years) arrived without either of the parties having notified the other of their willingness not to renew the contract, this was extended for one year plus. As of now, the tacit extension period will be of 3 years.
In order to put an end to the abuses in the matter of bail demand by the lessors, the Royal Decree Law approved by the Government modifies article 36.
Currently, in addition to the deposit (delivery in cash the amount equivalent to a monthly rent), the rule established that landlord and tenant could agree on any type of guarantee. This in practice leads to abuses by the landlord, requiring all types of endorsements, which meant an additional burden for the future tenant. The Royal Decree Law approved limits these additional guarantees up to a maximum of 2 monthly payments.
The norm approved by the Government also expressly establishes that the expenses of real estate management and formalization of the contract are the responsibility of the lessor when it is a legal person (company or company).
It is also expected that tenant and landlord can reach agreements to improve or renovate the house for the duration of the lease, but in this case will have to wait for the publication of the Royal Decree Law to see exactly what is the modification of the current LAU.
Update the Rents
The lessors may only update the rents to their tenants on an annual basis, in the terms agreed by the parties and, in the absence of an express agreement, rent will not be revised during the term of the contracts.
A matter of great importance is the modification of the Law of Horizontal Property so that the Communities of Owners can adopt agreements by majority of 3/5 of the owners (until now unanimity was needed), to limit or condition the exercise of the activity of tourist rental housing.
The Royal Decree Law that is published today establishes the possibility of suspending housing evictions when the Administration appreciates that there are indications of a situation of vulnerability. Thus, when the tenant is required to pay, the regulation requires that he be informed of the possibility of going to the Social Services, and if the Administration considers that this situation occurs, he must immediately notify the Court, which will suspend the eviction until measures are taken that said Social Services deem appropriate.
This suspension will last one month if the landlord is an individual and two months if it is a legal person. Once the measures have been adopted, the suspension will be lifted, continuing the procedure.
In the fiscal area, the law establishes the exemption of Property Transfer Tax and Documented Legal Acts (AJD) in the subscription of housing leases for stable and permanent use, in order to reduce the tax burdens associated with the rental. In other words, no tenant in Spain will have to pay the ITP when they sign a rental. However, this measure will have little impact on the pockets of those affected, since the vast majority of tenants were unaware of the existence of this tax and the regional tax administrations barely controlled their collection.
It also tweaks the Law Regulating the Local Treasury to modify the Tax on Real Property (IBI) in two cases: first, when it is a social housing rental and the landlord is a public entity, the tenant may be exempted from tax; and in addition, the City Councils that have surpluses in their accounts are allowed to promote their public housing stock, establishing a bonus of up to 95% in the IBI quota for housing subject to rent at a limited price. The regulation also introduces the definition of “permanent vacant property” for the purpose of applying a surcharge on the IBI of up to 50% applied by the municipalities.
The Government, for the time being, has decided not to include measures that allow tax deductions for living rent or for having leased a home due, as these measures would require amending the Law of Personal Income Tax (LIRPF), although it does not rule out that they are included in a future law.