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NEW RENT DECREE, DOUBTS?

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The Spanish outgoing Government has approved a new rental decree that extends contracts from 3 to 5 years (or 7 if the lessor is a company) and prevents rent increases within the contract above the CPI. It will be the third regulation regulating rent in force in less than three months.
This is what you should know if you have a rental contract or are planning to sign one soon:

What law is your contract subject to?

The simple answer is that rentals in Spain comply with the provisions of the Law on Urban Leases (LAU) with the articles in force at the time of signing the contract. From then on, the easiest thing to do is to differentiate between three periods:
-Until December 19, 2018, this 1994 law was governed by a reform that approved the PP in 2013 and reduced the duration of contracts to three years.
-Between 19 December 2018 and 23 January 2019. On 19 December, a government decree reforming the LAU came into force and was rejected by Congress, as published in the BOE on 24 January. Therefore, between December 19 and January 23 (legal sources are inclined to think that the repeal is not effective until it is published in the BOE, even if Congress voted before) the contracts are governed by what that decree said.
-As of January 24, 2018, the law returned to the 2013 reform, which will be in force until the decree approved this Friday by the Council of Ministers comes into force.

And when will it go into effect?

Normally the decrees are activated one day after their publication in the BOE. Government sources point out that it is most likely that the publication will take place this Saturday, so the decree would be launched on Sunday and contracts signed on Monday should already be adapted to the new regulations.

How long will your contract last?

None of the two decrees passed in the last month contained a retroactivity clause because that would raise legal problems. So again it depends on when you signed it:
-If your contract is prior to December 19 or after January 23, the minimum duration is three years. If, at the end of those three years, none of the parties indicates that they wish to terminate the contract, it is extended for one more year (tacit extension).
-If you signed between 19 December and 23 January or will sign once the new decree comes into force, your contract has a minimum duration of five years if the owner is a natural person. If the property belongs to a legal person (i.e. a company) the minimum duration is seven years. The extension, if neither party says it wants to terminate the contract, is three years in both cases.
-For the contracts that are signed with the decree approved this Friday, a novelty has to be taken into account: one month as before is not enough for the landlord or tenant to communicate, at the end of the contract or of the tacit extension, that they want to put an end to it. Now the landlord must give four months’ notice and the tenant two months’ notice.

Can the landlord raise the rent as much as he wants?

In contracts signed before the new decree, the annual update of income is adjusted to what the contract establishes (normally the CPI, but there are other formulas). In the absence of a reference index, the Competitiveness Guarantee Index is applied.
The new decree, however, establishes a caveat: the annual update within the contract cannot in any case exceed the CPI.

What if he’s gonna sign a new contract?

The decree does not touch Article 17 of the LAU, as demanded by Podemos. That article establishes that the price of a rent is the one “freely agreed upon by the parties”. Therefore, there is no formal limitation on the landlord asking for whatever he wants for his flat.
In order to bring greater transparency to the market, what the decree does is to establish a reference price index that should be implemented within eight months and that will annually say what an average rent is worth up to the detail of neighborhoods and census sections. This index, which in last October’s budget pact between the Government and Podemos was established as the basis for communities and Town Halls to limit prices, has only an informative value for the moment so that, within the current competences, the Administrations can use it. In the future, the Government has indicated that they are already studying a series of fiscal measures to encourage a fall in prices. In any case, it should be applied in the next legislature.

Can the landlord ask for a deposit or guarantee?

Yes, but with limits. The new decree establishes that the guarantees or additional guarantees to the deposit requested by the owner can not involve for the tenant a disbursement equivalent to more than two months of rent. To this is added the obligatory deposit, which the decree does not modify and is therefore maintained in one month. So, at the signing of the contract, the tenant would need to have a maximum of the amount equivalent to four months of rent (current month, deposit and two months maximum of collateral). But to this can be added the costs of real estate.

Who should pay the real estate agency?

Although the law did not so far establish it, it was an unwritten rule in many cities that it was the tenant who paid the real estate expenses (usually one month’s rent) if the apartment had been found through an agency. The new decree makes a new difference at this point depending on whether the landlord is a natural or legal person. In the first case, things remain as they are, so the tenant can be required to pay for them. But if the flat is owned by a company, the company must always bear the real estate expenses without exception.

What if the landlord sells the apartment where the tenant lives?

The new decree establishes two measures to strengthen the right of tenants in cases where a fund buys their apartment. On the one hand, the new owner will be obliged to assume the conditions of the contract in force even if it is not registered. Until now, the law only granted this protection to contracts deposited in the public registry.
The second novelty has to do with the right of first refusal. When a landlord sells a rented flat, the tenant has a preferential right to buy that property if he matches the offer of the potential buyer. However, the law establishes an exception when a company buys all the properties in a block, so that tenants cannot exercise that right. The exception is maintained, but the new decree provides that, in such cases, public administrations may exercise the right of first refusal and retraction. In other words, if a fund tries to buy an entire block of flats, tenants cannot buy those flats, but the City Council, for example, can opt to buy the entire block in preference to the private buyer.

If he doesn’t pay, can he be evicted?

When a tenant fails to pay rent, the landlord can go to court in exactly the same way as before to apply for eviction. However, the new decree modifies the procedure below. The court will now be obliged to ask for a report on the tenant’s vulnerability to social services. If they determine that such a situation exists, the procedure is halted for one month in order to find the tenant a place to stay. When the landlord is a legal entity, the stay is for up to three months. In addition, from now on the judges will have to indicate with exact day and time the date when the launch will take place, as demanded by the anti-eviction platforms.

Source: EL País

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