Changes in Real Estate Regulations in 2019

There have been a series of adjustments in real estate laws lately, also due to government changes, and these laws are aimed at protecting tenants from possible wrongdoing by landlords or agencies.

These laws bring stability to rental agreements, as landlords are not allowed to raise rental prices as often as they once used to anymore.

This article by ShBarcelona will focus on some of the changes that have been made to real estate laws. It will show both positives and negatives.

Related article: Modifications in Urban Leasing Act (LAU)

New regulations, new problems?

The new law in a nutshell

• Photo via Pixabay

  The minimum period of rental contracts has been extended from three to five years, and the period of tacit renewal has been extended from one to three years. This is only the case if the landlord is a natural person, and when both landlord and tenant haven’t expressed the intention of not renewing the rental contract.

• If the landlord is a legal entity, the minimum period of rental contracts is seven years, and the period of tacit renewal is three years.
• Rent increases will be in accordance with the CPI (consumer price index) for the duration of the contract (5 years).
• Besides the one-month deposit, additional guarantees are limited to an amount of two months worth of rent, except when it concerns long term contracts.
• A landlord must now inform the tenant four months in advance before the contract – or the extension – ends in order to end a rental contract and not renew it. (After five years if the landlord is a natural person and seven years if the landlord is a legal entity.) If the tenant wants to end the contract, he must give two months’ notice.
• If no one ends the rental contract before it expires, the contract will be automatically extended each year, with a maximum of three years.
• The owner’s right to recover the property and end the contract early must explicitly be included in the contract. He can only do so if he needs the property for his own place of residence, or for his wife or children.
• Anyone who buys a rental property must respect current rental agreements, whether or not it is registered with Property Registry.
• If there is an agreement between the landlord and tenant on improvements of the property, there is no need to sign a new rental contract.
• Property management fees and contract formalization costs are at the expense of the landlord, provided that it concerns a legal entity.

Although new regulations include returning to the old, minimum contract duration of five years for all tenants, this reopens the debate on whether this duration is just enough or way too long.

Related article: Should You Rent or Buy Property in Barcelona?

Dilemma

As is often the case in these debates, it all depends on someone’s needs. Every tenant would like some form of stability when it comes to the roof they have over their heads.

But there is also the landlord, who wants to successfully exploit his property. It feels unfair to not allow a landlord to improve his property or get new tenants to generate higher revenue.

A solution to the minimum contract duration can usually be found somewhere in the middle, and social consensus seems to be the best option. First, we had the old situation of five years, then we went to a period of three years. This meant a decrease in contract length had already taken place.

In conclusion, what is most important is that, besides agreeing on the minimum duration of a contract, it will provide legal clarity and peace of mind to both tenants and landlords.

What is your opinion on these changes in real estate regulations in Spain?