Royal Decree Law On Urgent Measures Regarding Housing Matters And Rents

On April 3, the Congress of Deputies validated a new Royal Decree-Law 7/2019, of March 1, on urgent measures regarding housing and rent, which had been published in the BOE on March 5 (hereinafter the "Decree-Law").

This validation fully integrates this Decree-Law in the Spanish legal system, thus revoking its provisional nature.

This law will be applicable to residential lease agreements that are signed after the date of this law's entry into force. Lease agreements entered into prior to this entry and subject to the Urban Leasing Law of 1994, unless agreed by the parties and not contrary to the legal provisions, will continue to be governed by the previous laws that applied to them.

The most significant developments of this law are the following:

• Extension of the minimum lease term of the rental contract from 3 to 5 years, if the landlord is an individual, or to 7, if the landlord is a legal entity.
• Tacit renewal is extended from 1 to 3 years, if neither party says anything after 5 years, if the landlord is an individual, or from 1 to 7 years, if the landlord is a legal entity.
• To end the contract the tenant must give 2 months' notice and the landlord must give 4 months' notice.
• Tourist housing and apartments are expressly excluded from the new LAU. Therefore, they are removed from the LAU`s scope of application and subject to regulation by the law governing rentals of tourist housing and apartments.
• The agreement of the community of owners to limit or condition the exercise of business activity referring to tourist apartments will require the approval and a vote in favour by 3/5 of the total of the owners that, in turn, represent the 3/5 of participation quotas.
• Whoever buys a rented house must respect the lease contract, subrogating the rights and obligations of the landlord, during the first 5 years of validity if the landlord is an individual and 7 if it is a legal entity. And this applies even if the contract was not registered at the Property Registry.
• If the term of duration of the contract is longer than 5 or 7 years, depending on whether the landlord is a natural or legal entity, the purchaser will be subrogated for the entire duration unless it is a registered bona fide third party.
• If the parties have stipulated that sale of the property extinguishes the lease, the purchaser should only carry on with the remaining time for the period of 5 or 7 years, according to whether the landlord is an individual or legal entity.
• Subrogation rights will be possible in case of death of the tenant, but the parties may agree that, for contracts of more than 5 or 7 years, according to whether the landlord is an individual or legal entity, there is no right of subrogation after the end of that period.
• It will not be possible to waive the subrogation in the event of the death of the tenant when whoever can exercise this right is a person in a situation of special vulnerability and is a minor, or disabled person or person over 65 years of age.
• The possibility that the landlord, an individual, will recover the house for himself, by extinguishing the lease contract, only exists if it has been written into the contract itself.
• In the absence of an express agreement there will be no update of the rent. In case of agreement, it will be updated annually by reference to the annual variation of the Competitiveness Guarantee Index. The Consumer Price Index (C.P.I.) will only operate as a limit and therefore the annual update of the rent cannot exceed the result of applying the CPI percentage variation.
• When the landlord carries out improvement works, unless otherwise agreed, this will give him/her the right to raise the rent.
• The parties may agree in writing that the general expenses for the adequate maintenance of the property, its services, taxes, charges and liabilities shall be borne by the tenant.
• The costs of real estate management and formalization of the contract will be borne by the landlord when the latter is a legal entity.
• There will be no place for the preferential acquisition rights when the rented dwelling is sold jointly with the other dwellings or premises that are part of the same property owned by the landlord or when they are sold jointly by different owners to the same buyer. In such cases, this rights may be established by housing legislation in favour of the Public Administration.
• If there is only one dwelling in the property, the tenant will have the preferential acquisition rights.
• As additional guarantees of compliance when it comes to housing leases, with a duration of up to 5 or 7 years, depending on whether the landlord is a natural or legal person, a cash guarantee or deposit of more than two monthly rents is not allowed by law and therefore cannot be agreed on.
• Modification of Law 49/1960, of July 21, on Horizontal Property, establishing the obligatory nature of works to promote accessibility. The co-owners will contribute, according to their respective participation quotas, to the endowment of the reserve fund or community budget that will exist in the community to fund such works, as well as the rehabilitation, conservation and repair of the property, increasing the percentage of the reserve fund from 5% to 10%.
• Modification of the procedure of housing eviction procedures. The existence of the procedure will be communicated by the Court to the social services. The obligation to indicate the day and time of the eviction is established. The rule of the amount is determined to establish the type of procedures.
• Various economic and tax measures are also regulated in terms of housing and rent, such as empowering municipalities to establish by virtue of a tax ordinance, a bonus of up to 95% in the Real Estate Tax (IBI) fee for real estate properties of residential use intended for renting a house with limited income or so that, in the case of real estate intended for residential use and permanently empty, demand a surcharge of up to 50% of the net amount of said tax.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.