Known in Spanish as the Ley de Arrendamiento Urbano (LAU 29/1994)* this law forms the basis of the rules that regulate landlord and tenants rights in Spain. In Spain the leasing of a property for residential purposes is distinguished from other types of leases - such as commercial businesses, for example. A lease is said to be for residential purposes when it is satisfying the need for a permanent home for the tenant in a habitable property. A residential letting having been determined, the LAU applies to the primary building as well as any other land or structures connected to the property. * LAU 29/1994 has been amended in a number of important respects - please see our blog post Tenancy Laws in Spain Overhauled to Boost Rental Market
Minimum Duration of Leases
The duration of a residential lease may be freely agreed between the landlord and tenant, though, if it is for less than five years, the lease becomes renewable on a yearly basis. This is obligatory and may not be avoided unless agreed to by the tenant. That said, if the contract contains an express provision to the effect that the property will be required for the landlord's own habitual residence within the five year period, a contract may be made for less than five years. Note should be taken, that failure on the part of the landlord to occupy the property may result in damages arising in favour of the tenant. At the end of the five year period, if neither of the parties informs the other of an intention to not renew the lease, the lease becomes automatically renewable on a yearly basis for a further period of three years unless the tenant gives one months notice of an intention to quit.
Upon signing the contract there is a legal obligation on the tenant to provide a deposit of one month’s rent. The deposit will stay in the possession of the landlord until the lease period has ended. At the end of the lease, the landlord has one month to return the deposit. If it is necessary to use part of the deposit to return the property to its condition prior to the leasing, the balance should be repaid within one month following the termination of the lease. The deposit may not be used instead of the final month’s rent. It should be noted that the tenant in Spain is liable for any wear and tear through normal usage of the property, unless otherwise agreed. So, any repairs that need to be carried out are paid for with the deposit, and any left over is returned to the tenant. The only legally recognized deposit is to the value of one-months rent.
Rent and Rent Reviews
The rent may be freely agreed between the parties and is payable monthly unless otherwise agreed. The landlord may only change the rent once a year on the anniversary of the signing of the contract and it must be amended as per the prevailing inflation rate (IPC in Spain). After the end of the five year period the rent may be freely agreed once again (lease review) or, if there is no communication between the parties on this issue, the rent continues as before. From the fifth year, the rent may be increased by an amount equal to the legal interest plus 3% on any investment made to improve the property, with a maximum increase in the rent of 20% being the limit.
Rights and Obligations
- The right of first refusal on the sale of the home
- If the home is repossessed or otherwise affected by a court order the tenant retains the right to remain in the property for a period up to five years from the signing of the lease
- If the home is sole, the new owner must respect the existence of the tenancy
- If the tenants are spouses who divorce, any spouse who did not sign the lease may nonetheless continue to live in the property even though the spouse who signed is no longer living there
- The tenant may not make modifications to the property without the consent of the landlord though a disabled tenant may make the necessary refurbishments to make the property adequate for their needs
- The tenant must advise the landlord of the need to carry-out any repairs and permit any necessary refurbishment by the landlord
- Wear and tear shall be the responsibility of the tenant and the tenant shall have responsibility for minor repairs
- The landlord has at all times an obligation to maintain the property in a habitable condition, unless the deterioration is the fault of the tenant
- If any refurbishment carried out by the landlord lasts more than 20 days, the tenant is entitled to a reduction in the rent equal to the proportion of the property that is effectively denied to the tenant while the refurbishments are carried-out.
State Fiscal Benefits for Landlords
The net profit obtained after subtracting the costs from rental income may be reduced by 50% where the property is used as the principal home of the tenant. The deduction may be increased to 100% where the tenant is between the ages of 18 and 35 and has an income over €7,236. Where there is more than one tenant, their income is added proportionately. If the reduction of 100% would result in a negative(less than 0) outcome, then only a 50% reduction may be applied. It is required that the tenant facilitate a number of personal details to the landlord so that these may be submitted in support of the claim for this deduction against income tax.
State Fiscal Benefits for Tenants
Where tenants are earning less that €24,000 they may make a deduction for income tax purposes of 10.05% of the rent paid in that tax year. The maximum taxable base upon which this deduction applies is €9,015 for those earning less than €12,000 and reduces according to a sliding scale up to €24,000.
Regional Fiscal Benefits
There are a number of tax benefits to both owning and renting properties that are available at a regional level. More information can be found on these benefits by viewing the section on 'Property Law By Region' on the lefts side of this page .
What Information Must Be Included in a Rental Contract?
A valid contract for a residential letting must specify: the identity of the contracting parties, the specific property to be leased, the duration of the lease, the rent to be paid at the beginning of the lease as well as any terms that the parties have contracted (if they are to be given effect to). The lease should be written in Spanish, though this does not mean that there cannot be a version in the language of the prospective tenants.
This varies according to whether the contract relates to a holiday rental or long-term. If a holiday lease is envisaged, the maximum term is 11 months, whereas long-term residential leases have a minimum term of one year (however specification of a lease as being less than one year in duration does not necessarily convert it to a holiday lease). It is important to check whether there is a penalty for early termination of the contract. Long-term residential leases may be renewed by the tenant for up to three years, even though the landlord is not in agreement. This is known as prórroga forzosa. Holiday lets may not be extended without the agreement of the landlord. There are many other questions relating to deposits, insurance, pets, community rules, state of the property, additional guarantees etc, but it would be necessary to write a book to cover all possible aspects of a lease.
Can the tenant leave before the end of the contract?
No. If the tenant leaves before the end of the lease then provision should be made to pay the remaining months rent, unless otherwise agreed with the landlord.
What causes may terminate the lease?
The landlord may unilaterally terminate the lease in the following circumstances:
- If the tenant fails to pay the rent
- If the tenant fails to pay the deposit
- Sub-letting of the property by the tenant without the landlord’s consent
- If the tenant damages the property or carries out refurbishments with the express approval of the landlord
- Where the tenant carries out activities on the property that disturb others, are insanitary, harmful, dangerous or unlawful
- If the tenant is no longer using the property as their principal residence
- Failure by the tenant to comply with any other obligation undertaken in the contract
The tenant may terminate the lease where:
- The landlord fails to maintain the property in a habitable state
- Where the landlord disturbs the tenant’s actual enjoyment of the property or that use to which there is an entitlement to enjoy
Ensuring the return of deposit monies
To prevent issues arising with the landlord when leaving a rented property, a tenant should:
- The day before the contract ends or the day before leaving the property, contact telephone, water, gas and electricity providers to pay the pending bills and to cancel contracts with them. Also, to prevent any incorrect future payments being made from that bank account, better to change the name and details of the billing account. This can be left to the landlord, but we strongly advise that the tenant does this as it takes a very short amount of time and can prevent future upsets with the owner of the property.
- On the day of leaving the property the tenant must visit the property with the owner to sign documentation regarding the state of the property, and the remaining rights of both parties. If there is no damage, neither party will have any future rights, the keys will be handed in, the deposit will be returned and the contract ends there. Unfortunately, if there is damage, the deposit may be kept by the landlord, and a contract must be signed by both parties stating the remaining rights of each half.
- Whether or not the property has been left with or without damage, we recommend taking photos of all of the rooms in case they are later needed for proof. The tenant may have to prove in court that the damages were not caused by them, and photos can be a great help.
- If the landlord refuses to accept the keys back, make sure to send them a burofax or telegram reporting that you're leaving keys into the post box or similar, always with receipt acknowledged.
- If 10 days after leaving the property the landlord has not offered to reimburse the deposit or has not presented a written list of damages, make sure to legally demand the return of the deposit, this will help a lot if future legal action is required.
For information on this topic go to the guide: Evictions in Spain .
Complaints about noise and other anti-social behaviour
Should other members of the community of owners make complaints to the landlord regarding the behavior of the tenant that is anti-social such as making noise at late hours etc the landlord should relay these complaints to the tenant in an effort to avoid their recurrence. If such efforts fail and the anti-social behavior continues, the landlord has recourse to the law to terminate the lease.
Who is responsible for household bills?
The community charges and taxes are payable by the tenant only if this is expressly agreed to in the contract. Those bills that are capable of individualization i.e. that can be metered, such as gas, electric, telephone etc are payable by the tenant.