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 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 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.
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Rights and Obligations
The landlord and tenant both have a number of reciprocal 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.
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