The End of CPI: A New Cap on Rental Renewals
One of the most notable changes is the cap on rental renewals. Until December 31, 2023, the cap will remain at 2%. It will then rise to 3% throughout 2024. Starting from 2025, a new Rent Index will be applied, designed to be more stable and lower than the Consumer Price Index (CPI). This Rent Index aims to cap rent increases during annual renewals, providing more predictability for tenants.
Additionally, tenants can benefit from an extraordinary extension of their current contract for up to three years on an annual basis. This provision offers more security and stability for renters.
Identifying Rental Tension Zones
The law introduces the concept of “rental tension” or “stressed” areas. Previously, an area needed to meet multiple conditions to be declared a stressed rental market. Now, only one of two conditions needs to be met:
- The cost of housing exceeds 30% of household income in the area, including expenses and utilities.
- Prices have risen by more than 3 percentage points above the CPI in the last five years.
Large Property Owners: A New Definition
The law also redefines what constitutes a large property owner in these stressed areas. Previously, an individual or legal entity needed to own 10 properties to be considered a large landlord. Now, that number has been reduced to just five properties, provided it is justified by the corresponding Autonomous Region.
Rental Caps Depending on the Landlord
The application of rental caps in stressed areas will vary depending on the landlord’s classification. For private landlords, the previous rent will serve as the index, allowing only the capped increase (2% in 2023, 3% in 2024, and the new index from 2025). For large landlords, a separate price index will be applied, which will not exceed the new rental index set by each Autonomous Region.
New Rentals in Stressed Areas
For properties being rented for the first time in five years, the limits set by the price reference index will apply. This measure aims to prevent landlords from keeping properties vacant to circumvent rent caps.
Who Pays the Real Estate Agent?
The law stipulates that all real estate fees and expenses incurred during the rental process must be paid by the property owner, not the tenant. This is a significant shift from previous practices where the burden often fell on the tenant.
Contracts and Legal Clauses
The new law eliminates clauses that allowed parties to opt-out of the law’s provisions. It also prohibits landlords from introducing new expenses that would require tenants to pay for community fees, rubbish charges, or other non-attributable expenses that were not previously agreed upon.
Boosting Subsidized Housing
The law increases the percentage of land set aside for subsidized housing from 30% to 40% for new developments and from 10% to 20% for unconsolidated urban land.
Eviction Rules
Evictions must now have a predetermined date and time, and new extensions in eviction procedures can delay the process for more than two years. The law also mandates out-of-court settlement procedures for vulnerable individuals.
Conclusion
Spain’s new Housing Law of 2023 is a landmark piece of legislation aimed at balancing the interests of landlords and tenants. With its various provisions on rental caps, tenant protections, and landlord classifications, it represents a significant shift in Spain’s housing policy.
Take Action Now
If you’re a landlord or tenant in Spain, it’s crucial to familiarize yourself with the new Housing Law to understand your rights and responsibilities. Don’t wait until you’re in a legal bind; take proactive steps today to ensure you’re in compliance with the law.
- For Landlords: Review your current rental contracts and consult with legal experts to make sure they align with the new regulations. Consider how the new definitions and caps may affect your properties, especially if they are in “stressed” areas.
- For Tenants: Understand the new caps and extensions available to you. If you’re in a stressed area, know that you have additional protections and rights under the new law.
- For Both: Open lines of communication are essential. Whether you’re a landlord or a tenant, clear and transparent dialogue can help both parties navigate the new legal landscape effectively.
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