Rent increase

In Spain the landlord can increase your rent but with some limits. This faculty is regulated at Article 18 of the Spanish Law of Urban Leases (Ley de Arrendamientos Urbanos, Ley 29/1994, de 24 de Noviembre).

Rental contract

When a property is rented, the tenant signs the lease contract/agreement where the landlord decides the amount of rent will be paid. There are cases where the tenant can negotiate with the landlord which bills (i.e.: water and electricity supplies, community, council taxes, etc) and amount of deposit ) are included in the rent, although this is often decided by the landlord.

The amount of rent has no legal limitation, so the landlord can charge the rent he considers, although it is usual that the rental is based on the current market prices.  We recommend comparing the available options (i.e.: properties at the area, market prices, location, etc,) before renting a property.

However, the amount of deposit has legal limitations, so the landlord has some restrictions not only when the property is rented but also when the contract is updated.

Deposit

Regarding the deposit, it is regulated at Article 36 of the Spanish Law of Urban Leases which says:

1. At the celebration of the contract, it will be mandatory the requirement and provision of cash deposit in an amount equivalent to a monthly rent in the rental of housing and two monthly rent in the lease for another use than housing.

2. During the first five years of the contract, the deposit will not be subject to updating. But each time the lease is extended, the landlord/lessor may require that the bond/deposit be increased, or the tenant decreases, until it becomes equal to one or two monthly payments of the current rent, as appropriate, at the time of the extension.

3. The update of the bond/deposit during the period of time in which the agreed term for the lease exceeds five years, shall be governed by the stipulated for that purpose by the parties. In the absence of a specific agreement, the agreement on the update of the rent will be presumed to also be required for the update of the deposit.

4. The balance of the deposit in cash that must be returned to the tenant at the end of the lease, will accrue the legal interest, after one month from the delivery of the keys for the same without having made the refund.

5. The parties may agree on any type of guarantee of compliance by the tenant of their additional lease obligations to the cash deposit.

In the case of the lease of housing, in contracts of up to five years, the value of this additional guarantee may not exceed two monthly payments.

6.  (…) “

Rent

The rent is regulated at Article 18 of Spanish Law of Urban Leases which was modified 6th March 2019 by Real Decreto Ley 7/2019.

Due to this recent modification, we need to distinguish between two different scenarios:

  • Rent increase from lease contract celebrated from 1st April 2015 to 5th March 2019
  • Rent increase from lease contract celebrated from 6th March 2019 to the present.

A) Rent increase from lease contract celebrated from 1st April 2015 to 5th March 2019

The characteristic notes of this rent increases are the following:

a) There is freedom of agreement regarding the rise in income.

b) This freedom of agreement means that if the rent update is not agreed in the contract, the rent will not be revised during the term of the rental.

c) When there is freedom of pacts, the lease rent can be updated as the parties want. You can annually raise the percentage that is agreed (for example: you can agree that the rent will rise 3% per year, 5€ per year, …), or that it will do so according to the index you want (example: according to the IPC, or another index reference,)

d) Although there is freedom of agreement, you can only update the rental income, annually.

e) When there is an agreement to update the income, but its content is diffuse on the index to be applied, the Consumer Price Index (IPC) will be applied.

f) The landlord must notify the tenant of the amount of the updated rent that must be paid from the month following that in which the rent increase comes into play.

B) Rent increase from lease contract celebrated from 6th March 2019 to the present.

There is a new paragraph in article 18 which states that the rent update will have the maximum limit of the Consumer Price Index (IPC), so the landlord/ lessor may not establish increases higher than that index.

CONCLUSION:

The update of the rent in the housing leases must be expressly agreed in the contract, not being able to rise above what the IPC marks in the contracts that are concluded from March 6, 2019 onwards.

So, how often can a landlord increase the rent?

The Landlord is only allowed to increase the rent once every 12 months (counting from the beginning of the contract).

BUT the landlord can only increase the rent if it is said at the rental contract. In the absence of an express agreement between landlor/ lessor and tentant/ lessee, which has been reflected in the lease contract, no rent update will be applied.

How much can a landlord increase the rent?

Before the last law modification, there was freedom of agreement regarding the rise in income. Generally speaking the most common reference was the Índice de Precios de Consumo  or Consumer Price Index (IPC), although it was possible to agree another Index or percent.

After the last law modification, the rent update will have the maximum limit of the Consumer Price Index (IPC).

The IPC, or Consumer Price Index, is a statistical measure of the evolution of the prices of goods and services consumed by the population who reside in family dwellings in Spain.

The set of goods and services, which make up the shopping cart, is basically obtained from the consumption of families and the importance of each of them in the calculation of the IPC is determined by the said consumption. The IPC is established by the Instituto Nacional de Estadística (Statistics National Institute of Spain).

In order to calculate the rent increase, we need to take into consideration the last IPC reference published at the date of the rental contract update.

You can calculate the increase of your rent through this link: https://www.ine.es/calcula/

When will be payable the rent increase?

As previously mentioned, during the term of the contract, the rent may only be updated by the landlord/lessor or the lessee on the date on which each year of the contract is fulfilled, in the terms agreed by the parties at the lease contract. Therefore, the updated rent will be payable by the tenant from the month following on which the landlord notifies the other party in writing, expressing the percentage of alteration applied and accompanying, if the tenant required, a certificate of the Statistics National Institute of Spain.

In REUTERS SOLICITORS will solve all your doubts about your lease contract.

Do not hesitate to contact us for more information.
http://www.reuterssolicitors.com/contact-us/

Related Posts

If you want to know more about RENT DEPOSIT, please follow: