With the new annual rent renewal limit, some tenants are finding themselves with the unpleasant surprise that their landlord wants to raise their rents by 5%: 2% for 2023 because they did not get to apply this increase and 3% for this year. Círculo Legal Barcelona and the Agencia Negociadora del Alquiler (ANA) point out this is perfectly valid because the existing case law establishes that rises can be accumulated when not applied. However, indexes for updating rents cannot be applied retroactively.
However, José Ramón Zurdo, ANA's director general, reminds us it is quite another matter if the landlords have voluntarily waived the rent update and it is accredited. Increases can not be accumulated in this case.
Arantxa Goenaga, partner and lawyer at Círculo Legal Barcelona, "Landlords can only collect the amount resulting from the update after having communicated the increase to the tenant, which will be 30 days in advance".
The lawyer, however, recognises that "it is a complex issue" and assures that "it will depend very much on what is stated in the rental agreement. If the rental agreement states – as is usually the case – that the non-application of the increase does not imply a waiver of the increase, and therefore, given that the Law on Urban Leases has not been modified on this point (Article 18) and that the article that establishes this limitation is from the Law on the Right to Housing, which modifies Article 46 of Royal Decree-Law 6/2022, of 29 March, adopting urgent measures within the framework of the National Plan of response to the economic and social consequences of the war in Ukraine and that this article, concerning rentals, speaks of an agreement between the parties, so I understand that it could be applied".
Carmen Giménez, lawyer at G&G Abogados, also agrees that it is legal to apply the cumulative increase percentages "in the year of the update in which it is intended to be applied, as the failure to exercise a right included in a contract does not imply its abandonment, nor is it an impeditive cause to exercise it at the corresponding time, which, in this case, will have to be when each year of the rental agreement expires. However, such updating may never be retroactive but must be applied from the month following the notification, as provided in Article 18.2 of the LAU".
In short, Giménez adds, "When a lease contract has not been updated for some years, the resulting differences in the rent if said update had been applied in due time will be lost, as the rent update is not retroactive. However, there is nothing to prevent the updating, if duly notified, from resulting from the sum of the indexes of the years in which it was not done".
Focus on financial effort
The lawyer from Círculo Legal Barcelona advises tenants to be fully aware of their financial situation: "The financial effort of rent and other additional expenses such as utilities should not exceed 30% of income". Respecting this percentage, according to the lawyer, "will ensure that we will not have difficulties in meeting payment obligations". This is the limit the Housing Act applies to determine stressed areas.
It may be the case that, after analysing the tenant's solvency and verifying that the rent does not represent more than 30% of the tenant's income, the tenant's financial profile changes and the margin increases. "The landlord would be completely unaware of this circumstance unless there is a non-payment insurance policy in force which, to be updated, needs to check the tenant's financial situation every year, which could lead the insurer not to renew the policy," Goenaga points out.
Rent fraud
"The imbalance between supply and demand is pushing rent up," says the expert, referring to the step backwards many landlords have taken, withdrawing their flats from residential rentals and taking them to seasonal rentals. "We are finding ourselves with rent that, on paper, is for less than 12 months and, therefore, not governed by the LAU, but for practical purposes, constitutes the tenant's habitual residence".
The Círculo Legal Barcelona spokesperson explains that this "camouflage" is illegal: "The owner wins because they are not exposed to compulsory extensions, so, once the contract term is over, they can rent the flat again for the rent they want, avoiding the regulations", she points out.
José Ramón Zurdo emphasises that "whether a contract is seasonal or traditional does not depend at all on whether the landlord fixes the rental period for less than a year; what determines whether we are dealing with one type of rental or another is that the tenant establishes their habitual residence in the rented property to stay there permanently and there is no real cause that justifies the tenant's temporary nature. Therefore, a lease signed for four months can perfectly well be a traditional lease if the tenant is going to reside in that property regularly because they do not have anywhere else to live, and a contract signed for two years can be a seasonal lease, if there is a cause that justifies this temporary nature".