A fairly common question we get is how a landlord goes about updating a rental. Well, the short answer is that unless you worded it into a rental agreement, on leasing a property, you simply cannot add it in belatedly; unless your tenant agrees to it – which he won’t.
Rental updates are regulated in art 18 of Spain’s LAU (Spain’s Tenancy Act).
On drafting a rental contract, a lawyer will ask the landlord if they want this clause worded in. Typically, the rental increase applies annually and will be in line with inflation. It will normally be indexed to a generally accepted financial benchmark, such as Spain’s IPC (Índice de Precios al Consumidor, or consumer’s price index). But the parties are free to choose another index.
Forward-planning on this matter is key, because after the new changes in law as from the 6th of March 2019, long term lets now have a minimum duration of 5 years, but may legally extend up to 10 years with silent renewals and depending on whether the landlord is a legal or physical person. Before these changes in law, long term lets only lasted three years, so this overlook wasn’t that big of a deal. With the new changes now in place, overlooking a rental update is nothing short of punitive to a landlord.
Trust me, you really do not want to get caught renting out a property over the next 10 years locked in a low rental - this is a recipe for disaster.
The new law of March 2019 also introduced a cap in the rental update; it cannot exceed the IPC annual index. Any increment over and above the IPC, even if agreed by the parties in a rental agreement, is null and void.
It should also be noted that some regions of Spain, such as Catalonia as from the 22nd of September 2020, have introduced specific regional laws capping any rental increase. The fines on breaching this regional regulation are very steep indeed.
Bottom line, if you are a landlord, and plan to rent out a property in Spain, for your own good and peace of mind, you should hire a lawyer to draft you a professional rental lease to avoid you much aggravation and fines. You can thank me later.
- At LNA we offer the following competitively priced service: Rentals (contract drafting)
Further reading at IDEALISTA:
- Termination of long-term lease agreements and ‘silent renewal’ – 10th April 2019
- Renting in Spain? Five clauses you should be mindful of – 7th May 2019
- Rental deposit scheme: how to get your deposit back – 16th May 2019
- Buy-to-let in Spain: landlord tax reliefs – 23rd May 2019
- How to formally end long-term lease agreements in Spain – 6th June 2019
- How to return the keys to your landlord – 2nd July 2019
- Top 10 mistakes on renting in Spain – 7th July 2020
- Top 8 illegal rental clauses in Spain – 21st July 2020
- Renting: be wary of signing ‘reservation’ contracts – 12th August 2020
- 8 tips to rent like a pro in Spain (Buy-to-Let) – 3rd February 2021
- Rental deposits in Spain: 1 or 2 months? – 29th March 2021