Termination of long-term lease agreements and ‘silent renewal’

What happens when your rental lease is up in Spain? / Gtres
What happens when your rental lease is up in Spain? / Gtres

Spain has recently amended its rental laws in March 2019, in most cases to the detriment of landlords, creating serious legal obligations that landlords should be acutely aware of. One of the issues that is important to understand is what happens to a long-term lease when it is over.

Most landlords wrongly assume that when the mandatory five years are up (or seven, for legal persons) the lease agreement is automatically terminated – crass mistake. If nothing is done, an automatic extension to long-term leases operates by law (known as ‘silent renewal’ in English legal jargon or prórroga tácita, in Spanish). The idea behind it is to protect and bolster the rights of tenants even more.

Silent renewal periods

For all long-term rental contracts signed on or after the 6th of March 2019:

  • If the landlord is a physical person, the silent renewal adds an extra 3 years to the lease, making a long-term tenancy’s total duration 8 years.
  • If the landlord is a legal person (i.e. companies), the silent renewal adds an extra 3 years to the lease. Making a long-term tenancy’s total duration 10 years.

Let’s take the example of a contract signed on the 10th of March 2019 by a private landlord. If by 2024 the landlord takes no action, the contract will be automatically extended for a further 3 years until the 9th of March 2027.

How do you avoid this legal extension?

A lawyer needs to draft a formal notice of termination and serve it to your tenant by recorded delivery within a specified time limit. This must be done giving a 2-month notice if the landlord is a physical person and with a 4-month notice if the landlord is a legal person (i.e. a company).

I’m trying to sell the property on. How would this affect me?

It affects you. Under the new changes to Spanish rental laws, any buyer acquiring a property needs to respect the whole duration of a pre-existing lease agreement until it ends. This means a buyer may have to wait several years before they are able to attain vacant possession. Needless to say, most buyers do not have the patience to put up with this, putting a damper on any house deal.

For this reason alone, it is strongly advised that landlords take legal counsel before signing any lease agreement in Spain. There are many different types of rental agreements, and some will lock you into an 8- or 10-year contract if you are not mindful.

That said, there are always legal ways to circumvent such pesky matters. Talk to a lawyer who can help you pre-empt such matters, so they don’t jeopardise the sale of your house.

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