On May 23, 2013, the Spanish Government approved the 4/2013 Reform Act on the Urban Renting System, which partially amended the 29/1994 Act. It aims to correct the weakness of the current Spanish market for renting by promoting rentals given the low rate compared to the large number of unoccupied location units. This new regulation came into force on June 5, 2013 with the main objective of making the rental market more flexible.
The main innovations that the Reform introduces to reach its goal include the following elements:
- Shortening of legal deadlines : The minimum duration of the lease is reduced:
- From five to three years for the compulsory extension. The compulsory extension applies to those leases with a validity period of at least three years. After the three years’ validity period has expired, the lease will extend for a period of one year until reaching the maximum of three years.
- From three years to one year for the tacit extension. The tacit extension takes effect after the lease expires or once the compulsory extension has run its three-year period. This extension occurs when neither of the parties has notified the other about wishing to renew the lease.
The Law, by modifying these durations, offers to each contracting party greater flexibility.
- Simplification of the termination or recovery of the lease: the Act establishes that the lessor will be able to recover possession of its housing for a family member (first-degree relatives, relatives related by adoption, or spouses) or for himself or herself provided that at least one year has passed since the parties have signed the lease or after the provision of housing.
Likewise, the lessee — by providing 30 days’ notice — can rescind the contract once six months have passed. In these circumstances, the lessee must compensate the lessor by the amount remaining under the contract.
- Inscription of the lease contract in the Property Registry: The Reform establishes with certainty that non-registered contracts shall only have consequences between the contracting parties, and third parties may not invoke rights or obligations under them. However, registering a contract would protect the rights of the lessee from third parties.
- Speedier eviction procedures: From now, the contract may be terminated in case of late payments. The eviction procedure should be initiated from the first month’s delay. The lessee will have a deadline of 10 days to oppose or postpone the action by paying the rent due. These new deadlines will help reduce legal and administrative burdens.
- Introduction of a defaulting tenant list: The owner may consult a registry that establishes a list of all the tenants that have failed to pay rent. This measure promotes the rental system by creating more security for owners.
- Implementation of an energy certificate: Beginning June 1, 2014, energy certificates for all transactional or rental real estate operations will be mandatory. The energy certificate will be valid for 10 years. It is the owner’s responsibility to ensure that an authorized technician carries out the application. If the lessor does not fulfill this condition, the lessor could face sanctions that will vary according to the seriousness of the situation (between 300 and 6,000 Euros).
This Reform represents real progress for the Spanish market because it is an important step toward contractual freedom, and it simplifies the formalities related to the Spanish Tenancy Law.
This article is not considered as legal advice