NEW FEATURES OF THE NEW HOUSING LAW
INCREASES IN RENT
In this article we will discuss the major novelties that the modification of the Law on Urban Leases, also known as the “Housing Law”, may entail.
The Housing Law, whose opinion on the Draft Law has been paralysed since May 2022, was approved by the Transport, Mobility and Urban Agenda Commission on 20 April 2023.
Thus, it is intended that the amendment will become definitive after approval by the Congress and the Senate during the month of May, so that it could be incorporated into our legal system from 28 May 2023.
However, what will be the impact of this Law? In this article we will deal with the modifications in terms of price increases:
a. Limitation on the increase of an active lease
Limitation on the increase of an active lease
Although it is true that the Law on Urban Leases indicates that the increase in rent can be in line with the increase in the CPI, from March 2022, in order to curb inflation, the Guarantee and Competitiveness Index, which does not exceed 2%, has been used as an index. This measure is foreseen until the end of 2023.
The new Housing Act empowers the National Institute of Statistics to provide a new reference index so that the CPI is no longer used definitively.
Furthermore, the new Law determines that rents may not increase by more than 3% of their value when the lessor is a large tenant (if not, it will be agreed and in the absence of an agreement it may not be more than 3%)
Limitation on the price of new leases
If new contracts are signed, the consequences will be different depending on whether the lessor is a large holder or not a large holder.
– If the lessor is not a large holder, the rent may not exceed the rent of the previous contract, after application of the annual updating clause, except for certain cases in which it may be increased by a maximum of 10%.
Cases in which it may be increased by 10%:
o If in the 2 previous years, refurbishment or improvement actions have been carried out that entail a saving of non-renewable primary energy;
o If in the previous 2 years, accessibility improvement actions have been carried out; or
o When the agreed term is 10 years or more.
Likewise, the tenant may not be charged fees or expenses that were not foreseen in the previous contract.
– Without prejudice to the above, if the lessor is a large tenant, the rent of the new contract may not exceed the maximum limit of the price applicable in accordance with the system of reference price indices that will be published in the future.
This regulation will apply to contracts entered into after the entry into force of the Draft Law, once the index system has been approved.
It should be borne in mind that although the Draft Law defines large holders as individuals or legal entities owning more than 10 residential properties or a built-up area of more than 1,500 m2 for residential use, excluding garages and storage rooms, it expressly allows the Autonomous Communities to lower the threshold to 5 or more properties in areas with a tight residential market.
In conclusion, Bufete Frau is prepared to provide comprehensive and up-to-date legal advice in relation to the important amendments to the Urban Leases Law, also known as “Ley de Arrendamientos Urbanos”, also known as “Ley de Vivienda”. Our team of experts is aware of the proposed changes and can provide expert assistance on the matter. Whether you need to understand the limitations on increases in active leases or the pricing restrictions on new leases, our firm has the knowledge and experience to guide you through the implications of this legislation. In addition, we are prepared to address regional particularities in stressed residential market areas, where autonomous communities may establish additional requirements. At Bufete Frau, we pride ourselves on offering a solid legal service tailored to our clients’ needs, providing effective solutions and protecting their interests in the changing landscape of urban lease law.