Friday, 15 June 2012

New laws to stimulate rental housing

SPAIN Renting a property in Spain is unusual. At any rate, that is what the statistics say: only 17% of housing is rented, against the European average of 83%. There are only 1.8 million properties rented out, but over 3 million remain unoccupied. Part of the reason behind these figures may well be in the law - and lack of legal security for both parties to rental contracts - that has for a long time applied to what is now, in perilous financial times, perceived as a very weak market that needs stimulation. So the Government has decided to make some significant changes to the law. The Minister for Public Works, Ana Pastor, recently announced a draft bill that includes such items as that rent increases will no longer be calculated according to the CPI (Consumer Price Index) but will be by agreement between landlord and tenant. There is a lot more to the law, which we describe and analyse below.>>>
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As mentioned above, the yardstick used until now for an annual increase in rent, depended by law on the CPI of the previous year as published annually by the National Institute of Statistics (Instituto Nacional de Estadística). From now on, rent increases are subject to the mutual agreement of both parties.

Termination of contract
From now on a tenant wanting to leave a property before the date of the rental contract can do so with a single month's notice. Until now, the entire lease had to be met, by law, which had many people being obliged to pay two rents, for instance.
Landlords, on the other hand, will now be able to regain possession of their property if it is needed for themselves, for immediate relatives or for their spouse (as in divorce cases, for example), and have to give only two months' notice.
Rental contracts have usually included a clause known as 'obligatory extension', which allows the tenant to extend the duration of the lease for up to five years, irrespective of the length of the lease term. That extension has been reduced from five to three years.
Another practice has been the 'automatic extension' of a lease, which allows the tenant to continue renting the property, if both parties agree, beyond the original lease term and the obligatory extension have expired. This automatic extension has been reduced from three years to one year.

Rental housing
Buying a property for rental, and it being rented out, no longer obliges the landlord to allow the tenant to remain in the property if the rental contract is not registered in the appropriate register.

Non-resident tax measures
Tax exemptions for rental income now ranges from 60% to 100% for non-residents. Also, exemptions are introduced for properties owned by non-resident entities (i.e. companies) in Spain. The 3% that non-resident entities have been paying until now, will now be exempt from this tax.

This has always been a gray area, but from now on, evicting tenants who do not pay their rent will be faster and simpler. Provided their is a stipulation in the rental contract, non-payment of rent will result in the immediate termination of the lease. To evict such a tenant will no longer involve a sentence by a judge (which could take years in some cases), instead all that will be needed is a duly attested summons or injunction.
Also, courts dealing with evictions for non-payment will be able to order only one public official to attest to the eviction, instead of the two that had previously been required.

(Important: This item is not legal advice; CampoPulse, its managers or writers accept no legal responsibility for its content. Please consult an attorney in any cases arising from circumstances described herein.)

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