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30-05-2023

Leases after the new Housing Law

The new law on the Right to Housing will come into force on the 26th. Its main objective is to facilitate access to decent and adequate housing for people with difficulties in accessing it under market conditions, paying special attention to young people and vulnerable groups.

If you or your company are the owner of a rented property or intend to put it on the rental market, you will be affected by the modifications to the Urban Leases Law (LAU) established in the new regulation. Below, we detail the issues that may affect you the most.

  • Determination of the rent. The rent agreed in a new rental contract for a property located in a stressed residential market area cannot be higher than the rent in force for the last 5 years, once the annual rent update clause of the previous contract has been applied. Although it may be increased by a maximum of 10% in the following cases:
    • if, in the 2 years prior to the form of the new rental contract, the dwelling has been the object of a refurbishment, energy improvement or accessibility action;
    • when the rental contract is signed for a period of 10 years or more, or when a right of extension is established that the tenant can voluntarily take advantage of during the aforementioned period.
  • Payment of rent. This must be made by electronic means, unless either of the parties to the contract does not have a bank account or access to electronic means of payment and at their request, in which case it may be made in cash.
  • Expenses derived from the contract. The property management costs and the costs of formalising the contract must be paid by the owner of the property.
  • Price reduction. The new Law allows the Administration to impose a reduction in the price of rents in areas declared as areas with a stressed residential market. This is, for example, areas where the supply of rented housing is scarce and the average household income to meet the costs of housing is more than 30% of income.
  • Updating the rent. The CPI can no longer be used as a reference index. During 2023, the maximum percentage increase is 2%, and during 2024, 3%. The creation of a new specific index, lower than the CPI, is planned.
  • Extension of the contract. At the end of the contract, the tenant can take advantage of an extraordinary annual extension for a maximum period of 3 years, under the same terms and conditions as the current contract.
  • Eviction procedure. If the property is considered to be the habitual residence of a vulnerable family, in the event of an eviction procedure, the period of suspension of the eviction is increased from 1 to 2 months if the owner is a natural person, and from 3 to 4 months if the owner is a legal entity.

Impact for tax purposes

  • PERSONAL INCOME TAX. As from 1-1-2024, a 50% reduction in personal income tax is established in general on net income obtained from the rental of dwellings. This percentage may be increased up to:
    • 90%, if the property is located in a stressed residential market area with a reduction of at least 5% on the previous contract;
    • 70%, if the home is intended for rent in a stressed residential market area and the tenant is a young person between 18 and 35 years of age, or if the home is subsidised or subsidised affordable housing, leased to the public administration or third sector or social economy entities that have the status of non-profit entities, or under a public housing programme that limits the rental income;
    • 60%, if renovation work has been carried out on the dwelling in the previous 2 years.

IBI: In order to increase the supply of real estate, properties that have been empty for more than 2 years, provided that there are more than 4 properties in this situation, unless there is a justified cause, may be subject to a penalty by the Town Hall. This penalty consists of a surcharge of up to 50% of the IBI quota, and can reach up to 150%, depending on the time of vacancy and the number of dwellings the owner has in the municipality.

If you have any doubts about this subject, please do not hesitate to contact us, by telephone to Carles Monfort Codina or by e-mail to cmc@btsasociados.com, we will be delighted to help you.