Legal aspects to take into account when renting a property

The property rental market in Spain is going through an excellent period. In fact, after years of reductions due to the economic crisis, landlords are taking advantage of the situation to increase prices and obtain a higher return on their properties. However, starting from the basis established by Civil Law, there are a series of legal aspects that both landlords and tenants must take into account. Our civil lawyers who are experts in leases tell you about the most important ones.

The security deposit and additional guarantees

The Law on Urban Leases, which from now on will be referred to as LAU, establishes that the tenant is obliged to pay his landlord, at the time of signing the lease, a cash deposit equivalent to one month's rent. However, in most cases, the amount of this deposit is usually not sufficient to solve any problems caused by the tenant in the flat.

This is why the LAU gives the landlord the right to request an additional guarantee in the form of an additional month's rent or, failing that, a joint and several personal guarantee from a third party, a bank guarantee or insurance. This last formula is the most commonly used, as it allows the tenant to meet his obligations without incurring large expenses.

For its part, the LAU also establishes that the security deposit must be deposited with the corresponding regional body. This must be done by the landlord, who will receive it back when the contract expires or is dissolved by mutual agreement. This is indispensable in order for the tenant to be able to deduct expenses for the main residence in his income tax return. Failure to do so entails heavy penalties for the landlord.

Supply contracts and the energy performance certificate

Many landlords continue to pay the electricity, water or gas bills and then pass the amount on to the tenant. However, although this is perfectly legal, it is best to change the direct debiting of the bills without changing the ownership, as it avoids problems in case of non-payment.

In addition, the landlord is obliged to provide the tenant with a copy of the energy efficiency certificate of the property at the time of formalising the lease. This is valid for a maximum of 10 years. Failure to do so is typified within the LAU as a serious infringement.

The increase in the monthly rent

This is one of the most important issues for landlords and tenants. According to the LAU, the landlord has the right to update the amount of the rent once a year according to the Consumer Price Index (CPI) or the Competitiveness Guarantee Index (CIG). The latter is more stable, although landlords still prefer the former.

Moreover, after each year of the contract, after which the LAU requires an extension to be signed, the landlord can also update the rent at his discretion. This sometimes creates the problem that the tenant refuses to accept it and continues to pay the original amount.

In such cases, the LAU sides with the landlord. Specifically, as soon as the tenant refuses to update the amount of the rent, the landlord must wait until the agreed date for the payment of the monthly rent. In the event that the amount does not include the established increase, the landlord must refuse payment and send a burofax to the tenant in which the termination of the contract is determined within 30 days.

This can give rise to another legal problem, which is that the tenant refuses to continue paying or to leave the property once the 30 days have elapsed. In this type of case, it is best to reach an out-of-court agreement, as the deadlines are significantly reduced, but this is not very common. So most landlords, in this type of situation, have to resort to the courts.

At that point, there are only two alternatives. In the first, the tenant pays what he owes and leaves the property voluntarily. In the second, eviction takes place. The main problem with going to court is that the process can take between 3 and 8 months.

The IRPF of renting

For quite some time now, the Ministry of Finance has been particularly hard on black rents. In fact, this market has traditionally generated a relatively large underground economy, although on many occasions a blind eye was turned. Nowadays, if the Tax Agency catches you with an undeclared rental, it will automatically send you a settlement proposal, a document more commonly known as a 'parallel'. In addition to specifying the amount of personal income tax due, an additional penalty of between 50% and 150% of the undeclared amount will be demanded.

Transfer Tax (Impuesto de Transmisiones Patrimoniales)

Many tenants do not know it, but they are obliged to pay the ITP (Impuesto de Transmisiones Patrimoniales) when they rent a property. This has been compulsory for years and failure to pay it carries penalties of up to 75% of the amount due. Fortunately for tenants, the autonomous communities, which are the bodies in charge of managing this tax, do not usually open proceedings or impose fines when non-payment occurs.

Null and void clauses

Many landlords include a multitude of clauses in their rental contracts that, according to the LAU and Civil Law in general, are null and void and, therefore, cannot be applied. These are generally those that infringe on the tenant's rights.

For example, it is very common for clauses to be established whereby the tenant's right to the legal extension of up to three years established by the LAU is denied. Similarly, it is not possible to penalise the tenant if he/she does not stay for one year. This legal text grants the tenant the right to unilaterally terminate the contract without penalty after the sixth month. Nor is it legal to force the tenant to pay more than one month's rent in advance, to make the tenant responsible for the upkeep of the house or to demand access by the landlord. The latter goes against the inviolability of the home established by the Spanish Constitution.

But what happens if a lease has null and void clauses? The nullity of a clause can only be determined by a judge. For this reason, if there is no agreement between the tenant and the landlord for its non-application, there is no choice but to resort to the courts. It is very rarely used in this type of case because it is not particularly cost-effective.

In short, these are the main legal aspects that our civil lawyers detail to take into account, whether you are a landlord or a tenant, with regard to tenancy agreements. If you have any doubts or simply want to know more, we invite you to contact G. Elías y Muñoz Abogados, where a team of professionals will attend to you and resolve your case in the simplest way possible.