How does the entry into force affect the new legislation of the rental to owners and tenants?

The past 6 March the Real Decree-Law 7/2019 about urgent measures with regard to housing and rental was entered into force. The new law recovers the majority of the changes that were included in the abolished Decree-Law 21/2018, which was applied during the 19th December 2018 and the 23st January 2019.

The proposed provisions in the Royal Decree-Law are not applied with retroactive nature and only affect the rental contracts signed from its entry into force. This means that the formalised contracts before the 6th of March will remain regularised by the previous regulatory frameworks. Thus:

– The formalised contracts prior to the 19th December 2018, and between the 23st of January and the 5th of March 2019, will be governed by the old rule of 2013.     

– The formalised contracts during the 19th of December and the 23st of January 2019, will be subject as provided in the approved premature Royal Decree then.   
Which are the measures of the new Royal Decree Law of rental?

Modifications in the development of the contract

It extends the duration of the rental contract

One of the most important changes, already included in the previous “premature” Royal Decree, is the mandatory extension that goes from 3 to 5 years if the landlord is a physical person, or 7 years if the owner is a legal person.

This means that the expiration date of the contract is applied such extension in an automatic way until 5 (or 7) years.  

Likewise, it remains extended the tacit renewal, which means that when none of the parts shows the will of terminating the contract, it shall be in force during 3 more years. Not applying the mentioned legal extension requires the explicit prevision in the contract.

Longer time of prior notice for the termination of the contract

In order to exercise the power of terminating the rental contract, the property owner must communicate this will with a minimum notice of 4 months (arguing the necessity of living in the house in routine, as an individual or of relatives of 1st grade) or with a minimum notice of 2 months if such power is exercised by the property owner.

Limitation of the bail required in two instalments

It is limited the amount of the bail with a maximum of two month’s rents, that can be provided through deposit or bank guarantee, except those contracts of large duration.       

The costs of the real estate management and formalization of the contract are borne by the property owner when he or she is the legal person.

Legal advertising of the contract

In contrast to the previous legislation, it is no longer required the advertisement of the lease contract in the Property Registry so the corresponding juridical effects in front of thirds arises.

Creation of a Rental Price Index

With the provision of being able to be applied in the following months, a new rental state system has been created, and it includes the possibility to create autonomic state systems of reference. The objective of this measure if to have a reference framework and that works as a support to possible measures of the fiscal policy.

Limitation of the IPC increase

With the application of the new RD, the actualization of agreed rent cannot exceed the percentage change in Consumer Price Index during the contract term.

In any case, the explicit agreement of the exercise of such power of the owner is required. In case there is no agreement in the contract, the amount of rent is frozen during all its validity.

The owners’ community can forbid the rental for tourist use

From now on, the communities of neighbourhood can forbid the rental of flats of touristic use. To that effect, a majority of 3/5 parties is required, without the necessity of unanimity in the decision-making.

The new Royal Decree will not be applied in the lease contracts of houses for touristic use, which will be regulated by their own sectoral legislation.

Changes in the Law of Civil Procedure in the legal proceedings

The new text also has many modifications that include the Law of Civil Procedure in terms of lease to offer better protection of the tenants’ rights. Within other modifications, it stands out the obligation to inform the social services from the Courts and the prohibition of the launch with open date.       

Modifications in the fiscal obligations

Deductibility of the IBI and exemption of the ITP
The stable and permanent housing rents are exempted from the Tax on Property Transfers (ITP) back again. Thus, the tenants will no longer have to pay such tax.

On the other hand, the councils will be able to set the 95% allowance on the IBI for those houses that are rented with a limited income for a legal form.

For further information, please do not hesitate to contact our Legal Department (info@cinc.es).      

Kind regards,
CINC Business Consultancy