Saturday, May 18, 2024

New Housing Law: news on leases

Report translated from Spanish, published by El Derecho.com via local gestors Vera Cruanyes.

    On 5-25-2023, Law 12/2023 was published , for the Right to Housing, whose main objective is to facilitate access to decent and adequate housing for people with difficulties in accessing it under market conditions, providing special attention to young people and vulnerable groups.

    Owners of rented homes or who intend to put them on the rental market will be affected by the modifications to the Urban Leasing Law (LAU) established in the new regulation. Next, we detail the issues that may affect them the most.

    How is rent determined?

    The rent agreed in a new housing rental contract located in a stressed residential market area cannot be higher than the current rent, in the last 5 years, once the annual update clause of the rent of the previous contract has been applied.

    However, it can be increased by a maximum of 10% in the following cases:

    • if, in the 2 years prior to the form of the new lease contract, the dwelling has undergone a rehabilitation, energy improvement or accessibility action;
    • when the rental contract is signed for a period of 10 or more years, or a right of extension is established that the lessee can voluntarily avail of during the aforementioned period.

    In the case of a home located in a stressed residential market area and it has not been rented in recent years or when the landlord is a large holder of homes located in stressed residential market areas, the rent agreed at the beginning of the new contract will not may exceed the maximum limit of the applicable price according to the system of reference price indices taking into account the conditions and characteristics of the rented property and the building in which it is located.

    How should the rent be paid?

    Payment of the rent must be made through electronic means , unless either party to the contract does not have a bank account or access to electronic means of payment and at its request. In this case, exceptionally , it may be made in cash and in the leased home.

    Who should pay the expenses derived from the contract?

    In the contract it can be agreed that the general expenses for the adequate maintenance of the property, its services, taxes, charges and responsibilities are paid by the lessee. The real estate management expenses and the formalisation of the contract must be paid by the owner of the house.

    Possible price reduction

    As the owner of a property, it is important to know that the new Law enables the Administration to impose a reduction in the price of rentals in areas declared as stressed residential market areas . That is, those areas:

    • where the supply of housing is insufficient and the average income of the families to face the expenses of the same supposes more than 30% of the income;
    • in which there has been a price increase of more than 3 percentage points over the CPI increase over a period of 5 years.

    It is important to note that if you are the owner of 5 or more urban properties for residential use located in these areas declared as stressed, you will be considered a ” large holder “.

    Rent update

    Regarding the update of income, it should be taken into account that it is no longer possible to use the CPI as a reference index, and that the creation of a new specific index , lower than the CPI, is planned for the revision of the amount of income annual. Until this index is applied, maximum percentage increases have been established, being 2% during 2023 and 3% for 2024.

    Contract extension

    Another matter of great relevance is that the lessee will have the possibility of benefiting from the termination of the contract to an extraordinary extension, on an annual basis, and for a maximum period of 3 years, under the same terms and conditions of the current contract.

    Eviction

    As of 6-30-2023, the eviction procedures and the releases that are suspended when the plaintiff is a large homeowner will only be resumed at the express request of the same if the plaintiff certifies that it has submitted to the conciliation procedure. or intermediation that the Public Administrations establish for this purpose, based on the analysis of the circumstances of both parties and of the possible existing aid and subsidies in accordance with the legislation and regional regulations on housing.

    If the property is considered the habitual residence of a vulnerable family, before an eviction procedure, the period of suspension of the release is increased from 1 to 2 months if the owner is a natural person, and from 3 to 4 when he is a legal person.

    Repercussion for tax purposes

    The Law for the Right to Housing establishes incentives for real estate rental contracts at reduced prices for young people and vulnerable people with low incomes. It is what is known as incentivized affordable housing .

    These incentives consist of a reduction in personal income tax on the net income obtained by the homeowner. In general, it is established at 50% , but it can go up to:

    • 90 % , if the house is located in a stressed residential market area with a reduction of at least 5% on the previous contract;
    • 70 % , if the property is intended for rent in areas with a stressed residential market and the tenant is a young person between 18 and 35 years of age, or if it is incentivized or protected affordable housing, leased to the public administration or entities of the third sector or social economy that have the status of non-profit entities, or hosted by a public housing program that limits rental income;
    • 60% , if housing rehabilitation works have been carried out in the previous 2 years.

    Another tax measure that may affect the owner of a property is that, in order to increase the real estate offer, the new text establishes that empty homes for more than 2 years, provided that there are more than 4 homes in that situation, except justified cause, may be penalized by the City Council. This penalty consists of a surcharge of up to 50% on the IBI fee , and can reach up to 150%, depending on the time of vacancy and the number of homes that the owner has in the municipal area.

    You can consult these questions and other related topics at Legal DNA and Fiscal DNA .

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