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Find out all about the new Tenancy Act

The Urban Rental Law or LAU as well as other regulations have now been modified through a Royal Decree Law on rental and housing approved by the Government. The origins of this 1994 law have over time been changed in order to adapt to the different needs that have arisen over the years. 
This latest revision will enter into force very soon and its goal is to favour the tenants who experience problems, such as the difficulty of finding affordable housing and the excessive increase in market prices. 
In this article, we will explain what this new rental law consists of and to what extent it will influence your life from now on, although you should know that when renting a property through Engel & Völkers, both the landlord and the tenant will receive personalised advice from an expert. 




The Minimum Term is Extended 

From now on, The Urban Rental Law states in article 9 the minimum tenancy term in the contract. The years for renting a flat or housing are agreed freely by both parties; the landlord and the tenant. However, the law determines a minimum period that must be met. Thus, if the contract specifies a term shorter than that established by law, the tenant will have the right to require the landlord to extend it until the minimum period is reached. 
This new regulation that modifies the previous minimum term, extends the time that the tenant can stay in the rental property. In fact, the new legislation has extended it from 3 to 5 years, or up to 7 years in the case of the landlord being a legal entity. 

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The Extension Period 

Article 10 is related to the extension of the contract after its expiration. In the past, if the expiration date of the contract or its extensions was fulfilled without the tenant and the landlord notifying each other about the non-renewal of the contract, it was automatically extended for one more year. Now, the term of tactical extension has been extended to 3 years. 

Rental Deposit Amount 
The Royal Decree-Law also modifies article 36 to end abuses in terms of the deposit requirements from landlords. Until recently, the landlord reached an agreement with the tenant in which a deposit to be paid normally amounted to a monthly rental payment. Although, additionally, the landlord could request the tenant to make a further guarantee of compliance in the form of any type of endorsement, which could mean paying a fine if breaching the contract. Now, the tenant will be more protected by getting rid of those added burdens. 
The new rental law has limited this guarantee to a maximum of 2 monthly payments, except in the case of long-term contracts. 

Home Improvement Agreements 

It is also possible to reach an agreement between the landlord and the tenant to establish a plan for improvement or renovation of the house while the rental contract lasts. The exact modification established by the current LAU is still unknown and will have to wait for its final publication. 

The Costs of Drawing up the Contract 

This new legislation approved by the Government also determines that the expenses derived from the formalisation of contract carried out by lawyers or advisors, as well as the expenses of real estate management will have to be covered by the landlord whenever we are talking about a legal person. In any case, there are exceptions, since the expenses of any improvements that are voluntarily carried out by the tenant will have to be paid by him. 

New Regulations on Tourist Rental 

Similarly, there are some measures that are related to tourist rental, although we will also have to be a little patient to know what the details of this new regulation will be. 
One of the most relevant issues has to do with the communities of owners, who will have something to say if the 3 fifths of the owners reach an agreement to limit in some way the activity related to the tourist rental of the house in question. 

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Evictions in Sensitive Situations 
The modified LAU or Royal Decree Law determines that it is possible to suspend the evictions of a home when there are clear indications of vulnerable situations. Thus, the law establishes that, once the rental payment is overdue, the tenant must be informed that he can be refer to Social Services so that the Administration communicates the situation to the Court to stop the eviction until the appropriate measures can be taken. For private landlords, the suspension of eviction will last one month, while if the person is from a legal entity, it will be two months. 
Exemption and Reduction of Taxes 
According to the new regulations on tax matters, the rental agreements will be exempt from the Property Transfer Tax and Stamp Duty or AJD. The objective is to reduce the tax burdens subject to the rental market. Modifications are also established in relation to Real Estate Tax. The tenant will be exempt from paying the IBI in terms of social housing rental. Likewise, the city councils with surplus funds may establish bonuses in the IBI quotas of up to 95%. On the other hand, in the buildings that are permanently vacated, the city councils will have the authority to request a surcharge of up to 50% of the tax on the owners. 
The above is for your information, but if you want to protect your interests as landlord or tenant, it is best that you have a legal security in terms of renting a property. Renting through Engel & Völkers will provide you with the advice you need in order to rent out your home or sign the rental agreement with complete certainty. We put ourselves in the shoes of the owner and the tenant to save them future headaches by informing them of all their rights.

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