Modification of the legislation property rentals

Due to the current scarcity and general high cost of long term rental properties, recent legislation has been introduced which aims to increase the number of properties available to be rented as permanent residences as opposed to being used for short term tourist lets providing tenants with greater legal protection. The idea is to counterbalance the increase in long term rental prices in those areas that are characterized as being typical tourist destinations which implies that a large percentage of properties are only available for tourist lets.

The modification of the previous legislation has been made by means of a Royal Legislative Decree dated 1st March 2019 but due to the procedure used by the Government at the time, an eventual ratification of the legislation must be made. However, for the moment the legislation does produce legal effects. In this article we will give consideration to one of the most important changes to the previous legislation which refers to the term or duration of rental agreements for a permanent residence.

Although the duration can be freely agreed on by the parties, if the term were less than five years – or seven if the landlord were a legal entity (company for example) as opposed to an individual -, the agreed term of the contract could be extended with an obligatory nature by yearly extensions until the said terms of five and seven years were complied with unless the tenant gives the landlord thirty-daysnotice prior to the expiry of the initial contract or that of each of the yearly extensions, of his/ her wish to not extend the contract.

The aforesaid minimum terms of the rental contract will be calculated from the date of the start of the contract or from the date on which the property was made available if this were later than the date of the signature of the contract. It will be down to the tenant to prove when the possession of the property was handed over.

If no specific term were established in the contract, it will be understood that the contract is for a one-year period without prejudice of the right of the tenant to extend the contract up to the corresponding five or seven-year minimum duration. However, once the first year of the contract has expired, the obligatory extension will not be applicable in those cases in which the landlord made an express reference in the contract to the fact that either he/she personally, his/her direct family members or his/her spouse in the event of divorce, separation or the annulment of the marriage would need to make use of the property within the initial five year minimum term.

To actually exercise the right to recover the use of the property stipulated in the contract, the landlord must send a notification to the tenant advising of the reason due to which the property will be required with at least two months’ notice to the date upon which the property will be required by the landlord.

However, if after three months from the cancellation of the contract or from the date upon which the tenant actually vacating the property the landlord or his family members did not take up their right to use the property for themselves, the tenant may, within thirty days, opt to either move back into the property for a new period of five years on the basis of the previously agreed contractual conditions which were applicable prior to the early cancellation of the contract and with compensation for the costs that moving out of the property had entailed, or claim compensation equivalent to one month of rent for each year that remained of the initial rental agreement up to a maximum of five years.

The only exception to this right of the tenant would be if the landlord or his family members had not taken up their option to use the property due to a reason involving force majeure, as per the legally accepted definition of the word, or other reasons that were not foreseeable or even if they were foreseeable were inevitable.