Renting out property in Spain can be a profitable endeavor, but it comes with several legal responsibilities. Both landlords and tenants are governed by specific regulations designed to protect their rights and ensure compliance. Whether you are renting out your property for the long or short term, it is crucial to understand the legal framework and stay updated on recent developments.
This article will guide you through the essential laws and regulations for renting out your property in Spain.
Key legislation for renting property in Spain
The primary law governing rental agreements in Spain is the Ley de Arrendamientos Urbanos (LAU) or Urban Leases Act (Law 29/1994, of November 24). The LAU distinguishes between two main types of rental contracts: long-term residential rentals and short-term holiday rentals. Both categories are subject to specific regulations, which vary depending on the region.
Long-term rentals (Arrendamientos de vivienda)
Long-term rentals, defined as leases for primary residences, are tightly regulated under the LAU. These leases must meet specific requirements to protect tenant rights:
- Minimum Lease Duration: According to Article 9 of the LAU, the minimum lease term is five years for individual landlords, or seven years if the landlord is a company. After this period, the lease can be extended yearly if neither party objects.
- Rent Increases: Rent increases are regulated by Article 18 of the LAU. The landlord may only increase the rent annually and must base the increase on the Consumer Price Index (CPI) unless otherwise stated in the contract.
- Termination by Tenant: Tenants have the right to terminate the lease after six months, provided they give at least 30 days’ notice (Article 11 of the LAU). If an early termination clause is agreed upon, landlords may claim compensation, but it must be specified in the contract.
Short-term rentals (Arrendamientos para uso distinto de vivienda)
Short-term rentals, often referred to as tourist or holiday rentals, are generally for properties rented out for vacation or temporary stays. These rentals are regulated under Article 3.2 of the LAU, but additional regional laws apply, particularly in tourist-heavy regions like Catalonia, the Balearic Islands, and Andalusia.
- Licensing: In regions such as Catalonia and the Balearic Islands, landlords must apply for a tourist license before renting their property for short stays. Local laws often specify the maximum number of rental days per year and outline the taxes that apply to rental income from holiday properties.
- Regional Regulations: For example, in Barcelona, Decree 75/2020 of the Tourism Law of Catalonia strictly controls short-term rentals, requiring properties to meet specific standards to qualify for tourist licenses. Municipalities can also impose limits on how many properties can be rented out.
Legal requirements before renting
Whether you plan to rent your property long-term or short-term, certain legal obligations must be fulfilled:
- Energy Performance Certificate (EPC): Under Royal Decree 235/2013, all properties in Spain must have an Energy Performance Certificate (Certificado de Eficiencia Energética) before being rented out. This certificate must be included in advertisements, and failure to provide one could result in fines.
- Tourist License (for short-term rentals): As noted earlier, some regions require a Tourist Rental License. For instance, in Andalusia, Decree 28/2016 governs the renting of tourist properties, requiring owners to register their properties with the Registro de Turismo de Andalucía. Properties that do not comply with local regulations risk heavy fines.
- Security Deposit: Article 36 of the LAU mandates that landlords collect a security deposit equivalent to one month’s rent for long-term leases. For short-term rentals, landlords can request up to two months’ rent. This deposit serves as protection against property damage or unpaid rent.
Important clauses in the rental agreement
The rental agreement is a legally binding contract that must adhere to the guidelines set out in the LAU. While landlords and tenants can negotiate specific terms, some clauses are essential for ensuring the agreement is enforceable:
- Duration: For long-term leases, Article 9 of the LAU requires the minimum lease duration to be five or seven years, as mentioned earlier. If the tenant decides to stay after this period, the lease may be renewed annually by mutual consent.
- Rent and Rent Increases: Any rent increases must follow the guidelines in Article 18 of the LAU and should be explicitly stated in the contract. The landlord cannot unilaterally raise the rent during the lease term unless agreed upon in advance.
- Maintenance and Repairs: The LAU distinguishes between minor repairs (tenant’s responsibility) and major repairs (landlord’s responsibility). According to Article 21 of the LAU, the landlord must carry out all necessary repairs to ensure the property remains habitable. The tenant can claim compensation for any expenses incurred if the landlord fails to meet this obligation.
Tenant rights in Spain
Spanish law offers significant protections for tenants. Some of these include:
- Right to Stay in the Property: Under Article 10 of the LAU, tenants have the right to stay in the property for the entire lease term unless specific conditions for termination are met, such as non-payment of rent or breach of contract.
- Rent Increase Limits: Tenants are protected from arbitrary rent increases, as rent can only be adjusted annually based on the CPI. The landlord cannot increase the rent without prior agreement or without meeting the legal requirements for a rent review.
- Right of First Refusal: If the landlord decides to sell the property, the tenant has the right of first refusal under Article 25 of the LAU. This means the tenant must be given the opportunity to purchase the property before it is offered to third parties.
Tax implications of renting property in Spain
Renting out property in Spain comes with tax obligations. Landlords must declare rental income to the tax authorities, and the tax treatment varies based on residency status:
- Resident Landlords: Rental income is declared as part of the annual income tax return under the Impuesto sobre la Renta de las Personas Físicas (IRPF). Landlords can deduct certain expenses related to the maintenance and management of the property.
- Non-Resident Landlords: Non-residents must declare rental income under the Impuesto sobre la Renta de No Residentes (IRNR). The flat tax rate for non-residents is 24% of the gross rental income, but deductions are only allowed for EU and EEA residents.
Summarizing, renting out your property in Spain can be a lucrative venture, but it requires careful navigation of the legal landscape. Ensuring compliance with laws like the Ley de Arrendamientos Urbanos (LAU) and obtaining necessary licenses such as the Tourist Rental License will help you avoid legal complications. Additionally, staying informed about your tax obligations as a landlord is crucial to ensuring smooth and profitable rental operations.
By consulting with legal professionals familiar with Spanish property law and understanding your obligations under the LAU and regional regulations, you can successfully rent out your property while protecting your rights and interests.