The new reform of the law of urban rentals

2 January, 2019

In last July, we already commented on the announcement that the Government was going to proceed to modify the LAU (Urban Renting Act), and therefore, on December 18, 2018, Royal Decree Law 21/2018 of December 14th on urgent measures about housing and rent was published; this new reform returns to the spirit of the Law of 1994. The following points are to be highlighted:

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  1. The duration of the rental contracts will be longer. The minimum term of the lease agreements for housing is extended from 3 to 5 years, or, as an important novelty, to 7 years, if the lessor is a corporation.
  2. In addition, an extension of the contract to 3 more years is regulated, in case that, on the expiration date of the contract, neither of the parties have notified to the other one, at least 30 days in advance, their willingness to resolve it. Keep in mind that, if the landlord is a corporation, this extension would start after the minimum 7 years have elapsed.
  3. Additional guarantees are limited to the deposit (which is one month’s rent on housing) whose value cannot exceed two monthly rentals.
  4. In the event that the lessor is a corporation, he will be responsible for the costs of housing management and of the contract closings.
  5. The tourist rental concept, introduced by the previous reform, is complemented, referring to marketing channels. In addition, regarding the tourist rental flats, Law 49/1960 of July 21st of Horizontal Property has been reformed, allowing neighboring communities to limit or veto this type of leases in the building, provided that the decision is voted by three fifths of the community owners. This measure will only apply to new tourist flats and not to existing ones, because “it does not have a retroactive character”. Therefore, we have to point out that Catalonia has its own legislation, which establishes a qualified majority of four fifths for this (and other) kind of decisions in communities.
  6. Royal Decree 21/2018, in addition, undertakes two reforms: one on taxes, and another one on the procedure housing eviction (LEC 1/2000) in order to improve the coordination between the judicial bodies and the social services; in these cases, judges will have to notify the start of the eviction processes to the social services. They will issue a report and, if they warn that the people who are going to be expelled from their home are in a vulnerable situation, a one-month extension will be opened (or two when it is a corporation that requests the eviction) to look for a solution.

As it has been already previously commented, we miss a reform for the cases of sale of leased housing, since a proposal to return to subrogation under the terms of the lease, without the current need to have recorded it in Land Registry, was disregarded. In short, we consider the reform is positive, although it seems to be insufficient.

As we already pointed in the mentioned previous post, in our opinion, it is not necessary to reduce the rights of the tenants in order to ensure the interests of the owners. In case of serious breaches, a rapid and effective judicial response is needed. Now, these modifications and measures should be accompanied and completed by other policies to support the need for housing of the most vulnerable sectors, affected by economic vulnerability and residential exclusion.

If you have any questions about this article, you can use the contact area of our website to contact our team of specialist lawyers. We will be glad to answer your questions.

David Roca – Lawyer

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