Spain's new housing law brings significant changes.
Some changes are reshaping the meaning of private property
and a free market economy. That is why every property owner in Spain should get to know them.
We note that the new housing law is intended to serve the Spanish government's main goal of reducing rental prices and increasing supply to fight inflation.
These are the main changes in the law:
Traditionally, rental prices were linked to the CPI (Consumer Price Index); the new law changed that. The Spanish government gave a temporary solution, limiting the rent increase to 3% in 2024. At the same time, it tasked the Central Bureau of Statistics with determining a new index, which will be used for the leases and should be below the CPI standard to prevent inflation. The new law defines areas of high demand and gives local authorities the justification to intervene in rental prices and curb them. In other words, the law allows the municipality to intervene in the free market and dictate prices. Those who do not comply are expected to face heavy fines, and until today, those who owned many properties for rent (10 or more) were considered to have multiple apartments. Accordingly, various restrictions were imposed on him (legal, regulatory, and financial. As of today, the number has been reduced, and those who own 5 or more properties (or a constructed area of 1500 square meters) are considered to have multiple apartments. Therefore, a different rent update index applies to them. The new index will apply to properties that have not been rented for at least 5 years. In addition, the period of lease renewals in long-term lease contracts has been extended.
Strengthening the protection of tenants:
The new law, among other things, obliges all apartment owners to pay for
Brokerage fees and expenses related to the lease. In the past, this obligation applied only to legal owners and not to physical owners, whereas today, it applies to everyone.
Before the law, contracts were drawn up that exempted the housing law. For example, to circumvent the salary update limit imposed by the government, various expenses such as local taxes and garbage fees were excluded from rent. As of today, this cannot be done.
Specific percentages must be allocated to subsidized housing for new construction or renovation of existing properties. The new law increases the rate of subsidized housing.
40% must be allocated for new projects (compared to 30% in the past), and 20% must be allocated for the renovation of existing properties (compared to 10% in the past).
The new law provides more robust protection for tenants. For example, evictions related to mortgage non-payment have been banned until May 2028. Lenders cannot foreclose on properties for vulnerable tenants so quickly. The local authorities will also be required to provide alternative accommodation.
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