Overview of the new Law for the Right to Housing
The new Law for the Right to Housing, which came into force on May 26, 2023, has introduced several modifications to the Urban Leases Law that both housing owners and renters need to be aware of. This comprehensive housing legislation aims to address various issues in the housing sector, including housing affordability, rehabilitation of properties, and protection of vulnerable occupants. The law encompasses measures to create a fairer and more accessible housing market for all stakeholders involved, providing a framework that fosters stability, security, and social welfare.
Purpose of changes: Address housing affordability, encourage rehabilitation, protect vulnerable occupants
The key purpose behind the changes in the Law for the Right to Housing is to tackle critical challenges within the Spanish housing market. Firstly, the law aims to address housing affordability by implementing measures such as tax relief and incentives for rental properties in stressed areas. These efforts seek to create a more balanced and accessible rental market, particularly for vulnerable demographics. Secondly, the law encourages the rehabilitation of properties by providing tax deductions for property owners undergoing renovations. This measure is designed to improve the overall housing stock and enhance living conditions for occupants. Lastly, the law places a strong emphasis on protecting vulnerable occupants by implementing stricter regulations for evictions and extending release procedures to allow more time for finding alternative housing solutions. By promoting social welfare and safeguarding tenants’ rights, the law aims to foster a more equitable and compassionate housing landscape in Spain.
Agency Fees for Landlords and Tenants
Real Estate Agency Fees – A Shift in Responsibility: Under the Law 12/2023, of May 24, for the right to housing, the burden of real estate agency fees now falls on the shoulders of the owner. Section 1 of Article 20 explicitly states that “The expenses of real estate management and those of formalization of the contract will be borne by the landlord.” This change aims to create a more transparent and equitable process for all parties involved.
Tenant’s Financial Obligations: Although the owner takes on the real estate agency fees, the tenant remains responsible for other financial obligations. This includes paying the deposit and any additional security required at the time of signing a new rental agreement. These financial commitments ensure a sense of accountability and security for both the tenant and the landlord.
Cases Where Tenant Pays Agency Fees: However, there are specific scenarios in which the tenant may be responsible for paying the agency fees. In the case of leases for luxurious or sumptuary homes exceeding 300 square meters built or with high income, the Urban Leasing Law in its article 4.2 allows the tenant to bear the fees. Additionally, leases for uses other than housing, such as vacation rentals, seasonal rentals, and commercial or industrial purposes, may also require the tenant to cover the agency fees.
Commercial Leases and Urban Leasing Law (LAU): When it comes to commercial leases, the contractual relationship between the parties will be governed primarily by their mutual agreement. If there are no specific agreements, the provisions established in the Urban Leasing Law (LAU) will apply. For cases not regulated in the LAU, the provisions of the Civil Code will act as a regulatory supplement.
Tax Relief Modifications
The new Law for the Right to Housing, implemented on May 26, 2023, has brought significant changes to tax relief for both housing owners and renters in Spain. Previously, housing owners enjoyed a 60% tax relief, which has now been reduced to 50%. This reduction may impact homeowners, as they will have a slightly higher tax burden than before.
However, there is a possibility of obtaining up to 90% relief if a new lease is signed in stressed areas, where housing supply is insufficient, and the rent is reduced by 5%. This incentive aims to encourage landlords to offer affordable rental options in areas with housing scarcity.
Additionally, houses undergoing rehabilitation can still benefit from a 60% tax relief. This measure aims to incentivize property owners to invest in improving and renovating properties, ultimately increasing the supply of habitable homes in the market.
Moreover, landlords offering rental properties in stressed areas to young people aged 18 to 35 or for social rental purposes can avail of a 70% tax deduction. This move seeks to address housing affordability concerns for vulnerable demographics and promote social welfare.
Empty Properties and Real Estate Tax
Another significant aspect of the new housing laws is the regulation surrounding empty properties and real estate tax. Town Halls now have the authority to increase the Real Estate Tax up to 150% for properties that have been empty for more than two years, targeting property owners who leave their properties vacant. This measure aims to encourage the efficient use of housing resources and reduce the number of empty properties, especially in high-demand areas.
Furthermore, individuals with over four properties in the municipality are subject to this increased tax. This measure aims to address the issue of housing monopolies and promote a more equitable distribution of housing resources in Spain.
Impact on Evictions
The new housing laws place a strong emphasis on protecting vulnerable occupants and preventing unjust evictions. Under the updated regulations, competent Public Administrations must be notified of eviction resolutions, even without the consent of the involved parties, to verify the vulnerability of the occupants and take necessary action. This step aims to safeguard tenants’ rights and ensure fair treatment during the eviction process.
Moreover, the plaintiff in an eviction case must prove the occupant’s economic vulnerability, ensuring that eviction proceedings are fair and just. This provision aims to prevent unnecessary evictions and protect vulnerable tenants from losing their homes.
For large property owners, a conciliation or intermediation procedure must be conducted before admitting the claim. This requirement encourages landlords to explore alternative solutions and reach an amicable agreement with their tenants, rather than resorting to eviction as a first option.
Additionally, the introduction of extended release procedures allows for the postponement of eviction processes for up to two years. This extended period aims to provide occupants with more time to find alternative housing solutions, particularly in cases where they face difficulties in finding a new home due to various circumstances.
New Tax Regime for Landlords
A. Starting from January 1, 2024, a new tax regime for landlords will be implemented in Spain to create a fairer rental market and shift the financial burden from tenants to landlords. As part of this change, landlords will be responsible for paying the Property Tax (IBI) unless agreed otherwise in the rental contract. This shift in responsibility aims to provide more clarity and transparency regarding tax obligations for both landlords and tenants, ensuring a more equitable distribution of financial responsibilities.
Additionally, rental income will be subject to a progressive tax rate ranging from 15% to 45%, depending on the landlord’s income level. This progressive tax rate seeks to ensure that wealthier landlords contribute more to the housing sector and affordability efforts, helping to address income inequality and promote social welfare.
It is important to note that these changes will only apply to new rental contracts signed after January 1, 2024. This grace period offers landlords and tenants time to adjust to the new tax rules and understand their respective obligations under the revised tax regime.
Provisions in the Urban Leasing Law and Housing Law affecting rental contracts
A. The new housing laws introduce several provisions that directly impact rental contracts in Spain, aiming to provide more stability and security for both tenants and landlords.
B. One significant change is that if a lease ends, the contract will be automatically extended if the owner does not notify the tenant four months in advance (two months for the tenant). This provision aims to provide tenants with more stability in their housing arrangements, preventing sudden evictions and allowing tenants to plan ahead.
C. Additionally, tenants have the option to decide not to renew the contract each year, offering more flexibility in rental agreements. This provision empowers tenants to make decisions based on their changing housing needs and financial situations, providing more control over their living arrangements.
D. Moreover, tenants in social vulnerability can request an extraordinary extension for up to one year before the regular extension ends. This provision is especially crucial for vulnerable populations, as it offers additional support and protection during challenging times.
E. On the other hand, owners can avoid the extension and reclaim their property if they need to occupy the rented apartment themselves. This provision balances the rights of property owners to use their properties for personal purposes while also respecting the rights and needs of tenants.
Understanding Stressed Areas and their Implications
The new Law for the Right to Housing introduces the concept of stressed areas, which refers to neighborhoods or municipalities where there is a special risk of insufficient housing supply for the population. The declaration of a stressed residential market area is the responsibility of the autonomous communities and municipalities, and its validity is three years, with the possibility of annual extensions.
To declare a stressed zone, certain conditions must be met, including the average cost of rent or mortgage plus basic expenses and supplies not exceeding 30% of the average household income in the area. Additionally, the amount of rentals or the purchase of homes must have increased at least three points above the Consumer Price Index in the five years prior to the declaration.
The new law also distinguishes between big holders (owning more than ten properties) and small owners (owning less than five homes). In stressed areas, individuals or companies that own five or more homes in the municipality or neighborhood are also considered big holders.
Current tenants have the right to request a six-month extension in habitual residence leases that end until June 30, 2023. This provision provides additional protection for tenants during the housing market transition and ensures continuity in their housing arrangements.
Conclusion
In conclusion, the new housing laws in Spain aim to address housing affordability, encourage property rehabilitation, and protect the rights of vulnerable occupants. While the reduction in tax relief may impact homeowners, there are incentives for rental properties in stressed areas, young tenants, and social rental purposes to promote affordable housing options. The changes in eviction procedures prioritize protecting vulnerable occupants and preventing unjust evictions, ensuring fair treatment for tenants. Moreover, the provisions in the Urban Leasing Law and Housing Law provide stability and flexibility in rental contracts for both tenants and landlords.
As Spain’s housing market evolves under the new Housing Law, it is essential for both landlords and tenants to understand their rights and responsibilities. While the owner now assumes the real estate agency fees, tenants must still be aware of other financial obligations in rental agreements. Cases where the tenant pays agency fees are outlined in the law, particularly in luxurious or sumptuary homes and commercial leases. By staying informed about these key changes, all parties can navigate the housing market with confidence and clarity. Understanding the nuances of the Housing Law ensures a fair and harmonious rental experience for everyone involved. As these laws come into effect, their overall impact on the housing market and the rights of property owners and occupants will be closely monitored.
