As many of you may know, in the year 2023, Spain has passed the controversial and innovative Law 12/2023 on the Right to Housing, known as the new housing law in Spain.
Changes introduced by this novel regulation
In this article, we will analyze some of the issues related to this law. Let’s begin:”
Information to be provided to tenants 📄
The new housing law offers a greater amount of information compared to the past, especially concerning the information that tenants have the right to request regarding properties. Furthermore, it standardizes the information that both buyers and tenants can request.
Previously, it was not a novelty for tenants to be able to request information about properties, but this information was usually more limited and restricted to specific cases. The most extensive documentation requirements were typically associated with the purchase of properties off-plan.
Royal Decree 515/89, which was usually associated with documentation for the purchase of properties off-plan, pertains to the information provided to buyers and tenants of homes. However, there were some differences regarding who should provide the information and what specific information should be provided in the context of sales and leasing.
The new housing law establishes a legal obligation that equalizes the information to be provided to both buyers and tenants, eliminating the need to refer to Royal Decree 515/89. This new law adds new information obligations, such as:
👉 Identification of the owner
👉 Economic terms of the transaction
👉 Energy efficiency certificate
👉 Certificate or habitability certificate
👉 Usable and built-up area (distinguishing between private and common areas, without including areas with a height lower than that required by regulations)
👉 Age of the building
👉 Renovations carried out in the building and actions taken on it
👉 Architectural protection regulations
👉 Information about territorial planning
These details can be crucial for both tenants and buyers. However, it’s worth noting that this new housing law may have limited practical scope regarding the documentation to be provided, as lease contracts are often drafted by landlords and may vary in terms of the information provided. The regulations are especially relevant when landlords are professionals or companies.
In summary, the new housing law has expanded and standardized the information that buyers and tenants can request, eliminating some of the differences that existed before. This law aims to provide greater transparency in property and lease transactions.
Tenants have the right to a wide range of information related to the homes they rent, according to the current housing law. This regulation standardizes the required information for both buying and renting, which is a novelty. Previously, the information varied significantly between these two transactions. The law imposes a legal obligation to provide this information to tenants, including data on area, age of the building, renovations carried out, energy efficiency certificate, and accessibility conditions. However, there are concerns about the practical applicability of some of these rules and how they will affect lease contracts, especially in relation to renewals and areas of tense residential markets.
Landlord as a Consumer
The question of whether tenants are considered consumers and users has been analyzed by experts in the field. In general terms, a tenant is considered a consumer when renting a property from a professional or businessperson.
However, if both the landlord and tenant are individuals, the tenant is generally not considered a consumer, as the landlord does not act as a professional or businessperson.
This interpretation of the regulations is essential because, otherwise, any agreement that goes against the tenant’s interests would be invalid according to consumer protection regulations. This could lead to absurd results, such as the impossibility of waiving certain rights allowed by the Urban Leases Law.
It is important to note that this issue is not trivial, as the penalties for non-compliance vary by autonomous communities. Furthermore, a lack of adequate information can lead to the annulment of contracts with significant consequences, as moving involves not only signing a contract but also expenses related to changes in utilities and relocation.
Tensioned Residential Areas ⚡️
It should be noted that this new housing law is an “accumulation of rules” and does not unify concepts. This law contains many concepts that are already defined by urban planning regulations but are defined differently than, for example, the consolidated text of the state land law from 2015.
This creates problems of coherence and applicability in practice, especially regarding tensioned residential areas:
These areas are defined as those where housing is not affordable for the majority of the population due to high demand and prices.
The declaration of these areas is the responsibility of the autonomous communities but may also involve municipalities. The declaration process involves gathering information on criteria such as demand, occupancy, and income of potential tenants, which is complicated.
The criteria for the declaration include:
📈 An increase in housing prices of more than 3% in the last five years or;
📊 Housing prices accounting for 30% of family income, including common expenses.
It is important to note that historically, throughout Spain, at least 40% of family income has been allocated to housing. This would mean that Spain is a tensioned residential market in itself. 😅
However, challenges arise if a municipality requests the declaration of a tensioned area without having autonomous community regulations to impose the limitations implied by this declaration. In the meantime, administrative acts are enforceable unless an interim measure is obtained. In the event of the annulment of the declaration, questions arise about property responsibilities and economic impacts of limiting rents to 3%.
Despite these challenges, it is important to note that the Constitutional Court has addressed issues related to rent limitations and has established that they can be limited, although competence may vary by region.
In summary, the new housing law has introduced rent limitations, raising questions about their functioning and practical effects.
The Figure of the Major Property Holder
The figure of the Major Property Holder is an important point of consideration in this new housing law in Spain.
The definition establishes that a Major Property Holder is an individual or legal entity that owns more than 10 urban residential properties or a built area of more than 1500 square meters for residential use.
However, this definition can be modified if the autonomous community regulations justify it, allowing someone with fewer than 10 properties but more than 1500 square meters in tensioned residential market areas to be considered a Major Property Holder.
It is important to note that to reduce the designation of Major Property Holder, for example, to someone who has 5 residential properties, the following conditions must apply:
1.- 💥 In tensioned residential market areas, and;
2.- 💥 If the autonomous community lowers that qualification, so this designation may vary from one autonomous community to another.
Issues related to shared ownership, such as usufruct or ownership shares, are not specifically addressed in the definition. This raises certain ambiguities that could affect leases and legal processes.
In summary, the concept of a Major Property Holder is generally based on ownership of more than 10 properties or 1500 square meters, but it can be adjusted in specific areas if justified by the autonomous community.
Rent Control 🚧
Rent control, aimed at limiting rent increases, is implemented in several ways in this law. One of the less-mentioned measures is the restriction on rent increases, which will be limited to 2% this year and 3% next year, regardless of the General Competitiveness Index (IGC).
Furthermore, this law introduces new regulation limiting rent increases based on the index to be created in 2024, and this could significantly impact housing lease contracts. This measure is controversial, as it is not based on clear and established criteria and has been included as an additional provision in the urban lease law in an unusual manner.
However, a key concept to understand how rent control will be applied is that of the ‘tensioned residential market area,’ which we have already explained in the previous section. While it does not exist in Madrid, many such areas have already been declared in Catalonia, demonstrating its relevance.
The modification of lease contract extensions for housing is one of the key aspects of this new housing law, and it has generated some controversy.
These new provisions will apply to contracts entered into after the law comes into effect.
In summary, the usual annual extensions are maintained until reaching at least five years if the lessor is an individual or seven years if it is a legal entity. In addition, two new extensions are introduced:
One for up to one year for tenants in a vulnerable situation, which the landlord must grant if they are a Major Property Holder, and;
Another for an additional three years in tensioned residential market areas, which the tenant can request unless there is a new agreement or one of the exceptions established in the Urban Leases Act applies.
However, there has been controversy regarding automatic renewal. The law refers to automatic renewal as ‘that of the previous section,’ which has caused confusion due to a change in the order of articles during the legislative process. Specifically, Article 10.2 is mentioned as the previous section, but in reality, automatic renewal is found in Article 10.1. This has led to the interpretation that the new extensions, especially the additional three years in tensioned residential market areas, should not apply simultaneously with automatic renewal, which could lead to a legal debate in the future.
It is important to note that these extensions should not apply simultaneously if the lessor is a Major Property Holder in a tensioned residential market area. In summary, these modifications will come into effect in the future, within eight to ten years, once the tensioned residential market areas are established.
🔖 These modifications will come into effect in the future, within eight to ten years, once the tensioned residential market areas are established.
Declassification of Protected Housing⌂
The new housing law introduces significant limitations on the declassification of protected housing and the reservation of land for protected housing:
📍 Lands designated for the reservation of protected housing are frozen and;
📍 They must maintain this classification, with limited exceptions.
📍 Housing subject to protective regulations on these lands is also declared of indefinite nature, except those that have not received assistance and have been built on unclassified land for public housing reservation.
The latter can be declassified, but with a minimum period of 30 years. This means that protected rental housing, which normally has a duration of 10-15 years, becomes permanent.
However, there is controversy regarding the interpretation of the transitional provision. The new housing law states that all housing with a definitive classification as of the law’s entry into force will continue to be regulated by the old legislation. This poses a challenge for ongoing developments that only have provisional classification, as they could end up with a permanent regime.
Furthermore, the law increases the percentages of land reservation for protected housing, from 30% to 40% in rural areas and from 10% to 20% in urban reform or renovation projects, without providing a clear transitional provision. The question arises as to whether this new housing regulation applies to new developments or if the transitional provision of the consolidated text of the 2015 land law, which establishes different percentages, applies.
The new law has introduced significant changes in eviction procedures. Firstly:
- It establishes the obligation to notify the date and time of eviction, which was not required before.
- It has implemented an information period and;
- A possible suspension process before carrying out the eviction.
However, challenges arise in the implementation of these measures. In practice, this could lead to an increase in the time it takes to carry out an eviction, as several administrative procedures must be followed before execution.
Furthermore, the complexity of these processes, such as obtaining certificates and the lack of resources, could further slow down the process.
Regarding economic and social vulnerability, it is established that the plaintiff must demonstrate that the defendant is in a situation of economic vulnerability, which includes income limits in relation to family expenses. However, these limits are low and could apply to a large portion of the population. Social vulnerability is not objectively measured, leaving the decision in the hands of social services.
In summary, although changes have been introduced in eviction procedures to ensure greater tenant protection, these changes could also lead to complications in the duration of processes and in the assessment of the vulnerability of the defendants. To avoid defaulting tenants, we recommend reading our previous post.
Would you like to learn more about this new law? Contact us, and we will assist you with whatever you need!