On September 22, Law 11/2020 of September 18 came into force, on urgent measures regarding the containment of income in housing lease contracts for permanent residence. The main objective of the new law is to contain the increase in rental prices in those contracts that are included in the scope of its application, which excludes contracts signed before January 1, 1995, contracts of official protection, those of insertion, social rent, social policies or those of a welfare nature and compulsory social rent.

The new regulation is applied in those municipalities that are declared areas with a tense housing market, which currently includes 60 Catalan municipalities – those with more than 20,000 inhabitants. The most relevant novelty is the application of a reference index – depending on the area and municipality – that will limit the maximum amount of rent.

How will the initial rent of a lease be determined from the entry into force of Law 11/2020?

In the housing lease contracts signed from the entry into force of Law 11/2020, and that are included in its scope, the rent will be determined taking into account 2 conditions:

  1. The reference price: The new rent may not exceed the reference price. This is calculated from the reference index of housing rental prices of the department responsible for housing, which, taking into account the useful area of ​​the property, as well as, among others, the year of construction of the same and its certificate energy, establishes the reference price per square meter that should govern each case. Thus, applying said price to the meters of useful surface of the property, we will obtain the maximum rent of the same.
  2. The rent of the last lease: In those homes that have been leased in the last five years, the rent may not exceed the rent entered in the last lease. The rent may be updated according to the Competitiveness Guarantee index, an index that is currently in a negative value. This condition shall not apply to contracts in which there is a kinship relationship between the parties, as well as to contracts relating to dwellings initially excluded from the law enforcement regime.

However, the reference price limit will not be applied in cases where the landlord is a natural person whose living unit has an income equal to or less than 2.5 times the Catalan sufficiency income indicator (for the year 2020 the indicator is set at 7,967.73 euros per year), including rental income. In this case, the contracts will be conditioned only by the rent of the last lease, being able to increase up to the reference price in case the rent is lower.

Can the income set by the benchmark be increased?

The rent may be increased or decreased, according to the agreement of both parties, applying a maximum variation of 5%, as long as a minimum of three of the characteristics provided in the law concur, which must be specified in the contract for their due accreditation. These are: elevator; parking; furnished home; heating and / or cooling system; communal areas of shared use or similar equipment; concierge service, and special views.

The landlord may also increase the initial rent in those contracts in which works have been carried out that improve the habitability, security, comfort or energy efficiency of the home during the last year. To calculate the applicable increase, the rules provided for in the Urban Leasing Law for improvement works will be applied, based on the capital invested in the improvement of the home.

These increases may not be applied cumulatively, having to choose one of them.

Finally, the parties may agree to the assumption by the lessee of general expenses and individual services, in accordance with the Urban Leasing Law (they will be detailed in the contract) and will be justified in the month of January for their due regularization.

How will the new contracts be formalized?

The lease must be accompanied by the document generated by the rental price indexing system, with the information related to the value of the index corresponding to a dwelling similar to the one rented, expressed in euros per square meter (useful area), specifying the lower and upper price margin. This information will refer to the end date of the previous contract.

Is a sanctioning regime envisaged?

Leasing above the price of the Index, falsifying the reference price and not attaching it to the contract entails penalties with fines of between 3,000 and 9,000 euros.

Likewise, the violation of this Law will entitle the tenant to be reimbursed for the rents that exceed the established limits plus the legal interest increased by 3 points.