By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of January 2018
Following Spain’s ongoing two-digit rental property bubble, I thought it would be a good idea to write a brief recap of the seven most common blunders in rental agreements.
If you want to avoid stressful situations for you and your family, it is strongly advised you hire a law firm before you commit signing on the dotted line. Taking legal counsel ahead pre-empts most legal problems saving you money (and grievances) on the long run. This advice applies both to landlords and tenants. You can hire our legal service from €165 plus VAT: Rentals (contract drafting). Rental contracts in English also available.
1. 11-month rental contracts are watertight. Eleven-month contracts is a popular urban myth that somehow manages to perpetuate itself from one year to the next. Such contracts were designed to circumvent Spain’s Urban Tenancy Act (which deals with 12 months renewable contracts) and thus waive generous long-term tenant entitlements. 11-month contracts are void and when challenged at court, a judge will rule they are in fact a long-term contract subject to the LAU, meaning tenants can stay in a property for three years. If landlords wish to avoid the lenient tenant entitlements set by the LAU, they should be signing seasonal contracts instead which legally waive them. More details in my articles: Urban Rental Law in Spain – Spain’s Tenancy Act – 8th May 2016 and Seasonal lets: an alternative to holiday home rentals – 8th of October 2017.
2. Non-renewable 12-month rental contracts. A similar trick to point one above, is to word a long-term rental contract, which constitutes a permanent abode, as a non-renewable 12-month contract. Forbidding the extension avoids a tenant staying in a property for a number of years. Such a clause is null and void on being legally challenged. A tenant is allowed to stay in a property for up to three years at his sole choice (he can move out ahead if he pleases, providing six months have elapsed, see point three below). Only a tenant may choose whether to renew or not his rental agreement for a further 12 months. Spain’s tenancy laws are biased towards tenants for historical reasons outlined in my article Urban Rental Law in Spain – Spain’s Tenancy Act.
3. Cast-iron 12-month rental contract. Following on the above, another frequent clause is to word a contract as a 12-month contract, meaning a tenant cannot pull out of the rental contract ahead of the 12 months for whatever reason. This clause is also null and void following the amendment to Spain’s Urban Tenancy Act in June 2013. As explained above, a tenant may move out of a property ahead of the 12 months so long as 6 months have gone by. He must notify in advance his landlord of his intention of moving out but there is no need to justify a reason for it. The tenant however will have to pay a compensation to the landlord on breaking away for the outstanding duration of the long-term contract. So, there is a price to pay on bailing out ahead of time.
4. Two months rental deposit. By law, a landlord can only request a one-month rental deposit from a tenant on rental agreements subject to the LAU (Spain’s Tenancy Act). Notwithstanding, additional guarantees may be requested but they are not labelled as a ‘deposit’ from a legal point of view. On the other hand, by law, landlords of seasonal contracts must request a minimum of a two-month rental deposit. Often both type of contracts are confused leading to mistakes. More details in my article: Urban Rental Law in Spain – Spain’s Tenancy Act – 8th May 2016.
5. Right of entry. Frequently, concerned landlords word into a tenancy agreement the right to visit the rented property giving only a short notice. This is in fact null and void. This error stems from a misconception, when a landlord rents a property, he loses possession of it until such a time the keys are returned. What this means is that a landlord is forbidden to enter (his own) property without the express written permission of his tenant. Should a landlord disregard this, he can be criminally prosecuted for illegal trespassing being remanded into custody. More details in my article: Renting in Spain: Top Ten Mistakes – 8th of June 2011.
6. The tenant is responsible for any damage to the (rented) property. Frequently, landlords word rental contracts in such a way that they make tenants responsible for any and all damages to the property. Such a clause is – you guessed it – null and void. Tenants are responsible of paying for the normal wear and tear. Landlords must pay for repairs and maintenance that allow the property to be apt for dwelling purposes as per art. 21 LAU.
7. In the event of a sale, the tenant must leave. Another common mistake is to word a rental contract in such a way that if the property is sold whilst it is being rented out as a permanent abode, the tenant must leave the property (with his family). This again is null and void. Although following the amendments to Spain’s Lease Act in 2013 there are legal reasons which allow a landlord to bypass the three-year rule and kick out his tenant ahead of time, a sale is not one of them. The new buyer will be forced to respect the outstanding tenancy agreement until it ends (the full three years). This may lead to complicated legal situations with multiple ramifications which exceed the purpose of this article. Legal advice should be taken.
Hiring a seasoned lawyer, in my experience, pays for itself on all the money you stand to save on avoiding the most common pitfalls on signing a rental agreement in Spain.
You should hire a lawyer from the onset, particularly if you are a foreigner in Spain, before you commit yourself signing on the dotted line of a tenancy agreement. All agreements should be put in writing and worded into the rental contract. Quite often these contracts are flawed or have clauses which are null and void as templates are frequently used which tend to perpetuate errors.
Unfortunately, practice tells me that most clients only come to us after they have signed and landed themselves in hot water. The legal fees they wanted to save themselves will now be threefold at least.
Bottom line, for your own good, hire a competent lawyer from the outset before you commit and sign a tenancy agreement or any other legal document for that matter. Trust me, you will save yourself money and aggravation on the long run.