Renting a home in Spain: the rental contract (LAU)

A residential tenancy is the contract by which an owner (arrendador, the landlord) gives another person (arrendatario, the tenant) the use of a home in exchange for rent, when the main purpose is to meet the tenant's permanent housing need. That purpose is what triggers the enhanced protection of Ley 29/1994 de Arrendamientos Urbanos (the Spanish Urban Tenancies Act, LAU).

The LAU is largely mandatory law: its rules on term, renewal and deposit protect the tenant and cannot be agreed away to the tenant's detriment. Other aspects (rent, allocation of costs, additional guarantees) allow freedom of agreement within the legal limits.

It is worth working out from the start whether the contract is for a main home, for a room or for business premises, because the legal regime and the obligations change. Managora identifies the correct type, drafts the contract and formalises it for you. You can start yours on the service page for arrendamiento_vivienda_lau.

The term is freely agreed, but if it is shorter than 5 years (or 7 years when the landlord is a legal entity, that is, a company), the contract is compulsorily renewed in one-year periods until that minimum is reached. During that stage it is the landlord who is bound: the tenant may choose not to renew by giving at least 30 days' notice before the end of each yearly period.

Once the 5 or 7 years are complete, if neither party gives notice that they do not wish to renew (the landlord 4 months in advance, the tenant 2 months), the contract is tacitly renewed in one-year periods for up to 3 more years.

The tenant may withdraw from the contract once at least 6 months have passed, giving at least 30 days' notice. The tenant will only have to compensate the landlord if that was expressly agreed, with the equivalent of one month's rent for each year left to run (pro rata if it is less than a year).

The landlord may only recover the home before the minimum term if the contract expressly stated the need to use it as a home for the landlord, for first-degree relatives or for the landlord's spouse in certain cases, giving 2 months' notice.

The legal deposit (fianza, the deposit set by law) is compulsory and equals one month's rent in a residential tenancy (and two months' rent in tenancies for a use other than housing, such as business premises). It must be handed over in cash on signing. In most autonomous communities (Spain's regions) the landlord is required to lodge that fianza with the corresponding regional body.

As well as the fianza, the parties may agree additional guarantees (for example a bank guarantee or an extra deposit). In residential contracts of up to 5 years (or up to 7 years if the landlord is a legal entity), that additional guarantee may not exceed the value of two months' rent.

During the first 5 or 7 years the fianza is not updated. When the contract ends, the landlord must return it if the home is handed back in good condition, and may deduct damage attributable to the tenant that goes beyond normal wear and tear. Managora sets out the fianza and the guarantees correctly in the contract to avoid disputes when it is returned.

The rent may only be updated if the parties expressly agreed it in writing. If there is no updating clause, the rent stays the same for the whole life of the contract. Where it is agreed, the review applies once a year, on the date each yearly period is completed.

For contracts signed from 26 May 2023, the increase may not exceed the Índice de Referencia para la Actualización Anual de los contratos de arrendamiento de Vivienda (IRAV, the official reference index for annual rent updates), which is published by the INE (Spain's national statistics office) and which Ley 12/2023 set as the cap. For contracts before that date, the agreed index applies, usually the IPC (the Spanish consumer price index).

The IRAV and the IPC change every month, so the contract should not fix a percentage as a closed figure but refer to the official index in force at the time of the review. You can check the applicable percentage (the IRAV index, or the IPC in earlier contracts) on the INE website, which is the official body that publishes and calculates them. Managora works out the update using the correct index and notifies it for you.

The landlord must hand over the home in a habitable condition and carry out, without raising the rent for it, all repairs needed to keep the home usable, unless the damage is attributable to the tenant. The landlord must also respect the legal term and the tenant's priority right to buy (derecho de tanteo y retracto, the rights of first refusal and pre-emption) if the home is sold, unless it has been validly waived on the terms the law allows.

The tenant must pay the rent and any agreed update, pay for the supplies that are individually metered (electricity, water, gas), take on the minor repairs arising from ordinary wear and tear, and return the home in the condition in which it was received apart from normal deterioration. The tenant may not carry out works that alter the home without the owner's written consent.

The general costs of the building (community of owners' charges) and the IBI (the Spanish local property tax) may only be passed on to the tenant if it is agreed in writing and with the amount set at the start. By contrast, in a residential tenancy the estate agency and contract formalisation costs are always borne by the landlord, whether an individual or a company.

Renting a room in a shared home is not always covered by the LAU's main home regime: case law is not uniform and a good many courts apply the Código Civil (the Spanish Civil Code) to it, with greater freedom of agreement and without the compulsory renewals of 5 or 7 years, unless the contract covers a permanent residence need. That is why it is essential to draft the applicable regime precisely. You can arrange yours on the arrendamiento_habitacion_lau service page.

Business premises are a tenancy for a use other than housing (Title III of the LAU): they are governed above all by what the parties agree and, failing that, by the LAU and the Código Civil. They do not have the minimum term or the protective renewals of housing, the legal fianza is two months' rent and, unlike housing, letting business premises is usually subject to IVA (Spanish VAT), and to IRPF withholding (Spanish income tax withheld at source) when the tenant is a company or a professional.

In these contracts, clauses such as the term, the rent update, works, transfer of the lease and possible compensation at the end matter a great deal. Managora drafts the business premises contract to fit your case. You can start it on the arrendamiento_local_negocio_lau service page, which shows the current price of the service.