Urban Leases Law: What should you know if you are a landlord or tenant?

I'm Rubén Águila, and when it comes to rentals, I know exactly what you're thinking. After many years of dealing with contracts, landlords and even courts, I will tell you firsthand what you need to know about the Urban Leases Law (LAU) in Spain. Throughout my life, I have seen the best and the worst of this legal framework, and today I want to share my lessons with you. But beware, I will do it in my style: direct, simple and with the experience of someone who has been in the line of fire.

What is the Urban Leases Law?

The LAU is basically the bible of rentals in Spain. It is in charge of regulating everything related to lease contracts, whether you are renting a home or commercial premises.The objective? To create a balance between the rights and obligations of the lessor (the landlord) and the lessee (the tenant). This includes everything from the length of leases to how prices are updated, the payment of deposits, and most importantly: what happens when things go wrong.

Quick (but essential) history

This law has gone through several reforms over the years. The original version dates back to 1964, but the most significant ones were in 1995 and 2013. However, the most recent update, Law 12/2023, has brought interesting changes that affect all contracts signed on or after May 25, 2023. So if you signed your contract after that date, pay attention.

Length of contracts: how long can you stay?

One of the key aspects of the LAU is the duration of the contract. This is where things get interesting. The law says that the parties (landlord and tenant) can freely agree on the duration of the contract. But if you decide to rent for less than five years (or seven if the landlord is a company), the law protects you: the contract will automatically renew every year until you reach that minimum duration.

And if that wasn't enough, with the new reforms of 2023, if you are in a situation of economic vulnerability, you can ask for an additional one-year extension after your contract ends. This, of course, backed by a report from social services certifying your situation. So, if the landlord is a large tenant (owner of many homes), he is obliged to grant you that extension. Not bad, right?

Rent price: How much can they raise you?

Let's talk about dough. Article 17 of the LAU makes it clear that rent is something that is freely negotiated between the parties. However, the law also brings important limitations regarding rent increases. If you live in a stressed area (which are basically areas where rent prices are out of control), your landlord cannot increase the rent in a new lease beyond the last price recorded in the last five years, adjusted for inflation.

Also, if the landlord is a large tenant, things get even more interesting: the rent price cannot exceed the price indexes established by the government for those stressed areas. So if you think you're going to get nailed with an exorbitant increase, it's time to take a look at what the law says about your area.

What if you want to leave early

Well, here things get a little more complicated. The LAU allows tenants to leave the apartment after six months of the contract, as long as they give 30 days notice. But if you are a landlord, you also have your rights. You can get your home back before five years if you can prove that you need the property for yourself or a close relative.

Yes, it's not as easy as saying "I need my house."

Yes, it's not as easy as saying "I need my house. You have to give at least two months notice and comply with the legal procedures. And watch out, if you skip any steps, you can end up in legal trouble, so make sure you do everything accordingly.

Deposit: A small safety cushion (or so it should be)

When you sign a contract, the law requires you to deliver a deposit. For housing, it is one month's rent; if it is for a different use (such as commercial premises), it is two months. This deposit is an insurance for the landlord in case you cause any damage or do not fulfill your obligations. But, be careful! The landlord must deposit the deposit with the corresponding body, and if everything goes well at the end of the contract, he must return it to you.

The novelties of 2023: More protection for tenants

The reform of 2023, especially the Law for the Right to Housing, has been one of the most revolutionary in terms of protection for tenants. Now, if the rent is in a stressed area and the landlord is a large tenant, price increases are certainly limited. In addition, the law makes it easier for vulnerable tenants to extend their stay in the dwelling, even when their original lease has expired.

In addition, this law introduced benefits for those landlords who make improvements to their properties. If you improve the energy efficiency of a property or make the property more accessible, you can raise the rent by up to 10%.

Conclusion: Knowing the LAU is your best tool

The Urban Lease Law is a key piece if you are renting or leasing a property in Spain. Knowing how it works and what your rights and obligations are can save you a lot of headaches. My advice is to always read your contract well, consult a lawyer if necessary, and above all, don't be surprised.