The new Law 12/2023, of 24 May, on the right to housing, introduces certain new features which are described below:

1. Large landlords

Article 3.k) of the law defines “large landlord” as “an individual or legal entity that owns more than ten residential properties or a built-up area of more than 1,500 m2 for residential use, excluding in any case garages and storage rooms”.
However, these limits may be reduced when a stressed residential market environment is declared, so that “those owners of five or more residential properties located in that area” could be considered as large holders.

Aspects to consider:

I- According to what is stipulated in the 1st final provision of the law, which modifies article 10 of Law 29/1994, of 24 November, on Urban Leases (LAU), it is established that large landlords are obliged to accept, in rental contracts for main residence, an exceptional extension (with the same terms and conditions) for a maximum period of one year in the event that the tenant can demonstrate that he/she is in a situation of social and economic vulnerability.

II- According to the new sections 6 and 7 of article 17 of the LAU, when the property is located in a stressed area, the rent agreed at the start of the new contract may not exceed the last rent of the main residence rental contract that had been in force in the last five years in the same property, once the annual rent update clause of the previous contract has been applied, or the maximum limit of the price applicable in accordance with the reference price index system. The latter option will not be applied until the index system is approved (new transitional provision 7 of the LAU).

III- The law provides that, during 2023, the rent increases agreed by large landlords in main residence lease contracts may not exceed the result of applying the annual variation of the Competitiveness Guarantee Index, taking as the reference month for the update that which corresponds to the latest index published on the date the contract is updated. Likewise, during 2024, these increases may not exceed 3%.

IV- The 5th final provision of the law modifies Article 439 of Law 1/2000, of 7 January, on Civil Procedure (LEC), in order to introduce a new admissibility requirement applicable to claims for eviction for tenancy, eviction for precarious tenancy, summary guardianship of possession and protection of registered rights in rem (sections 1, 2, 4 and 7 of Article 250.1 of the LEC). These claims can only be admitted when the following issues are specified: if the property is the main residence of the occupant, if the occupant is in a situation of economic vulnerability and if the plaintiff is a large landlord.

V- In the event that these three conditions are met, i.e. the property is the main residence, the occupant is in a vulnerable economic situation and the claimant is a large landlord, claims will not be admitted unless it can be demonstrated that the claimant has gone through a conciliation or mediation process. This process will be based on an analysis of the circumstances of both parties, as well as the possible aid and subsidies available in accordance with regional housing legislation and regulations.

2. Stressed residential market areas

I- The autonomous communities will be competent to declare a residential market area as stressed. In general terms, this competence has been attributed to the autonomous community administration (and not to the local administration). The declaration will be valid for a period of three years and may be subject to an appeal to the administrative courts to prove its inappropriateness.

II- The declaration of a stressed residential market area is subject to the criteria defined by the autonomous communities and to the concurrence of one of the following two circumstances: that the average housing cost exceeds 30% of the average household income; or, alternatively, that the price of housing has experienced in the five preceding years an accumulated growth of 3% higher than the CPI. These circumstances will be reviewed three years after the law comes into force in order to adapt them to the reality and evolution of the residential market.

Aspects to consider:

I- A specific plan will be drawn up which will propose the necessary measures for the correction of the imbalances evidenced in the declaration as a stressed area.

II- Possibility of adopting specific measures by the Ministry of Transport, Mobility and the Urban Agenda within the framework of the State Housing Plan.

III- The land resulting from the compulsory transfer of urban development must necessarily be used for the construction and management of social or public housing.

IV- Possible adjustment of the definition of large holder.

V- The administrations will be able to impose obligations on large housing holders to collaborate and provide information on the use and destination of the dwellings they own.

VI- Collaboration formulas can be established with landlords in order to favour the increase in the supply of affordable rentals in the area.

VII- The owner or person intervening in the intermediation must indicate that the property is located in a stressed area. Prior to the formalisation of the contract, he/she will have to inform of the amount of the last rent of the habitual residence rental contract that has been in force in the last five years in that property, as well as the value that may correspond to it according to the rental price reference index that is applicable.

VIII- Commitment to reach within 20 years (or less, if so established by the autonomous administration) a minimum of 20% of the total residential market in the municipality in housing destined for social housing. To this end, the public investment forecast must be determined on an annual basis and the degree of progress must be explained.

IX- The following measures may be applied with the aim of containing prices in housing rental contracts:

· Extraordinary extension (Article 10.3 of the LAU): when the mandatory extension (Article 9.1 of the LAU) and/or the tacit extension (Article 10.1 of the LAU) ends, the lessee may request that the lease contract be extended extraordinarily for annual periods and for a maximum period of three years, during which the terms and conditions established for the contract in force will continue to apply. The lessee’s request for an extraordinary extension must necessarily be accepted by the lessor, except in specific cases.

· Limitation of contractual rents (Article 17, paragraphs 6 and 7, and Transitional Provision 7 of the LAU). The rent agreed at the start of new habitual residence rental contracts may not exceed the last rent of the contract that had been in force in the last five years in the same dwelling, once the annual rent update clause of the previous contract has been applied, without being able to set new conditions that establish the passing on to the tenant of fees or expenses that were not included in the previous contract.
For properties for which no residential tenancy contract has been in force in the last five years, the rent agreed at the start of the new contract may not exceed the maximum limit of the price applicable under the reference price index system (applicable once the index system is approved).

3. Extraordinary limitation of the annual updating of CPI-indexed income

The sixth final provision of the law modifies article 46 of Royal Decree-Law 6/2022, of 29 March, adopting urgent measures within the framework of the National Plan of response to the economic and social consequences of the war in Ukraine, which regulates the extraordinary limitation of the annual updating of the rent of housing rental contracts. The following limitations are applicable to all leases, with neither the concept of large tenant nor the concept of stressed area being relevant.

During 2023, if the rent is updated and there is no agreement between the lessor and lessee, the increase may not exceed the result of applying the annual variation of the Competitiveness Guarantee Index on the date of said update. Maximum of 2%.

During 2024, as in the previous year, the increase may not exceed 3%.

4. Eviction and eviction proceedings suspended under Royal Decree-Law 11/2020

Transitional provision 3 of the law allows, as of 30 June 2023, the resumption of eviction and eviction proceedings suspended in accordance with articles 1 and 1 bis of Royal Decree-Law 11/2020 of 31 March.

When the plaintiff is a large property owner, this resumption will only be possible – at the express request of the plaintiff – insofar as it is proven that the conciliation or mediation procedure established for this purpose by the competent Public Administrations has been held.

5. Minimum information in home purchase and rental transactions

Article 31 recognises the right of the person interested in the purchase or rental of a property to receive, prior to the formalisation of the transaction and the delivery of any amount on account, an extensive list of information.
In addition to all of the above, in the particular case of renting, the first final provision of the law modifies Article 20.1 of the LAU so that the landlord will be responsible for the costs of property management and formalisation of the rental contract.

6. Changes in personal income tax and real estate taxes

I. The IBI surcharge is increased for unoccupied residential properties, i.e. the property has been vacant for more than two years and, in addition, the owner has at least four residential properties, unless there are justified reasons for temporary vacancy (specified in the Housing Act itself).

Specifically, the surcharge is modulated between 50% and 150% of the IBI, depending on the duration of the vacancy and the number of unoccupied dwellings of the same owner in the municipality.

II. The general reduction in personal income tax for housing contracts is reduced to 50% (previously 60%). However, other cases are envisaged in which this reduction may reach:
– 90% when a new contract is formalised by the same landlord in a stressed area in which the initial rent has been reduced by more than 5%.
– 70% first rental by the taxpayer in a stressed area and the tenant is between 18-35 years of age. When there are several tenants, the reduction will be proportional to those who meet this requirement. Likewise, when the tenant is a public administration or non-profit entity and certain requirements are met.
– 60% when the property has been the object of a renovation project completed in the two years prior to the date of the rental contract.
The aforementioned increased reduction percentages -which come into force on 1 January 2024- will not be applicable to rental contracts for dwellings in stressed areas, when the rent agreed at the beginning of the rental contract exceeds the limits established in art. 17.6 of the LAU.