A lease agreement is a legal relationship of great importance—perhaps the most important, along with the sale of real property—within the field of real estate law, given the need for housing and the fact that it covers a large portion of the real estate transactions that take place on a daily basis, especially given the difficulty of accessing home ownership.
URBAN LEASE AGREEMENTS
As is well known, this involves the temporary transfer of the use and enjoyment of a residence or commercial space in exchange for the payment of rent.
The constitutional right to housing and the need to protect the fundamental rights of families to safely occupy a home, long ago led public authorities to address this issue through regulatory measures that ensured stability for families, as well as protection of their rights against abuses by landlords that must be prevented.
The imbalance between the two parties has led to the gradual development of protective regulations that, in turn, safeguard the rights of both parties in an effort to achieve balance and justice in this legal relationship, which is so important to people.
This type of contract is regulated in great detail, specifically in Law 29/1994 of November 24 (which has undergone countless amendments) on Urban Leases; hence, although the legal text does not contain many articles, it nonetheless encapsulates the entire legal framework governing this type of contract, resulting in a very extensive range of scenarios it covers; however, we will not provide commentary on it in this article, as that would exceed its scope.
If you have any questions or disputes regarding residential leases, please do not hesitate to contact this law firm.
KEY ASPECTS OF ITS LEGAL REGULATION
Without prejudice to the issues discussed in the following sections, the following matters are covered:
1. The law regulates lease agreements for residential properties and other properties used for purposes other than housing, excluding certain types of agreements, which it explicitly lists, including seasonal leases.
2. The provisions of the Act are mandatory; therefore, any agreements between the parties must comply with the Act unless the parties expressly provide otherwise.
3.- The agreements between the parties are binding provided they comply with the law; however, there are matters that the parties may stipulate even if they differ from the provisions of the law. See, in this regard, the tenant’s option to waive certain rights, such as the right of first refusal, subleasing, and so on.
4. The rent will be adjusted annually in accordance with the index established by law; however, this does not apply if the parties have not explicitly agreed to it. Some people who have consulted us have been surprised to find that they cannot increase the rent because this possibility was not included in the lease agreement.
In this regard, there are currently time limits on the increases that may be applied. See Law 12/23 of May 24, on the right to housing.
5. The landlord may prohibit or restrict subletting or the assignment of the lease.
6.- The rent is freely agreed upon by the parties, although it should be noted that the new Law 12/23 of May 24, regarding the right to housing, has introduced some changes depending on whether the landlord owns more or fewer properties, and whether the property is located in areas with higher rents—so-called “rental-regulated zones.”.
7.- Although the law allowed rents to be adjusted based on the CPI increase, the new regulations have established certain
Limits: 2% for 2023, 3% for 2024, and to be determined for 2025 at a later date.
Rent is usually paid on a monthly basis.
7. The tenant may not perform any construction work without the landlord’s consent, and any work carried out with authorization that becomes part of the dwelling shall be considered improvements to the property for the benefit of the landlord; we are referring here to improvement work, never to maintenance work, which must be paid for by the landlord.
TERM OF THE URBAN LEASE AGREEMENT
According to the law, the minimum legal term is 5 years, unless the tenant voluntarily vacates the dwelling before the end of that period.
Initially, the lease may be agreed upon for a shorter term, but in such cases, the tenant, if they so choose, may extend it to the minimum of 5 years, as we have mentioned; however, in this case, they must take into account what we discuss later regarding the denial of an extension.
We have sometimes come across 9-month leases that are purported to be seasonal leases, but this is not the case because seasonal leases are limited to 3 or 4 months; therefore, in these instances, we would be dealing with a standard lease subject to the aforementioned legal term.
Once the maximum term has expired, the parties may extend the contract either explicitly—by establishing new terms or a new extension—or tacitly on a year-by-year basis if the contract has not been terminated by the expiration date.
EXCEPTIONS TO THE STATUTORY TERM
It is common for landlords to stipulate that, during extension periods, the tenant’s right to an extension will not take effect if the landlord needs the dwelling for himself or for certain family members.
This is subject to a requirement for two months’ prior notice and to the tenant’s oversight, since if the tenant has not occupied the dwelling within three months; and in this case, the tenant who vacated the property will have 30 days to be reinstated in the use and enjoyment of the property, or to be compensated with an amount equivalent to one month’s rent.
This is an amendment that was added to the Urban Lease Law a few years ago. Its implementation has been highly controversial and has led to considerable conflict because it has been misused by many landlords who have seen it as an opportunity to evict tenants, knowing that there will be no adverse consequences for them afterward.
The reality is that this is the case because the person who is forced to leave the home will not do so without having signed another lease during the notice period, and even if they discover that the previous landlord breached the contract, it won’t be easy for them to return to the home and breach the new lease they’ve signed for another residence.
That is why we always give the same answer to anyone who asks us this question: namely, the need to respond to the notice of intent by demanding, without a shadow of a doubt, documentary proof of the necessity of such use by the aforementioned family member, since this often dissuades the owner from engaging in this abusive practice that constitutes a violation of the law.
Therefore, if this situation arises, you should not react automatically, assuming that the landlord’s claim is true; instead, seek the advice of a lawyer who specializes in these matters, as their involvement could help you avoid many adverse consequences.
Once the tenant moves out of the property, it must be occupied within the first two months, and the tenant will have the option to file a claim, If this does not occur, the landlord may either seek reinstatement of possession or claim compensation equivalent to one month’s rent for each year remaining on the lease.
THE TENANT'S OBLIGATION TO PAY RENT
The tenant’s primary obligation is to pay rent; therefore, failure to do so triggers the termination of the lease through eviction, the purpose of which is to remove the tenant from the premises.
The law equates the concept of rent with others, such as payments for electricity and water, etc., so that failure to pay rent will also result in the same consequence
With regard to eviction proceedings, the law grants the tenant the right to invalidate, weaken, or nullify the eviction action if the landlord has not previously issued a demand for payment that would have the effect of discharging the tenant’s liability upon such invalidation.
The law seeks to protect the landlord, but does not want hasty and harmful consequences; therefore, on a one-time basis, it allows the tenant to avoid eviction if he or she pays upon being served with a summons to answer the complaint, or upon the landlord’s first attempt at amicable collection.
CAN A TENANT STOP PAYING RENT?
The courts are very clear on this point, so the general rule is that it is not possible to stop making payments on the grounds of the landlord’s breach of contract.
This is not the case with reciprocal obligations, where the party in breach cannot claim a breach by the other party, and it is generally understood that, as long as the tenant is in use and possession of the dwelling, the landlord’s primary obligation is being fulfilled; therefore, it would be meaningless to allege a breach of contract that could justify such drastic conduct on the part of the tenant as nonpayment.
This circumstance must be taken very seriously; our advice is not to miss any payments, because even a single missed monthly payment could result in an eviction claim against you.
OWNER'S OBLIGATIONS AND CONSEQUENCES OF NONCOMPLIANCE
In the event of a breach by the landlord, the tenant must file a claim against the landlord if the parties are unable to reach an amicable resolution.
Tenants often complain that the landlord neglects the property and fails to address the repair requests that are his responsibility, and if this happens, you should not consider refusing to pay rent because, as we mentioned above, the landlord’s primary obligation is to provide possession of the property, and this obligation is fulfilled under the lease agreement; the landlord’s failure to cover repair costs is not a primary obligation, unlike the tenant’s obligation to pay rent.
THE PROBLEMATIC NATURE OF THE REFUND OF THE SECURITY DEPOSIT
The reality is that, although the law stipulates that the security deposit must be deposited at the official institution designated for that purpose, contracts typically do not include any provisions on this matter. As a result, landlords usually require the security deposit at the same time as the first month’s rent, promising to return it at the end of the lease.
The reality is that this rarely happens and is often a source of conflict; such returns are rarely handled amicably.
We always recommend that, before moving out, you arrange with the landlord or real estate agency a date to return the keys, as well as a date when both parties should meet to inspect the condition of the property, agree on any potential defects, and determine the extent of those defects.
In contracts, as established by law, the purpose of the security deposit is to ensure compensation for damage to the property, which is why landlords are often reluctant to return the money and make excuses for not doing so.
In our many years of experience, we’ve seen it all, and our conclusion is that if you don’t follow our instructions, you won’t get your security deposit back—because we’re always talking about amounts that don’t really make it worth hiring a lawyer and paying both the lawyer’s fees and the cost of the claim.
It's definitely best—knowing that this is a sensitive issue—to reach an agreement when the keys are handed over.
Every effort should therefore be made to arrange for the keys to be returned at the same time as the security deposit is refunded, following an agreement on the condition of the house.
What cannot be avoided is that, if there are outstanding bills, a certain amount will be withheld; however, this does not usually pose a problem, since the excess amount will be refunded once proof of payment for the bills has been provided.
EVICTION, AS THE MOST COMMON JUDICIAL PROCEDURE
Without a doubt, the most common legal action is eviction for nonpayment; as established by consistent case law, repeated failure to pay or the simple fact of failing to pay a single monthly installment is sufficient grounds for such an action.
You should be aware that the law recognizes that a tenant who has been served with a notice or sued for the first time for eviction due to nonpayment has the right to dismiss the action by paying the amount specified in the notice. This right will no longer apply if the claim is not the first of its kind.
Finally, it should be noted that in the event of nonpayment of rent, an eviction may be sought either without claiming the rent owed or by claiming the rent owed; the difference being that if the lawsuit combines both claims, the defendant has the opportunity to raise any type of defense regarding the amount owed; this is not the case if the claim is solely for eviction, in which case—unless the debtor provides proof of rent payment—eviction will proceed automatically.
Depending on the tenant's financial standing or ability to pay, this law firm recommends one course of action or another.
This eviction procedure has undergone procedural reforms over time, aimed at expediting the process to provide relief to the landlord as quickly as possible, while always safeguarding the tenant’s rights.
This article does not aim to address this legal proceeding, which will be covered in another article; we have simply chosen to mention it because of its practical importance and the large number of court cases it involves.
Other legal proceedings arising from the Urban Lease Law that are also relatively common and that our law firm handles include: eviction due to uncontrolled construction work; claims regarding improper rent increases or increases sought by the landlord; and so on.
The regulation of other procedures—other than those arising from the Urban Lease Law—that are of great importance and have significant implications, such as eviction for non-compliance with lease terms and eviction of squatters, should be excluded.
Both legal proceedings have been discussed and analyzed on our website, and we refer you to those posts.
Carlos BAÑO Law Firm
We don't want to conclude this article without mentioning that on our Law Firm We have extensive experience in drafting contracts as well as in representing clients in court on matters arising from the application of the Urban Lease Law.
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