Spanish rental contracts: What to expect when renting your first home in Spain

Renting a property in Spain, especially for the first time, can seem complex. You must navigate a market with its own characteristics and legislation, as well as understand tenants' and landlords' specific obligations and expectations.. However, with the right knowledge, you can navigate the process smoothly. From understanding different types of rental agreements to knowing your rights and obligations as a tenant or as a landlord, this article covers all the essential aspects of renting in Spain. Whether you plan to rent a property on a long-term basis or for shorter periods, being informed about Spanish laws and regulation will ensure you make the best decisions for your situation.

What are the types of rental agreements in Spain?

In Spain, rental agreements are typically governed by the Urban Leases Act (Ley de Arrendamientos Urbanos or LAU), which regulates most aspects of residential leases. The two main types of rental contracts are long-term leases and short-term or seasonal rentals, each with its own legal implications. You should consider their basic differences before deciding which one is most suitable for your objectives.

Long-term residential rentals

Long-term rentals are designed for tenants who wish to make the property their primary residence. The LAU protects these contracts, which typically last for a minimum of one year.

In this case, tenants are safeguarded against unjust eviction during the initial contract period. They are entitled to renew the contract unless you, as landlord, can prove you need the property for personal use. The contract's guidelines protect tenants from arbitrary rent increases.

Short-term and seasonal rentals

Short-term rentals (also known as alquiler de temporada) are for tenants seeking temporary accommodation, such as for holidays or work assignments. These contracts are generally less than one year and are not subject to the same tenant protections as long-term leases. While tenants must adhere to the contract’s specific terms, such rentals are often expected to come furnished. They are also typically more flexible in terms of lease duration.

What are the tenant and landlord obligations in Spain?

Understanding the legal obligations of both tenants and landlords will be crucial for a successful rental experience. Below are the basic aspects of this relationship, with more details available in this post regarding associated costs such as rent, security deposits, and additional expenses like utilities and agency fees.

Main tenant obligations

• Paying rent on time: Rent is typically paid monthly, and failure to do so can result in penalties or even eviction. Rent is usually paid via bank transfer, and tenants must ensure payment deadlines are met.
• Maintaining the property: Tenants are responsible for keeping the property in good condition. Small repairs, such as fixing appliances or minor wear and tear, usually fall to the tenant, whereas larger repairs are the responsibility of the owner.
• Paying utilities: In addition to rent payment, tenants generally pay for utilities like water, electricity, and gas unless the contract specifies that these are included in the rent.
• Adhering to community rules: If the rental property is part of a building with shared facilities, tenants must comply with community regulations, which may include quiet hours, use of amenities like pools, and maintenance of communal areas.

Main landlord obligations

• Providing a habitable property: In case you are the landlord, you must ensure that the property is in good condition when the tenant moves in and remains so during the rental period. This includes addressing any major repairs that arise, such as plumbing or heating issues.
• Respecting tenant privacy: The landlord cannot enter the property without prior notice unless in an emergency. Home owners must schedule inspections or repairs with the tenant’s consent
• Returning the security deposit: Once the lease ends, the landlord is required to return the security deposit, minus any deductions for damage or unpaid bills, within one month.

How to draw up a rental contract in Spain

A rental contract in Spain can be either written or oral, though we strongly advise you to have always a written contract to protect both parties. This document should cover the following key elements:

• Identification of the tenant and landlord: Both parties' full names and identification numbers (NIE for non-residents or DNI, Documento Nacional de Identidad, for residents) should be listed.
• Property description: Details of the rental property, including address, size, and condition.
• Rent and payment terms: This section outlines the rent amount, payment method, and due date. You may also include penalties for late payments.
• Duration of the lease: Do not forget to specify the start and end date of the lease, with details on whether it can be renewed.
• Security deposit: The amount of the deposit and the conditions for its return should be stated clearly. Remember that this serves as financial security, covering potential damage or unpaid rent at the end of the tenancy.

Here are two examples of rental contracts for you to use as a reference:

Template tenancy agreement for a residential property

Guidance template for a residential tenancy agreement

How long are rental contracts in Spain, and what is the renewal process like?

For long-term residential leases, the minimum legal duration is one year. After the first year, the contract is automatically renewed annually unless notice of termination is given by either party. These automatic renewals continue for up to five years for individual leases or up to seven years for corporate leases. If the tenant or landlord wishes to end the contract after this period, a four-month notice period is required.

Tenants also have the right to terminate a long-term lease after the first six months, provided they give at least 30 days' notice. However, some contracts may include a penalty for early termination, typically equivalent to one month's rent for each remaining year of the contract.

For seasonal or short-term rentals (e.g., holiday or temporary stays), there is no legally mandated minimum duration. The contract's length is determined by the agreement between the tenant and landlord, offering more flexibility to cater to short-term needs.

How much can a landlord increase rent in Spain?

Spanish law strictly regulates rent increases to protect tenants from unreasonable hikes. Any potential rent increase during the lease term must be explicitly stated in the rental contract.

Typically, rent increases are linked to the Índice de Precios al Consumo or Consumer Price Index (CPI), a measure of inflation published by the Spanish National Institute of Statistics (INE). The CPI tracks the cost of living, ensuring that any rent adjustments remain aligned with inflation rates. This mechanism ensures that rent increases reflect real economic changes.

However, it's important to note that even though rent increases can be tied to the CPI, landlords cannot increase rent beyond certain legal limits. In recent years, Spanish legislation has introduced additional restrictions in certain high-demand areas, known as zonas tensionadas (stressed residential areas). In these zones, local governments may impose caps on rent increases, especially in cities where housing demand far exceeds supply, such as Barcelona and Madrid.

Moreover, rent increases can only be applied annually, and the tenant must be informed of any adjustments with clear documentation. This transparency ensures that tenants are fully aware of any upcoming rent changes, and landlords cannot introduce retroactive rent increases.

How does the termination of a rental contract work in Spain?

At the end of a rental contract, the tenant must return the property in the condition it was in at the start of the lease, allowing for normal wear and tear.

A landlord will be required to return the security deposit within 30 days, minus any necessary deductions for repairs or unpaid bills. A clear breakdown and receipts for any deductions made by the landlord must be presented to the tenant. This transparency helps prevent disputes and ensures a smooth process for both parties.

A landlord should also conduct a final inspection of the property with the tenant. This allows both parties to review the condition of the property, address any concerns on the spot, and avoid misunderstandings later about potential deposit deductions.

Utility bills and rent payments have to be settled before the tenant vacates. Any outstanding amounts can be deducted from the deposit, but it's best to have proof, such as receipts, to avoid disputes.

The tenant is responsible for returning all keys and access devices. Failing to return them can delay the deposit return or incur additional charges if replacements are necessary.

What are the tax obligations when renting a property in Spain?

Home owners must declare all rental income to the Spanish tax authorities, and non-compliance can lead to fines. For non-resident landlords, the tax rate on rental income is 24%, although EU citizens may deduct certain expenses related to the property. Read more about tax reductions and allowances here.

Tenants do not generally have to notify authorities about their rental arrangement unless they are subletting the property or renting it out as a holiday home. However, in certain cases, tenants may benefit from tax deductions depending on their income and residency status.

What should you do if there is a dispute over a rental contract in Spain?

Disputes between tenants and landlords can arise for various reasons, including disagreements over rent, property maintenance, or the return of the security deposit. Fortunately, Spanish law provides multiple avenues to resolve these issues.

Common disputes

• Non-payment of rent: Landlords have the legal right to begin eviction proceedings if the tenant fails to pay rent on time. However, eviction is a formal process and requires a court order.
• Property damage: Disagreements may arise over whether damage to the property is due to normal wear and tear or tenant negligence. In such cases, the landlord may withhold part or all the security deposit.
• Unreturned deposits: If the landlord does not return the security deposit within 30 days after the contract ends, the tenant has the right to demand the return through legal actions.

Resolution methods

• Mediation and arbitration: Alternative dispute resolution methods that are quicker and less expensive than court.
• Court action: If mediation fails, tenants and landlords can file a claim in a Spanish court. For issues like non-payment of rent or unreturned deposits, courts can enforce the terms of the rental contract.
• Consumer protection agencies: In Spain, consumer rights organisations can provide advice and support to tenants facing issues with their landlords. These agencies can guide tenants on how to file a formal complaint.

Key takeaways for a first-time rental contract in Spain

Renting a home in Spain is a process that requires careful attention to both legal and practical details. You need to choose the right type of contract based on your needs, whether it’s a long-term lease protected by the LAU or a short-term rental for temporary stays.

While tenants must ensure they understand their responsibilities, such as maintaining the property and paying rent on time, landlords must provide a habitable property and return the security deposit within 30 days. Rent increases are only allowed if outlined in the contract and must follow guidelines linked to the Consumer Price Index. In case of dispute, be aware of your legal options, including mediation and court action, to ensure that your rights are protected.

For more insights on living expenses when renting in Spain, check out our Cost of living in Spain guide, which provides a comprehensive breakdown of costs such as rent, utilities, and other living expenses to help you budget effectively.