Annual Rent Update in Residential Lease Agreements.
Dear owners and tenants of Dust and Sand Luxury Homes in Sitges,
Starting January 1, 2024, significant adjustments will be implemented in the annual update of residential lease agreements governed by the national-level Urban Leases Law (LAU). These modifications, established by the final sixth provision of the Housing Law, extend the extraordinary limitation that has been in place since March 2022 in response to the economic and social consequences of the war in Ukraine.
Over the past 21 months, the reference for the annual rent update has been the variation of the Competitiveness Guarantee Index (IGC), with a maximum limit of 2%. Upon the annual lease renewal, the landlord and tenant must agree on the new increase. In the absence of an agreement, the increase cannot exceed 3%.
Specifically, the amendment to Article 46 of Royal Decree-Law 6/2022 establishes differentiated conditions for landlords considered “large holders” and those who are not. For the former, the increase will be governed by a new agreement between the parties, not exceeding 3%. In the case of the latter, the increase will result from a new agreement or, in its absence, cannot exceed 3%.
Since late March 2022, these restrictions on annual increases have been in effect as part of government measures to contain inflation, including fuel price reductions, a reduction in VAT on electricity bills, and discounts on public transportation.
However, intervention in the rental market has faced criticism. It is noted that these measures have reduced the supply of residential rentals, affecting both landlords and tenants. The shortage of supply has led to a 12% decrease in permanent rental homes.
Concerns are raised about excessive regulation and its negative effects on the rental market. Limited supply, coupled with increasing demand, has led to landlords seeking more secure tenant profiles.
It is emphasized that the constraint on supply is not only due to restrictions on price increases but also to concerns about non-payment and occupation of rented properties.
To counter these challenges, options such as affordable non-payment insurance for landlords and the ability to check credit databases before selecting potential tenants are offered.
In summary, these new rules in rental updates from 2024 aim to balance the market but have sparked debate on government intervention and its consequences.
We will keep our clients informed of any further developments.
Sincerely, Dust and Sand Luxury Homes
