Spanish Tax Advisory: Catalonia imposes limitations on property rents

The new regulation includes containment measures for rents in contracts of rental of housing

On September 22nd,2020 the Government of Catalonia launched the Law 11/2020 on income containment on rental housing. This new regulation includes urgent measures related to the limitation of rents in housing rental contracts.

Among the most outstanding measures, we can find the following:

  • It allows the Administration to declare certain areas of the territory as areas with a tense housing market, for a maximum period of five years.
  • Lease contracts for housing intended for the permanent residence of the tenant that are concluded on the dates specified, will be subject to a regime of rent containment.
  • The rent containment regime of the law is implemented by applying the reference price to the mentioned contracts. 

On the other hand, the area of the property affected by such restrictions must comply with the following conditions:

  • That the average price of housing rentals experiences a growth higher than the average in Catalonia.
  • That the cost of housing rent exceeds an average of 30% of the usual household income.
  • That the average price of housing rentals exceeds 30% of the average income of people under 35.
  • That the price of housing rentals has experienced, in the 5 years prior to the time of the declaration, a cumulative annual growth equal to or greater than three percentage points above the annual rate of the CPI for Catalonia.

As for the reference prices, this amount is established from the index published by the Generalitat department responsible for housing. More specifically, it will depend on the data in the register of urban property rental deposits.

In view of this, the initial rent agreed upon at the time of formalizing the rental contract must comply with the following aspects:

  • It cannot exceed the reference price for renting a property with similar characteristics.
  • It cannot exceed the rent stated in the last rental contract, updated according to the competitiveness guarantee index.

For its part, the new legislation has declared 60 municipalities that meet the following criteria as "areas with a tense housing market":

  • They are in the Metropolitan Area of Barcelona.
  • They have a population of over 20,000 inhabitants.
  • Rental prices in that area have increased by more than 20% in the period between 2014 and 2019. 

Finally, the law includes sanctions for non-compliance with the rent containment regime. In the case of serious infringements, these can amount to a fine of up to 90,000 euros.

B Law & Tax

International Tax & Legal Advisors

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Tags: tax advisor madrid, Tax measures, Housing, Spanish Tax Advisory, Rentals, Contracts, Leases