Catalonia plans new rental laws – we look at how it could affect landlords and lessees

The Catalan government recently announced that it is to put forward new proposals that would extend rental contracts for a minimum term of five years. Only five years ago, in 2013, Spanish legislation lowered the length of rental contracts from five to three years. However, Catalonia’s minister for land and sustainability, Damià Calvet, claims that this has been unhelpful for individuals and families who need continuity in their homes and lives at a time when rental prices have been going up. The Barcelona mayor Ada Colau is also in favour of a change of the law and believes it should be rolled out throughout Spain.

Under the current legislation, long-term contracts are for a minimum of one year with the right to stay up to three years. After the first year, lessees who want to end the contract need to give two months notice.

Many renters believe it is unfair that they are forced to uproot their lives or find new schools for their children at short notice due to the terms of their rental contract. They want to put down roots and build a community around them.

However, Bcn Advisors CEO Francisco Nathurmal thinks that overall, the new law would have a negative impact on the rental sector.

“We are regressing. Renting will become less flexible again and landlords will have to wait longer to get their homes back if they need to. They will also have to wait two more years to adjust the price to market values, which won’t help the rental market. Owners may switch to mid-term rentals or choose to sell their homes instead of renting them out. We could also see fewer properties available to rent, making the market less dynamic overall. This is a step back for landlords but is good news for tenants who are looking to rent a property for a longer period of time. It might also have an effect on rental prices especially if fewer properties are around, and therefore will drive prices higher in certain areas. The proposals could also have a significant impact on foreign investors’ buying habits, many of whom purchase property with the aim of letting out their homes to earn an income. They will also have to pay the agency fees, which are currently paid by the tenants.”

There has been much concern in recent years about the soaring costs of rents in Barcelona City. Since the third quarter of 2011 rental prices have risen at a compound average growth rate of just over 9% per year right up until the third quarter of this year. Latest figures at the end of Q3 2018 from property portal idealista showed an annual decrease in Barcelona city’s average rental prices of 5%, ending on €17.3 per square metre. Desirable districts such as Eixample, Gràcia and the Old Town saw the most notable decreases of 9% to €17.7 per square metre, 7% to €16.5 per square metre and 3% to €19.1 per square metre respectively.

Meanwhile up-and-coming areas such as Nou Barris and Horta Guinardó saw rises in rental prices of 8% and 5% respectively.

Athough the proposed legislation may mean landlords cannot increase their prices at the end of a shorter rental period, the longer tenancies could help them avoid often costly periods while they search for new tenants.