Long term rental in Mallorca

Renting in Mallorca: Your rights and obligations as a tenant

In Mallorca, as in the whole of Spain, all essential rental regulations are summarised in the Ley de Arrendamientos Urbanos (LAU) rental law. This law has been in force since 1995 and replaced older laws, which focused particularly strongly on the rights of tenants, with the consequence that due to the legal situation the renting of own properties was highly unattractive for many Spaniards. The result was a negligible share of rental apartments in the real estate market. By comparison, this figure was 17% in 2013, compared with 83% for condominiums. The European average is 30% of rental apartments. The Spanish market did not necessarily lack objects, only incentives and a corresponding legal framework for landlords, so that many preferred to leave their apartments vacant rather than rent them out on unfavourable terms.

The Rental Act of 1995 and in particular some new provisions of June 2013 are intended to ensure greater flexibility for both parties and a balanced protection of their rights. The expected effect: Liberalisation of the Spanish housing market.

Anyone who wants to rent a property in Mallorca could benefit from this, because the new law wants to motivate more private owners to rent out and the situation on the market could improve as a result. But attention: The regulations of the LAU are not applicable to all types of housing and tenancies. Excluded are commercial tenancies as well as luxury living spaces and short-term rentals, for example within the scope of holiday rentals. Furthermore, existing rental agreements remain unaffected by the new regulation. However, if you have already rented an apartment, you can agree with your landlord on a new version of the contract in accordance with the regulations in force since 2013. Here is an overview of the most important points of Spanish tenancy law and what you as the tenant must pay attention to.

Rental agreement: What has to be considered?

Important to know: In Spain, the rental agreement is informal, i.e. it can also be concluded verbally and legally. However, it is of course recommended that both parties agree on a written wording in order to have more legal certainty, especially in possible disputes. In particular, questions regarding the deposit and the amount of rent should always be clarified in the rental agreement, as should the exact address and size of the rented property, including the cadastral number, which allows a clear assignment. While both natural persons and legal entities may act as landlords, only natural persons are permitted as contractual partners on the tenant's side. However, married couples or shared flats can also be accepted as contract partners here, for example. One change resulting from adjustments made in 2013 is the future permissibility of an e-mail address, which is indicated instead of a postal address for the delivery of messages between the contracting parties.

Rent increases: What is permitted?

Due to the changes in the Rental Act, the rental agreement is to be relatively freely structured by both contracting parties, i.e. no concrete agreements are prescribed by the state. However, there are legal regulations with regard to possible increases: These may only be carried out once a year. Unless otherwise agreed in the contract, the amount is based on the consumer price or cost of living index IPC (short for índice de precios de consumo). This means that a rent increase of as many percentage points is permissible as the corresponding values of the IPC have changed. The IPC that was the most current at the time the contract was concluded is used as a reference. If the landlord, in Spanish arrendador, has made structural improvements, an increase in rent is permissible for the first time after three years, with which he can refer to these improvements. Although this increase may be based on the capital that had to be spent on these improvements, the maximum permissible limit is a maximum of 20% of the rental payment due at that time. It should also be noted that public subsidies must be deducted from the capital spent. When the rental payment is due can be determined individually in each rental agreement. As a rule, a monthly advance payment is agreed in the first seven days of the calendar month. Payment can be made by bank transfer or in cash (then the place of payment has to be the rented apartment, and of course the landlord is obliged to confirm).

Rental period: What is usual and allowed?

The term of the lease is laid down in Article 9 of the LAU. Whereas a minimum period of five years applied before 2013, this has now been reduced to three years. The official idea behind this is to take account of a short-term change in the tenant's living conditions in a more modern way: those who have to change their job and move to another location, for example, will benefit from the new regulation. But of course the landlord also benefits from this regulation. It should be noted that the landlord can assert his own use after the end of the first year of tenancy, which means that the tenancy agreement can be terminated by the tenant after only one year. If the rental contract stipulates a term other than three years, the principle of tacit renewal must be observed: If you as a tenant do not cancel at least thirty days before the end of the term stated in the contract, the contract is initially extended by one year until the minimum term of three years has been reached.

Deposit: How high is it?

Bail is mandatory. The amount of the deposit is usually one or two months' rent, details are specified in the rental agreement. The new version of the rental law of 2013 stipulates that the deposit may be updated for the first time after three years of rental periods, which means that the contracting parties may insist on a corresponding adjustment of the deposit at each subsequent extension of the rental agreement. However, it should continue to be the equivalent of one to two months' rent. If the parties have not agreed anything specific with regard to the adjustment mechanisms of the deposit, it will be adjusted in accordance with the rules for the agreed rent adjustments. These aspects are regulated in Art. 36 of the LAU.

Ancillary rental costs and property management: How are the costs distributed?

The ancillary costs in Spain are divided into two categories. Gastos generales are the "general costs", which are not only incurred in relation to the individual residential unit and over whose amount the tenant ultimately has no direct influence. These include the costs of general maintenance, but also charges such as waste collection or insurance. The contracting parties may agree that the maintenance costs of a residential property shall be borne by the tenant. In this case, the costs may be increased within the first three years of rental - also in accordance with the previous agreement. However, it is then directly linked to the previous increase in the rent payment: expressed as a percentage, it may not be more than twice as high as the last increase of the same. It can also be agreed that the tenant must pay the annual IBI (short for impuesto sobre bienes inmuebles) property tax. However, this must be explicitly formulated in the rental agreement. The other category of ancillary costs includes the gastos individuales, i.e. consumption costs that are based on the actual consumption of the individual tenant, namely the costs for gas, water and electricity. If you rent an apartment, you should make sure that the rental contract clearly states whether the rental sum shown there already includes all ancillary costs or whether these have to be listed separately.

Incidentally, a period free of rental costs can also be agreed in the rental contract if the tenant undertakes renovations or conversions in the corresponding property in return.

Termination of the lease: What must be paid attention to?

The Spanish rental law provides for the possibility for both parties to terminate the rental agreement. Since the new version of the LAU, the rental party is no longer obliged to comply with full lease years. This means in plain language: After a rental period of six months, the tenant may terminate the lease at any time by giving at least one month's notice. If such termination occurs before the end of the minimum term of the contract, the landlord may have the right to demand an appropriate compensation. The severance payment is usually based on the outstanding rental years, i.e. whoever terminates in the first rental year pays a severance payment in the amount of two monthly rental amounts, one for each remaining contract year. However, this scenario can be agreed in advance and also specifically regulated in the rental agreement. Furthermore, the tenancy can be terminated if the landlord loses or sells his property, for example through a mortgage. The following applies here: Is your lease registered in the land register? Only registered contracts will be continued in such cases, with all others no longer protected. The contract will be terminated accordingly and you must vacate the property within three months. If there is an entry in the land register, however, the tenancy can also continue to exist in the event of a change of ownership. The landlord also has the right in certain cases to terminate the tenancy in a timely manner, for example if the rent or deposit is not paid, if the tenant subleases the accommodation without the landlord's consent or carries out alterations without agreement. In the latter case, termination of the rental agreement without notice is even permissible. If an action for eviction is brought by the landlord, you - if granted - must bear the court costs incurred. The latter is automatically the case, by the way, if you do not appear for the court date! At the same time, however, it is also possible to seek an out-of-court settlement, e.g. by using mediation. Another reason for the termination of the lease may be the already mentioned registered own use of the property from the landlord's side. If this had to be included in the contract from the outset before 2013, this is no longer necessary; instead, the landlord can notify his intentions at the end of the first rental year with at least two months' notice and therefore terminate the contract. However, he or members of his family must then actually implement this personal need, i.e. he or they must move into the residential property. Otherwise the tenant has a right to compensation.

Rent real estate in Mallorca: The conclusion

Spanish tenancy law, which has been in force since 1995 and was last updated in 2013, attempts to protect both parties equally - in contrast to earlier versions, which mainly concentrated on the tenant as the contractual partner to be protected, but also indirectly generated disadvantages for them: Due to the unfavourable conditions for landlords, many hesitated to offer their properties for rent, so that the rental market, which was already stagnated by the long-term effects of the Spanish civil war, also stagnated. The current Rental Act is to be seen as a reaction to these conditions and current developments.

The LAU and its additions have thus created the conditions for a more flexible and dynamic property market, which benefits anyone looking for a long-term rental property in Mallorca. Even though there are a number of legal regulations and some peculiarities have to be observed in Spanish law, the general freedom of contract leaves enough freedom to agree with the landlord on a rental agreement that meets the needs of both parties as far as possible.

What you should consider with the long-term rent of a Finca on Mallorca stands in detail in our article on the page "Rent a Finca in Mallorca".