How Rental Earnings Are Updated and Other Keys About the New 2% Limit

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admin March 31, 2022 22 Views
Updated 2022/03/31 at 2:06 AM
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How Rental Earnings Are Updated and Other Keys About the New 2% Limit
How Rental Earnings Are Updated and Other Keys About the New 2% Limit Listen to this article

The rental income update has nothing to do with the price that is signed at the beginning of the contract or with other variable costs that the owner may pay to the tenants. However, for those who live in a rented house, this can become the main factor in the increase in housing prices, as long as the owner has demanded an increase. As the new decree of special measures for the energy crisis comes into force and as of June 30, the increase cannot exceed 2%. Leglitas’ attorney Mari Luz Rodriguez predicted that “there will be more and less, as the landlord will want to maintain the CPI.” [el tope que se aplicaba hasta ahora], which interests him because he is tall”. At the legal advice company they’ve been seeing an increase in calls for the issue for months, “since inflation started rising.” Here are seven questions to help you understand how the fare review mechanism works.

What is Fare Update?

When an owner and a tenant sign a rental contract, the price is determined independently, as established by the Urban Leasing Law (LAU). Only Catalonia, the regional rent regulation law that was approved in September 2020, deviated from that rule and set legal rent limits in some municipalities. But the Constitutional Court recently overturned that regulation. In other words, whatever price the two parties signing the lease across Spain can set right now. However, once they are signed, the tenant has the right to live in the home for at least five years (and seven years when the landlord is a company).

The price is agreed upon for the entire term of the contract, but Article 18 of the LAU governs the possibility of increasing it so that the landlord does not lose purchasing power. “Rent can only be updated by the landlord or tenant on the date when each year of the contract is completed,” the rule says. In other words, the update is a price adjustment that can be made at the end of each contract annuity and under certain conditions.

What are those conditions?

From the outset, the manner in which the rent is updated should be expressed in the lease. “In the absence of a clear agreement, it will not be implemented,” the law says. And it also does not come into force automatically, but “it shall be payable to the tenant from the month in which the interested party notifies it”. Leglitas’ lawyer Rodriguez explains that “the right thing to do is to communicate it in writing”, explaining the method used and the new volume. In very old contracts signed before March 31, 2015, the landlord has the right to request an annual increase, even if it is not explicitly stated in the contract, as Article 18 of the LAU was similarly written earlier, which is a Among those who have suffered the most from the political turmoil of recent years: it has been revised five times since 2013.

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How is the fare updated?

legally, as stipulated in the contract. This makes it difficult to know how this translates into practice. Because leases are private agreements, many times they are not registered and, moreover, many landlords are not aware that there is a way to claim an increase. for each annuity is completed. In any case, it is clear that those who use the Consumer Price Index (CPI) for the most part. This indicator of inflation began to skyrocket last fall as a result of a rebound in economic activity after the pandemic’s first hit. And while everyone expected it to begin to loosen up, the war in Ukraine has kept it rising, driven by international energy prices.

The CPI is also the indicator that was taken as the maximum reference in the last legal change to the norms, which was made in March 2019 when inflation did not appear to be a problem in the short or medium term. For updates, it is usual to refer to the latest inter-annual variation published by INE. For this April, for example, February will be taken (with prices varying between March 2021 and February 2022), as the statistical institute will not provide data for this month until the middle of the next (although this Wednesday it will be as of March). gives the figure at the end, not sure yet).

How will the new cap be calculated?

The idea of ​​the government to address this problem is to temporarily link the top of growth not with the CPI (which is skyrocketing), but with the Competitiveness Guarantee Index (IGC). This is another indicator that INE also publishes to measure variation in prices. But it doesn’t do this directly (the CPI compares the same basket of products twice and calculates the difference in their costs) but it does reduce the competitiveness that the Spanish economy has lost in relation to the eurozone since 1999. . The IGC was created to guarantee the competitiveness of the Spanish economy, and for this reason it has another feature: legally it is always applied in values ​​between 0% and 2% (even if it is negative or that). be more than a percentage). This is why the earnings update is temporarily capped at 2%, as it is currently above it (2.02%) and is predictable not going down.

Can you raise my rent by more than 2%?

If the landlord is an individual, and as explained by the government, it can be. Royal decree-law, as almost all rental laws have done in recent years, would differentiate between small and large owners. In the latter, individuals or companies that have more than 10 urban properties, or an area equal to 1,500 square meters excluding garages and storage rooms, will be considered. For small landlords, the rule provides for any possibility in agreement with the tenant, although it states that if there are discrepancies, the IGC is applied as a limitation. Hence the government is of the view that an increase of more than 2% will not be accepted. For larger owners, who have a better ability to negotiate and pressure the tenant, it has been established that the agreement can never exceed the new legal limit.

What if my fare is updated before or after the new limit?

The new law, in the absence of a look at the final text in the BOE, is not retroactive. If the contract was updated in March and is in accordance with the CPI, the tenant cannot request that the 2% cap be applied now. However, this situation has been dragged on for months and is often resolved through agreements between individuals. The Rent Negotiating Agency, a private company that leasing brokers, calculates that in the last quarter “about 85% of lessees did not implement the overall increase in IPC.” And of those, 27% (which represents about one in five owners) have given up on raising any money.

The new law is proposed from April to June. Therefore, from July 1, it will, in theory, revert to the state it has been in so far. But nothing stops the rule from being expanded as it has happened to others during the pandemic. Bumping the rent update with the IGC is a demand from tenant unions, who want it to be fixed in the LAU. And Jose Ramón Zurdo, general director of the Rental Negotiating Agency, believes we will see the measure extend beyond June 30: “I have no doubt that it will be extended, which will be another form of price interference.” runs the risk of becoming

Another thing to keep in mind is that the update takes effect from communication, which can be done at any time after one year of the contract. In other words, if the landlord has forgotten it and demands it after three months, the new price will start to be paid from the fourth month, but the tenant cannot claim the dues.

How many people does the measure affect and how much money is involved?

It’s hard to know. The Ministry of Transport has calculated that there are approximately 3.5 million rental contracts in force in Spain. As the rule will initially apply for a quarter, it will affect a quarter (875,000) of those contracts on the basis that the same number were signed in 12 months of the year. However, in practice there are times (September, change of year…) when the market is more active. The government didn’t even provide an overall impact figure, but it’s easy to calculate the cost in a standard contract.

According to the latest data from the Idealista portal, the average price of a two-bedroom apartment in Spain is 695 Euro per month. If the rent was revised now with a 7.6% increase in the CPI for February (last published), the tenant would have to pay 747.83 euros, which means about 53 euros more per month and 634 euros more per year will have to pay. If the new 2% cap is applied for growth, the monthly increase would be 13.9 euros (708.9 euros of income), which when multiplied by 12 months would cost an additional 167 euros. But be careful, because when it comes to percentages, those amounts are even higher in the most expensive cities.

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