Residential and commercial tenancies are one of the most complex and changeable areas of real estate law. Successive reforms at state and regional level have altered the rules on the duration and extension of contracts and on rent indexation. They have also introduced specific rules for stressed residential market areas and for “grandes tenedores”, large-scale landlords. Today, the legislation applicable to each contract may depend on its date, on the nature of the landlord, on where the dwelling is located or on the purpose of the letting.
Since 1992 we have advised owners, property portfolios and “administradores de fincas” —managing agents— in Barcelona on everything relating to the letting of dwellings, from the preparation and signing of the contract through to its ending. Where a dispute arises, we also defend the owner's interests before the courts.
A constantly evolving body of law
The “Ley de Arrendamientos Urbanos” —the LAU, Spain's urban tenancies act— remains the cornerstone of the legal regime governing residential letting, but applying it now requires account to be taken of a regulatory framework far more complex than that of only a few years ago. In residential tenancies, an essential part of the regulation is mandatory, so that the parties' freedom of contract is subject to limits that must be known before drafting the contract, before including a particular clause or before taking any decision during its term.
Barcelona adds to all this a particular complexity in matters of housing and residential and commercial tenancies. State legislation coexists with an extensive body of Catalan regulation, which addresses housing, the residential stock, stressed market areas and intervention in the rental market on criteria of its own. In recent years, the Generalitat, Catalonia's regional government, has developed instruments to expand the supply of housing earmarked for social policies and to act in those parts of the country where access to rented housing is most difficult.
For owners and managing agents, this overlapping of rules makes it essential to have legal judgement that is kept permanently up to date. A contract template that is correct in the abstract is not enough. Its clauses must be checked against the property, the owner, the municipality and the moment of signature. In so complex a field, our continuous practice and our specialisation in property and contract law add particularly significant value.
The duration of the contract, extensions and the setting of the rent
Few matters have changed as much as the duration of the contract and its extensions. Where the agreed term is shorter than the statutory minimum, the contract may be extended on a mandatory basis for years. Once that minimum has run, and unless one of the parties gives notice in time that it does not wish to renew, the contract is again extended year by year. To these ordinary extensions have been added extraordinary mechanisms linked to certain situations of vulnerability and to dwellings located in stressed residential market areas. The agreed date is no longer enough, on its own, to establish when a contract comes to an end. Keeping control of dates, expiry dates and notice periods is essential, above all where numerous contracts are administered. A communication sent out of time may determine the availability of the dwelling for years.
The rent presents a comparable complexity. A distinction must be drawn between the initial rent, its indexation during the term of the contract, its possible increase on account of improvement works and the limits that may apply depending on the property, the owner and the territory. Improvement works are a good illustration of that need for analysis. In some cases they allow the rent to be raised, but passing them on is subject to requirements, caps and calculation rules of its own, which must be reconciled with the general regime of the contract and, where appropriate, with the limits applying in stressed market areas.
In short, legal certainty begins with identifying precisely the regime that applies before a contract is entered into, amended, renewed or brought to an end.
Stressed market areas and large-scale landlords
The regulation of stressed residential market areas and of large-scale landlords has given a new dimension to the law of residential and commercial tenancies. The declaration of a stressed area responds to particular difficulties in gaining access to housing on affordable terms and rests, among other indicators, on the movement of rental prices, on household income and on the financial effort that households bear. This regulation seeks to address structural problems of the residential market, such as rising rents, the shortage of affordable housing or situations of vulnerability. In legal terms, the result is a far more intensive intervention in contractual relationships that were traditionally governed to a greater extent by the parties' freedom of contract.
For the owner, one of the most significant effects of this regulation arises when the rent of a new contract is set. In stressed residential market areas, limits may apply linked to the rent under the previous contract and, in certain cases, to the system of reference price indices. Before agreeing the new rent, it is necessary to check whether the dwelling is located in a stressed area, whether it was let as a principal residence during the preceding years, what the last rent was and whether or not the landlord qualifies as a large-scale landlord.
Status as a large-scale landlord has taken on particular importance. As a general rule, state legislation links it to certain thresholds of ownership of residential properties or of built floor area, and allows stressed residential market areas to set thresholds of their own. Determining it correctly is decisive, because the setting of the rent, certain extraordinary extensions and the duties to inform and cooperate with the competent public authorities may all depend on it.
Managing a property portfolio thus requires each contract to be related to the specific situation of the property and of the owner. The number of dwellings, their location, the letting history, the previous rent and the territorial regime have become legally relevant information before a new tenancy is signed.
Ongoing advice to owners, property portfolios and managing agents
A prominent part of our daily practice consists in providing ongoing advice to managing agents and to clients who manage property portfolios intended for letting.
Where numerous dwellings and contracts are administered, legal certainty cannot depend on resolving each matter in isolation. What is needed is consistent, rigorous and constantly updated legal judgement in order to prepare the contracts, determine the regime applicable to them, set and index the rents, monitor expiry dates and extensions, pass on expenses, send tenants the necessary communications and deal with the incidents that arise during the contractual relationship.
We work alongside the managing agent so that they have a legal contact who knows how they work and responds promptly whenever a question arises. Our aim is that managing agents and owners should be able to take each decision on the basis of legal judgement defined in advance, without having to reconstruct the problem from the beginning with every enquiry. That ongoing relationship turns tenancy advice into a genuine service of support for the portfolio, combining immediate attention to everyday questions with an overall view of the client's risks and needs.
Our work covers the preparation and review of new contracts, the analysis of older contracts, renewals and novations, rent indexation, the recovery of dwellings, works and repairs, the passing on of expenses, guarantees, the ending of tenancies and the other questions raised by the day-to-day management of a portfolio of properties.
Prevention of conflict and tenancy proceedings
We also act in disputes arising from the non-payment of rent and equivalent sums, breaches of contract, termination and ending of the tenancy, recovery of possession, works and repairs, damage to the dwelling, rent indexation, deposits, guarantees and, in general, any other question that may set landlord and tenant against each other during the contractual relationship or at its end.
Before going to court, we analyse the prospects of reaching a negotiated solution and the legal and financial consequences of each alternative. In many cases, well-judged action at an early stage serves to resolve the dispute or, at the very least, to narrow the parties' positions before litigation. If, in spite of everything, court proceedings prove unavoidable, more than thirty years of specialisation in litigation allow us to define the most appropriate strategy from the outset and to take on the legal representation in the proceedings.
