Advantages and disadvantages of registering a tenancy agreement in the land register

Advantages and disadvantages of registering a tenancy agreement in the land register

Advantages and disadvantages Urban leasing law

Redacción CIM Tax & Legal

It is not compulsory to register the rental contract in the land registry, but it is highly advisable for both the tenant and the landlord, as the advantages to be gained will outweigh the costs.

The main concern for both landlord and tenant when entering into a rental contract is legal certainty, i.e. that the contract contains terms and conditions that safeguard the interests of both parties and avoid unpleasant surprises.

Following the amendments to the Law on Urban Leases made in mid-2013, the registration of the lease in the Land Registry can have important benefits for both landlord and tenant, especially in certain circumstances. It is true that registration has a higher cost than a simple private contract between the parties, but there are occasions in which a correct guarantee is essential.

There is no obligation to register it in the Land Registry, in fact, most contracts are not registered. However, it is only in this case that registration provides full legal protection.

The procedure is similar to that of any other public deed: a notary will certify the agreement and verify that there is no illegality in it. This official document is then registered in the Land Registry.

Advantages for the tenant

The publicity of the Land Registry provides security for third parties, more specifically for possible purchasers of the property. There are two possibilities when a person buys a rented property, whether it is registered or not.

If the property is registered in the land register: The new owner is subrogated to the rights and obligations of the former owner vis-à-vis the tenant of the property. The contract must have been registered prior to the sale of the property.

If there is no such registration and the property is purchased by another person: The new owner does not have to abide by the lease, but can terminate it. In this case, the new owner must notify the tenant of his decision and the tenant has the right to continue for three months, paying the rent and other amounts due to the new owner.

Tenants of a property for use other than as a dwelling would be well advised to register their rental contract

Advantages for the lessor

The LAU establishes that a clause can be included in the rental contract that allows the landlord to immediately recover the use of the property in the event of non-payment of the agreed rent, provided that the agreement has been registered in the registry.

If the landlord is unable to collect the rent, he can require the tenant to pay what he owes through a judge or a notary. After ten days, if the tenant has not paid or has not justified the delay, the same judge or notary would declare the agreement terminated and the eviction can be carried out.

Disadvantages for the lessee and the lessor

The main disadvantage is bureaucracy and cost. There is no fixed cost, it will depend on the agreed rental price and the duration of the contract, although in residential leases the property is considered to be leased for at least the minimum term, which is currently three years.

There is a limitation on the tenant's rights in the event that the property is mortgaged prior to the signing of the contract. If the owner does not pay the mortgage and a foreclosure process is initiated, the tenant can be evicted, even if the contract is registered in the Land Registry and the tenant is up to date with payments.

The steps to be taken to register the lease in the Land Registry are:

Public deed or notarisation of the private rental contract.
Go to a notary with the private lease contract, so that he can convert it into a public document. Indicate in this contract the description of the property: town, street, number and location within the building of the leased property, its surface area and boundaries. The identity of the contracting parties, the agreed duration, the initial rent of the contract and the other clauses that the parties have freely agreed.

If the tenant requests registration of the contract in the land register, agree that he will bear the costs. Also, expressly agree in the contract that the contract will be terminated for non-payment.

Settlement of the corresponding tax for transfer tax and documented legal acts.

Registration of the rental contract in the land registry.
The registration must state the agreed term and, if applicable, the agreed extensions beyond those provided for by law.

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