New regulation on rental prices in Catalonia: How does it affect landlords and tenants?

Last Friday, the BOE published in the BOE the State System of reference index for rental prices in stressed residential market areas. The index will mainly limit the rents of large landlords in Catalonia (in the 140 municipalities approved as stressed areas), although it also affects owners of less than five homes.

Until now, a series of measures have been applied since the approval of the Law on the Right to Housing published on 25 May 2023. Among others, the following were already being applied:

• Property management and contract formalisation costs to be paid by the landlord.
• One-year extension of certain contracts.
• Minimum information in purchase and sale and lease transactions.
• New requirements for filing certain eviction lawsuits.
• Maintenance of the limitations on rent updates.
• Surcharge in the IBI quota if the property is empty.

Now, as of 16 March, the application of the rest of the measures aimed at regulating the price of rents in stressed areas has been approved. The declaration of a stressed zone will be valid for three years, which can be extended annually as long as the circumstances for such a declaration continue to exist.

The Law has been modified with regard to the concept of large tenant: in Catalonia it has been reduced to 5 or more dwellings owned for residential use or a built surface area of more than 1500 m2, not counting storage rooms and garages. On the other hand, for the rest of the Autonomous Communities, the limit is 10 dwellings or more than 1500 m2.

From 16 March, in order to determine the rents in the new contracts, it will be necessary to differentiate whether the property is located in a stressed or non-stressed market area:

• In a non-stressed area, the rent will be the one freely agreed by the parties.
• In a stressed area, we will differentiate between large and small landlords.

It is established that, in the case of a small owner or not a large tenant, if there has been a rental contract in the last five years, the rent may not exceed the last rent in force in the same dwelling, once the annual updating clause of the rent of the previous contract has been applied. In the new contract, the repercussion of expenses or fees that had not been agreed in the previous contract may not be agreed.

The limited rent may be increased by 10% if any of the following cases can be accredited:

• If the dwelling had been the object of a rehabilitation action in the terms provided for in section 1 of art.41 of the RIRPF, and which had been completed in the two years prior to the date of signing the new contract.
• If in the two years prior to the date on which the new rental contract is signed, renovation or improvement work has been completed on the dwelling in which a non-renewable primary energy saving of 30% has been accredited.
• If in the two years prior to the conclusion of the lease contract, accessibility improvement actions have been completed.
• And if the lease is signed for a period of ten years or more, or a right of extension of ten years or more is determined.

If there has been no lease contract for the last five years, the rent is determined by the reference index.

For the large tenant, the rent of the new contract will be set by the lower of the rent obtained by calculating the reference index and the last rent of the previous contract, in force in the last five years in the same dwelling, once the annual updating clause of the rent of the previous contract has been applied.

On the other hand, it should be borne in mind that the Law provides for a series of tax incentives applicable in the self-assessment of personal income tax on income from the rental of properties used as dwellings.

Specifically, the percentage reduction for the rental of dwellings, which had been 60%, is modified and the following cases are envisaged:

• 90% when the same lessor has entered into a new rental contract for the dwelling located in the ZMRT, in which the initial rent has been reduced by more than 5% compared to the last rent of the previous contract for the same dwelling, after applying the updating clause.
• 70%, when the lessor has rented the property for the first time to a tenant aged between 18 and 35, or when the tenant is a public administration or a non-profit organisation.
• 60% when the dwelling has been the object of a rehabilitation upgrade that has been completed within the two years prior to the date of the conclusion of the contract.
• And 50% in any other case.

We will elaborate on the practical application of the theme in subsequent articles, offering a detailed analysis of its implementation in different scenarios and concrete situations.