On 21st September 2020, the Generalitat de Catalunya (Government of Catalonia) published the new law 11/2020, of 18th September, in the Official Gazette, on urgent measures to restrain rent in housing leases. Pursuant to this Law the necessary new measures are introduced to limit the price increases of housing rentals in areas with a strong proven demand for rental properties.
1. CONTRACTS SUBJECT TO THE NEW LAW.
In order for a contract to be subject to the application of said Law, it is necessary for certain requirements to be fulfilled, and furthermore, that it does not fall within certain categories which have been expressly excluded.
In accordance with article 1 of the Law, those housing lease agreements for which the following circumstances exist shall be subject to the application thereof:
a) that the property is intended for the permanent residence of the lessee;
b) that the leased property is situated in an area which has been declared an area with a tense housing market.
That is to say, lease agreements on business premises are not affected and neither are housing lease agreements which are not in an area declared as a tense housing market.
Furthermore, those contracts signed before the entry into force of the Law shall continue to be governed by the provisions of the former legislation. However, the Law shall apply in the case of the novation of a contract subsequent to the declaration of an area with a tense housing market, whenever this means an extension of the duration of the contract or a modification of the rent.
On the other hand, the following types of lease agreement are excluded from the application of the Law:
(a) Those which are subject to special regimes for the determination of rent;
(b) Those agreements signed before 1st January 1995.
(c) Those agreements for housing subject to a social housing regime;
(d) Those wherein the subject of the agreement is housing integrated into inclusive housing networks or networks for mediation in social housing or the Fund for housing for social policies;
(e) Welfare housing;
(f) Those which are in accordance with the legal provisions applicable to mandatory social rentals.
2. AREAS WITH A TENSE HOUSING MARKET
Only those lease agreements for housing located in areas declared as “areas with a tense housing market” are subject to the system of restraint. At the moment they are as follows:
Badalona, Barberà del Vallès, Barcelona, Blanes, Calafell, Castellar del Vallès, Castelldefels, Cerdanyola del Vallès, Cornellà de Llobregat, Esplugues de Llobregat, Figueres, Gavà, Girona, Granollers, L’Hospitalet de Llobregat, Igualada, Lleida, Manlleu, Manresa, Martorell El Masnou, Mataró, Molins de Rei, Montcada i Reixac, Montgat, Olesa de Montserrat, Olot, Palafrugell, Pallejà, Pineda, El Prat de Llobregat, Premià de Mar, Reus, Ripollet, Rubí Sabadell, Salou, Salt, Sant Adrià de Besòs, Sant Andreu de la Barca, Sant Boi de Llobregat, Sant Cugat del Vallès, Sant Feliu de Guíxols, Sant Feliu de Llobregat, Sant Joan Despí, Sant Just Desvern, Sant Pere de Ribes, Sant Vicenç dels Horts, Santa Coloma de Gramenet, Santa Perpètua de Mogoda, Sitges, Tarragona, Terrassa, Tortosa, El Vendrell, Vic, Viladecans, Vilafranca del Penedès, Vilanova i la Geltrú y Vilassar de Mar.
3. FIXING OF THE INITIAL RENT.
General rule
(a) The initial rent may not exceed the price of reference for the rental of a property with similar characteristics within the same urban area.
(b) If the property has been leased in the five years prior to the date of entry into force of the Law, the initial rent may not exceed the consigned rent in the last duly updated lease agreement.
The criteria established in point b) above is not applicable in the following cases:
(a) If there is a family relationship between the parties who had formalised the most recent lease agreement signed before the entry into force of the Law.
(b) If a lease agreement is formalised relative to a property initially excluded from the application of the Law when the special regime for fixing rent terminates, which was applicable thereto.
If the lessor is a natural person, the limit of the consigned rent in the latest lease agreement is only applicable if the dwelling unit of the lessor has an income equal or inferior to 2,5 times the sufficiency threshold for rent in Catalonia. However, this is not applicable if the income of the lessee is 3,5 times higher than the weighted sufficiency threshold for rent in Catalonia.
If the same property is the subject of various lease agreements with a simultaneous effect which affects different parties, the sum of the agreed upon rent in the different contracts may not exceed the maximum rent applicable to the unitary lease of the property.
4. REFERENCE PRICE
The reference price is established based upon the property lease price index of reference which may be accessed via the internet portal site of the Generalitat. The index is considered to be a reference price (which is marked in red on the web page), without taking into account the greater and lesser pricing margins.
Nevertheless, the lessor may propose a price increase of up to 5% in two scenarios:
(i) if during the last year works have been carried out on the property which improve habitability, security, comfort or energy efficiency or (ii) if the property comprises at least three of the following: lift, parking, furniture, heating or cooling systems, community areas with shared use, shared pool or similar equipment, concierge services in the building or special views from the property.
5. NEW OR REFURBISHED DWELLINGS
In the case of newly built dwellings or dwellings which have undergone an important refurbishment process, and for the five years following the obtaining of the construction completion certificate, the rent agreed upon at the start of the contract may not exceed the upper margin of the price reference index for a dwelling with similar characteristics in the same urban area. This does not apply if public grants have been obtained for the execution of the work. The entry into force of the restriction is thus is delayed by three years.
6. ENTRY INTO FORCE
This Law entered into force the day following the publication in the Official Gazette, this being 22nd September 2020.
