Catalonia imposes limits on the amount of housing rent

The Generalitat of Catalonia has promulgated the regulation that aims to contain the permanent increase in income from housing leases in certain areas of its territory as a congruent measure to comply with the social function of the right to property.

In addition, in order to give effect to the constitutional right to enjoy decent and adequate housing, conditions and restrictions may be imposed on owners of property to achieve these aims, as provided for in the case law of the Constitutional Court. In the present case, restriction of the right to freely determine the amount they wish to set as rent in the housing leases they sign.

The rule limits the cases in which the amount of rent can be restricted in the lease:

1. The rented property must be intended for the permanent residence of the tenant.
2. Housing must be located in an area declared to have a tense housing market.
3. Housing may not be subject to a regime of official protection.

As regards the determination of tense market areas (municipalities or parts of municipalities in which the sufficient supply of rental housing to the population is particularly at risk), this is the responsibility of the competent housing department of the Generalitat, with the exception of the city of Barcelona, which corresponds to its City Council by means of a plenary session agreement.

In certain areas with a tense market, the rent for housing leases in these areas may not exceed 10% of the reference price for renting a dwelling with similar characteristics in the same urban environment.

Said reference price referred to in the standard is established based on the housing rental price reference index that is prepared and published by the department responsible for housing based on the data recorded in the Register of Urban Property Rental Deposits.

Said rental contracts must include the document generated by the indexation system informing of the index corresponding to a dwelling analogous to the rented one, expressed in euros per square metre, with its lower and upper margins.

The lease must state the exact amount that the parties (lessor and lessee) establish as the reference price within the aforementioned margins. Only in exceptional cases may a reference price higher than the higher margin be stated, with the reasons for this duly justified in the contract, and in no case may the increase exceed the higher margin by more than 5%.

In contracts subject to this rule, the rent may only be revised if expressly agreed in the contract and in any case the revision must be made with reference to the annual variation of the competitiveness guarantee index on the date of each revision.

As an exception to the limits established in the law, the law establishes that in the case of rental contracts for housing that is new construction or the result of a major renovation process, during the five years following the receipt of the certificate of completion of the work, the rent agreed at the beginning of the contract may not exceed by 20% (instead of 10%) the reference price for the rental of housing with similar characteristics in the same urban environment, except in the case that public subsidies have been obtained for the performance of the work, in which case the rent is subject to the maximum general increase provided for (10%).

The law also allows the formal declaration of a tense market area to exclude the application of this to dwellings with a useful roof area of more than 150m2.

As a guarantee for the lessee, the latter is entitled to the reimbursement of the amounts charged by the lessor in excess plus the corresponding legal interest.

On the other hand, it should be noted that in all offers of housing located in a declared tense market area, the application of the corresponding housing rental price reference index must be reported.

With respect to housing rental contracts already in existence at the time this rule comes into force, they will continue to be governed by the previous legislation. However, the new rule will be applied in the case of novation of the contract that implies an extension of the duration or a modification of the rent, when such modifications are subsequent to the declaration of the area in which the dwelling is located as an area with a tense housing market.

Finally, the regulation itself empowers the Government of Catalonia to present a bill to the Parliament of Catalonia on urban property leasing contracts, which will mean, in principle, that the 1994 State Urban Leasing Act will no longer apply in Catalonia in favour of the future Catalan regulation, which augurs well for a new conflict of jurisdiction between the State and regional public administrations.