When renting out a property, the first essential step is to have a lease agreement. Additionally, as a property owner, you will be interested in knowing how to rent your property safely to ensure that this activity has legal and judicial validity. That’s why, in this article, we will tell you everything you need to know about rental contracts.
What is a rental contract?
A rental or lease contract is a document in which the property owner agrees with a tenant to lease their property for a specified period in exchange for payment. For this document to be valid, it must be drafted following the guidelines of the Urban Lease Law (LAU).
Types of lease contracts
There are different types of contracts depending on the type of rental you want to offer:
- Contract for tourist rentals
- Contract for seasonal rentals
- Contract for long-term residential rentals
What information should it include?
Every contract must include certain information to be effective. Below are the necessary elements for the lease agreement:
- Personal details (both of the landlord and the tenant): Name, Surname, ID, and contact information
- Identification and location details of the property
- Contract duration: The duration of the agreement must be specified
- Initial rent
- Specific clauses
In this regard, it is advisable to seek professional assistance to correctly draft this document.
Duration, termination, and renewal
The duration of a rental contract is, in principle, whatever both parties agree on. Typically, this initial duration is one year, renewable up to five. However, it should be noted that with the entry into force of the LAU regulation, it is established that the tenant has the right to request a 5-year extension, even if the initial contract reflects a shorter duration.
Regarding the termination of the contract, a tacit renewal may come into effect. This means that if, after the 5 or 7 years provided for*, neither party communicates their intention to terminate the contract, it will be extended for another three years.
*Contracts will be for 5 years if the landlord is an individual or 7 years in the case of legal entities.
FAQs about the rental contract
If I don’t want to renew the rental contract, do I need to notify the tenant?
Yes, you must notify your tenant four months in advance.
Can I terminate the rental contract?
In principle, the rental must continue for the agreed duration. However, there are some special cases in which the owner can terminate the contract:
- If the tenant does not pay the rent or deposit
- If the tenant sublets the property without your permission
- If there is intentional damage
- If unauthorized works are carried out without consent
Can I reclaim the property?
Yes, as long as you are an individual and at least one year of the contract has passed. Moreover, the property must be used for yourself or close family members.
When does the rental contract start?
The law states that the term begins from the date specified in the contract or, in any case, from when the property is made available to the tenant if delivery is after the contract is signed.
What happens with rental expenses?
Unless otherwise specified in the rental contract, property expenses are shared. The landlord covers taxes such as the property tax (IBI), community fees, and maintenance expenses for the property and its facilities. The tenant, on the other hand, is responsible for basic utilities (water, gas, electricity, Internet…) and minor repairs. The waste collection fee, for example, can be agreed upon by both parties.
What happens if the rent is not paid?
If, unfortunately, you find yourself with a delinquent tenant, the first thing to do is try to talk to the person to have them pay the rent as soon as possible. If this fails, the only remaining option is legal action, to file a lawsuit against the tenant to claim the amount owed or initiate an eviction. However, this process can take between 3 and 8 months.
What are the penalties for not declaring the rental of a property?
The tax authorities do not overlook anything, so if you do not declare your rental property to the Tax Agency, you will face several fines and penalties. These penalties vary depending on the severity of the violation and can range from 50% to 150% of what was not declared.
As you can see, drafting a rental contract requires knowledge of current regulations and the real estate sector, which is why it is essential to have the professional advice of real estate experts. If you have any other questions, feel free to ask us!
