First of all, it is important to note that rent is the amount of money that the tenant agrees to pay the landlord in exchange for the use and enjoyment of the property for a certain period of time. This amount can vary depending on the type of property, its geographical location, size and condition.
The rent is a crucial element of a lease as it is the financial compensation the owner receives for giving up the use of his property. It is also a secure source of income for the landlord, allowing him to cover the costs of maintenance, taxes and any improvements to the property.
On the other hand, rent is also important to the tenant as it represents the cost of living in the property. It is important that both parties agree on a fair rent that is in line with market conditions and the property in question. This can be done through a comparative analysis of other similar properties in the area, as well as considering aspects such as housing supply and demand.
1.- How is the rent determined?
The current law does not set a limit on the amount of the rent and it must be agreed by the parties on a voluntary basis.
However, in the case of social housing, this limit does exist and the rules must be taken into account, as explained in our article.
As we have already mentioned, the amount of the rent is determined by the rules of supply and demand, taking into account the current market situation.
The rent holiday is a period granted by the landlord to the tenant during which no rent is payable.
For example, in cases where certain works need to be carried out on the property before it can be used, a rent-free period is usually granted in order to make it less onerous for the tenant, who will not be able to enjoy the property due to the adaptations that need to be carried out.
This rent-free period must be set out in the lease, stating when it begins and ends and whether it is conditional on any other aspect of the contract, for example, that certain types of work are carried out or that certain licences or permits are obtained.
If the rent gap is determined by the tenant carrying out works to adapt the property, the contract should state what will happen at the end of the tenancy, whether the tenant can take part in the works, whether the tenant will receive any compensation for the works, or whether the works will remain in the property without any right to compensation.
The grace period should be part of an overall negotiation of all the terms of the lease, as the grace period may be negotiated in return for extraordinary rent reviews or other favourable terms for the landlord.
It should be borne in mind that, unless the contract stipulates otherwise, the date on which the lease is signed and not the date on which the rent begins to be paid, as provided for in art. 18 of the current Urban Tenancy Act:
"During the term of the contract, the rent can only be updated by the landlord or the tenant on the date on which each year of the contract expires, under the conditions agreed by the parties".
It must be expressly agreed that the date of the end of the grace period will be taken into account for the renewal of the rent.
3.- Method of payment and periodicity of the rent
Article 17 of our Urban Tenancy Law stipulates:
"Unless otherwise agreed, the rent is payable monthly and must be paid within the first seven days of the month. Under no circumstances may the landlord demand an advance payment of more than one month's rent".
With regard to the advance payment of the rent, there is no unanimity in the case law on the possibility of requesting the advance payment of an annuity or a quarter of the rent, if this has been expressly agreed in the contract: some judges require the payment of the annuity or the quarter, while others consider that the payment of more than one month's rent is not possible.
The method of payment can be freely agreed (direct debit, bank transfer, etc.). It is advisable to make the payment in a way that is easy to prove, in order to avoid any doubts about the payment.
The landlord must provide a receipt for the amount of the rent with all the items and amounts broken down, e.g. common expenses, IBI, utilities, etc.
4.- Updating the rent
It is important to note that the rent in rental contracts may be subject to adjustments during the term of the contract. These adjustments may be made annually on the basis of the Consumer Price Index (CPI) or other recognised economic indices. The purpose of this is to prevent the rent from stagnating and to ensure that it remains in line with the economic reality of the country.
In order to avoid the gap in rental contracts, the current Urban Tenancy Act stipulates that in residential rental contracts signed from 6 March 2019:
"During the term of the contract, the rent may only be updated by the lessor or the lessee on the day of the expiry of each year of the term of the contract, under the conditions agreed by the parties. In the absence of an express agreement, no rent adjustment shall be applied to contracts.
In the event of an express agreement between the parties on a mechanism for updating monetary values that does not specify the reference index or methodology, the rent shall be updated for each annual period by reference to the annual variation in the Competitiveness Guarantee Index on the date of each update, taking as the reference month for the update the month corresponding to the last index published on the date of the contract's update.
In any case, the increase resulting from the annual update of the rent may not exceed the result of the application of the percentage variation of the Consumer Price Index on the date of each update, taking as reference month for the update the one corresponding to the last index published on the date of the contract update".
It follows that the rent update must be specified in the lease, otherwise it cannot be requested.
If the parties do not specify the method of updating, it will be updated each year with the Competitiveness Guarantee Index (GCI).
It is customary for the parties to determine the update of the rent by means of the CPI of the last 12 months immediately preceding the date of each update.
In order to update the rent, the party requesting the update must inform the other party in writing of the method used, the resulting rent and the month from which the new updated rent will take effect.
It should be noted that the lease may provide for the possibility of updating the rent retroactively in cases where the rent update is not requested for several years and is carried out at once. In these cases, it can only be done if it is stipulated in the contract, otherwise it will not be possible to update the monthly payments before the month following the notification of the rent update.
However, the new updated rent may be based on the accumulated CPI since the last year in which the rent was updated.
5.- Increase in rent due to improvement works.
As explained in our article on the rights and obligations of the tenant:
"The execution of improvement works by the landlord, after five years of the duration of the contract, or seven years if the landlord is a legal entity, entitles him, unless otherwise agreed, to increase the annual rent by the amount resulting from applying to the capital invested in the improvement, the legal interest rate of the money at the time of the completion of the works, increased by three points, without exceeding the increase of twenty percent of the rent in force at that time.
For the calculation of the capital invested, the public subsidies received for the execution of the works must be deducted".
In order for this situation to arise:
- The works must be improvement works: they must increase the value, use or comfort of the dwelling (conservation and repair works are not included).
- They must be works that cannot be postponed until the end of the lease.
- For contracts signed after 6 March 2019, the rent can only be increased after the first 5 years of the contract.
- The landlord must give 3 months' notice before the work begins.
- The tenant has the right to cancel the lease if the works have a significant impact.
In summary, it is important to remember that the rent in leases must be set in a transparent and documented manner. This means drawing up a lease agreement that sets out the terms of payment, deadlines, rent adjustments and any other relevant aspects relating to this issue. This will avoid potential conflicts and misunderstandings between the two parties.
The rent in a lease is a crucial element for both parties. It represents the financial compensation that the tenant is prepared to pay for the use and enjoyment of a property and provides a secure source of income for the landlord. It is important to set a fair rent in line with market conditions and to document all terms in a lease. It is also advisable to consider periodic rent reviews to ensure that the rent is up to date and to avoid problems in the future.
At Quikprokuo, we can help you with any aspect of your lease, as we have over twenty years experience in all types of leases. You can contact us through this link.