Spain publishes second housing decree governing indefinite extension of tenancy agreements

The second eight-page-long decree sets out urgent measures to strengthen the stability of tenancy agreements for primary residences, in practice amending the first decree. It does not, however, have the necessary support to pass in Parliament this Friday. Catalan party Junts has already announced its opposition to turning tenancies into a form of open-ended contract.

The main and most controversial new provision specifies that, as a rule, once the five-year maximum term of a tenancy agreement has elapsed, that tenancy will be renewed for a further five years, seven if the landlord is a legal entity.

If the landlord does not wish to proceed with the renewal, they must give their tenant six months' notice and compensate them with the equivalent of at least 12 months' rent for a similar property, provided they do not qualify for any of the valid grounds set out in the law.

That is to say, the landlord will not be able to oppose renewal of the contract unless they need the property for themselves or for a relative, up to the second degree of kinship by blood or adoption, or for their spouse in cases where there is a final court ruling on separation, divorce or annulment of marriage.

However, the regulation states that, if three months after the tenant has handed back the property it has not been occupied by the owner or their family members, barring cases of force majeure, the tenant shall also be entitled to the compensation set out above.

Compensation will not apply when the tenant has not occupied the property for more than six months during the 12 months preceding the notice; if they have another property available for occupation in the same municipality; or if they reject a "binding offer to enter into" a new tenancy agreement for the same property.

Furthermore, the decree provides for other "duly justified" circumstances which might mean that the owner's interests take precedence, which would allow them to not pay compensation. This includes cases where the landlord is in a vulnerable position.

The first decree comprises 96 pages and includes, among other measures, a moratorium on evictions of vulnerable people until 31 December 2030, if no alternative accommodation is available. This would extend the validity of the so-called "social shield".

It also restricts the purchase of property by "vulture funds" for two years if they pay less than 70 per cent of the property's appraised value. This extends to the purchase of entire buildings and can only be circumvented if the properties are used for social housing.

It is this first royal decree that stands the best chance of approval at the extraordinary Parliament meeting this Friday.

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