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Lease Contract

If you are interested in renting a property, take in to account that must do so according to the Law of “Arrendamientos Urbanos" of 1994. This Law shall only be applied in the case that the contract is signed after the 1st of January of 1995.

There for we are going to provide some advice for people that are going to celebrate a rental contract.

The Way the Lease Contract Must Be

The afore mentioned contract shall be drawn up in writing and showing the personal details of the owner and the tenant. The contract shall expose a detailed description of the property that is to be leased, the duration of the rental contract, the rental payment agreed and all those disposition that the parties may consider opportune.

The contract can be elevated to the public before a Notary public and therefore be registered at the corresponding land registry.

We recommend that you do not hesitate to ask our lawyers for all those clauses that you wish to incorporate in order to Project your rights and interests.

Duration of the Contract

The parties shall mutually agree the duration of the lease contract. If the duration agreed is less than 5 years, once the contract has ended, it shall be prolonged in one year periods until the rental period has reaches 5 years, this is unless the tenant informs in writing that he no longer wishes to remain in the leased property.

Therefore the property owner is obliged to prolong the lease contract up to the 5 year duration, with the only exception that the property owner had already manifested in the contract that he/she personally needs to occupy the Property before the course of these 5 years.

Once the 5 year period is up, if the property owner does not wish to renew the contract he/she has no need to as long as there is a 30 day notice given in writing.

If there is no type of previous extinction notice, the lease contract shall be prolonged for a further three years, always and when the tenant wishes to continue renting.

Deposit

The deposit is amount equivalent to one month’s rental payment, and shall be paid by the tenant to the property owner upon the signing of the lease contract. The afore mentioned deposit shall act as a guarantee for possible damage that the tenant may cause in the property.

Once the lease contract has been terminated the afore mentioned deposit should be returned to the tenant as long as it has been proved that there is no damage to the property. If there were any damage this would be discounted from the deposit.

If the deposit is not returned to the tenant, he/she may claim this amount plus interest.

The Rental Fee

The rental fee can be freely agreed between the parties. It is usually a monthly payment and should be put in to effect within the first seven days of the month.

The payment of the rental fee shall be made as per the mutual agreement of the parties, being, direct debited, transfer, etc…

With regards to updating the rental fee, the Law states that during the first 5 years of the duration of the contract the rental fee may rise or lower according to the variations that the Consumer Price Index (IPC) may experiment.

Payment of Expenses

General expenses, meaning those that derive from the common use of the property, the property owner shall be liable for, although, individual expenses such as, water, gas, telephone, etc... should be paid by the tenant.

Building Work of the Property
  1. Conservation building work.

    The property owner is obliged to carry out all repairs that are necessary for the conservation of the property in appropriate habitation conditions.

    Those repairs that consist in the wearing away derived from common use of the property should be paid by the tenant.

    When building work needs to be carried our urgently in order to avoid serious and immediate damage, can be done by the tenant, as long as he/she communicates this to the property owner, and he /she shall have right to the reimbursement of the expense.

  2. Upgrading building work.

    The upgrading building Works are those that affect hygiene, health and commodity of the property and occupants. The afore mentioned building work cannot be delayed until the finalisation of the rental contract, the tenant must tolerate these. If the building works take longer than 20 days the tenant has the right to a deduction on the rent equivalent to the proportion of property that he/she cannot use.

    The property owner should notify the tenant of the afore mentioned building works with at least three months notice, for once the communication has been received by the tenant he/she can opt to desist from the contract within a one month period.

    Upgrading building work carried out by the owner, once five years of contract are up shall give the property owner the right to increase the rental fee. This increase cannot be more than 20% of the current rental fee.


Sale of the Leased Property. Rights of the Property Owner.

In the case that the Property owner desires to sell the leased property, He/she is legally obliged to offer the property to the tenant first. Therefore, The tenant has the right of thirty days to agree or not to the option to purchase (right to negotiate).

In the case that the property owner should sell the Property and had not offered the same to the tenant, he/she has 30 days to oppose the sale and purchase the Property under the same conditions that the property owner had transmitted it with to the third party (right to withdraw).

The agreement by which the tenant resigns to the rights of negotiation and withdrawal shall be valid in those cases in which the rental contract has been celebrated for a period of time superior to five years.

Contract Resolution and Extinction

One cause of contract extinction is that the period of time contracted is up. There are also other grounds for extinction of a contract such as:

  • Non-payment of the rental fee.
  • Subleasing o cession to a third party sin without the property owners consent.
  • Causing damage in the property or carrying out building work without the owners consent.
  • Realisation of unhealthy or dangerous activity in the property.

Subrogation of the Rental Contract

Subrogation is the substitution of one person for another in the rental contract, the person whom subrogates acquires all rights and responsibilities that the previous title holder possessed.

Cession of the Rental Contract and Subleasing

We shall call cession the transmission in which the owner transfers the rights and responsibilities of the contract to a third person.

Subleasing is when the tenant rents part of the property that he/she himself have rented from the property owner.

In both cases, written consent from the property owner is required.

Claims

All objects related to the rental contract must raised before an ordinary civil proceeding (duration, rental fee, etc… ) they shall be transmitted via a court hearing: eviction for non-payment of rental fee, extinction of the contract, claims for payment…

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