17 June 2024 · Amaia Forcada
How long does a lease contract of housing last?
How long does a lease contract of housing last?
17 June, 2024
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Real Estate
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Amaia Forcada
The answer will depend on the regulations in force at the time the lease contract for housing was formalized.
Today, we will focus on the duration of lease contracts according to the current regulations, that is, those formalized after May 26, 2023, when the Law on the Right to Housing came into force.
According to Article 9.1 of the Urban Leases Act (LAU), the term of a lease contract for housing can be freely agreed upon by the parties (6 months, 1 year, 3 years…), however, as long as the agreed term is not longer, by law the tenant has the right to stay in the property through the system of mandatory extension for a minimum of 5 years if the landlord is a natural person (owner), or 7 years if it is a legal entity (company, real estate agency…).
In other words, the legislator obliges the landlord to guarantee a minimum term of stay in the lease contract of 5 or 7 years, provided that the tenant does not decide to leave the property earlier.
If the rental contract does not specify a duration, the law understands that it has been signed for a term of one year (Art. 9.2 LAU), without prejudice to the mandatory extension system.
Can the rental contract be terminated before reaching the mandatory minimum term, or the agreed term if longer?
Yes, from 6 months after signing the contract (Art. 11 LAU). At this point, the law grants the tenant the right to withdraw from it, provided that they notify the landlord at least 30 days in advance.
However, the law allows the parties to agree on penalties if the tenant withdraws from the contract after 6 months from signing or from the start of its validity, but before the mandatory minimum term of 5 or 7 years or the agreed term, if longer. Specifically, it can be agreed that the tenant must pay a monthly rent for each year of the contract that remains to be fulfilled. When the remaining time is less than a year, the tenant must pay the proportional part of the compensation.
For example, if a 5-year contract with a rent of €800 is signed and this penalty is expressly provided for, if the tenant leaves the property one year after signing it, they must pay the landlord a penalty of €3,200. If, in the same case, the tenant leaves the property two and a half years after signing it, he or she must pay a penalty of €2,000.
If the tenant leaves the property within the first six months of the contract term, there will be a contractual breach and the landlord can request compensation for the damages caused.
Can the landlord recover his or her property before the mandatory minimum term of 5 or 7 years, or the agreed term if longer?
If the landlord is a natural person and one year has passed since the lease contract was signed, there is a case in which he or she can recover the property (Art. 9.3 LAU). This is the case when the landlord needs the property for their permanent residence or that of their direct relatives (parents and/or children) and/or their spouse if a final judgment of separation, divorce, or annulment has been issued.
However, for this possibility to apply, it must be expressly provided for in the contract, and the landlord must notify the tenant at least 2 months in advance of the date the property will be needed, specifying the cause.
Note that if three months pass from the termination of the contract or from the effective eviction of the property, and the landlord or their relatives have not proceeded to occupy it, as long as this is not due to force majeure, the tenant can choose within 30 days to:
Once the mandatory minimum term of 5 or 7 years has elapsed, what happens to the rental contract?
The tacit extension of up to a maximum of 3 more years will come into play unless the landlord communicates their intention not to renew it 4 months before the end of the mandatory minimum term (5 or 7 years), or the tenant does so 2 months before that time (Art. 10.1 LAU).
In any case, once the tacit extension begins, the tenant can leave the property or prevent the contract from being renewed again by notifying the landlord one month in advance.
On the contrary, the landlord, once the tacit extension has begun, cannot terminate the rental contract unless the tenant decides to leave the property before the 3-year term is up (i.e., by giving 4 months’ notice before the end of the mandatory minimum term).
Once the mandatory minimum term and the tacit extension have expired, is there no possibility of continuing the lease contract?
Yes, there are two cases in which the contract could be extended again.
The first case requires the tenant to be in a situation of social and economic vulnerability, in which case the tenant can request an additional 1-year extension from the landlord under the same contractual conditions, provided a new lease contract has not been signed between the parties (Art. 10.2 LAU).
If the landlord is a major holder, i.e., has more than 5 urban properties in a stressed residential market area—or 10 urban properties regardless of whether they are in a stressed residential market area—or they own a residential built area of more than 1,500 m², the landlord is obliged to accept this extension.
The second case applies only if the property in question is in a stressed residential market area. If so, the tenant can request an extension under the same contractual conditions (Art. 10.3 LAU).
The landlord is obliged to accept this extension unless this possibility has been expressly excluded in the lease contract. It will also not apply if the parties have signed a new lease contract applying the price limitation, or if the property must be used by the landlord, their direct relatives, or their spouse after a final judgment of legal separation, divorce, or marriage annulment.
In this case, once the extension is accepted, the tenant will have the right to remain in the property for an additional two years.
If additional extensions are not applicable, they end up, or the agreed term was longer of 5-7 years and it is ended, what happens with the lease contract?
In any case, if additional extensions do not apply, any of the extensions ends, or the agreed term was superior of 5-7years and it is ended, and new leas contract is not agreed upon, but the tenant continues to reside in the property with the landlord’s consent (i.e., without notifying the contract’s termination), the lease will enter into tácita reconducción (Art. 1566 of the Civil Code [CC]).
This means that a new contract is born in which the same conditions as those agreed upon in the previous contract are maintained. However, in matters not expressly regulated by the contract, the contractual relationship will be governed by the Civil Code instead of the LAU.
The duration of the contract is the only clause that will be modified when the contract enters into tácita reconducción. It will be monthly if the rent in the previous lease contract was set in months, and annual if it was set in years (Art. 1581 CC), and the contract will be renewed for equal terms as long as the parties do not express otherwise.
For more information on tácita reconducción, you can check here the article published on our blog in which we analyse this figure in detail.
As can be seen, the duration of a rental contract is a complex issue that largely depends on the position of the parties throughout its duration. In any case, and for your convenience, here is a basic outline that summarizes what we have detailed so far in this blog entry.
Current duration of lease contracts for housing
At MES Advocats, we offer comprehensive advice and support to landlords and tenants in the formalization, management, extension, and termination of lease contracts. If you need more information or are interested in getting a quote, you can contact our real estate law department at this link.
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