We describe the limits that you cannot exceed when updating the rent of a rental contract in 2022, depending on whether you’re a major landlord or a private individual.
As a result of the disproportionate rise in prices, the Government approved, by Royal Decree-Law 6/2022 of 29 March, an extraordinary limit to the annual updates of the rent for housing, a measure that we are interested in addressing as it also directly affects rented housing in our municipalities of action: Altea, Benissa, Moraira, Jávea…
The vast majority of rental contracts use the CPI as the annual update index, and this index hasn’t stopped rising since the war in Ukraine broke out. In February 2022, the CPI stood at 7.6%, a situation that caused the Spanish government to decide to implement a Royal Decree in order to ensure that this increase was not passed on to the price of rent in equal measure.
Given the continuous growth of the CPI after the new regulation came into force (8.7% in May 2022 and 10.2% in June 2022), the government has decided to extend this measure until the end of the year, meaning that rental contracts that expire before 31 December 2022 will also be governed by the same mandate.
But what does Royal Decree-Law 6/2022 of 29 March consist of, and how should rent be updated until the end of 2022?
Rent update if the owner is a major landlord
If the owner is a major landlord, the update on a rental contract during 2022 will be that resulting from the new agreement between the parties, but cannot exceed the result of applying the annual variation of the Competitiveness Guarantee Index at the date of the update.
In the absence of an agreement between the parties, the increase in the rent will be subject to the same limitation.
In other words, the update increase will be that agreed by the parties, but may not exceed 2%.
What is a major landlord?
For the purposes of the application of the Royal Decree, a major landlord shall be understood to be a natural or legal person who meets any of the following conditions:
- Owns more than 10 residential properties
- Owns a constructed surface area of more than 1,500m2 for residential use, excluding garages and storage rooms.
Rent update if the landlord is NOT a major landlord
If the landlord is not a major landlord, the 2022 rent update will also be that resulting from the new agreement between the parties. In the absence of an agreement, the increase in rent may not exceed the result of applying the annual variation of the Competitiveness Guarantee Index at the date of the update.
In other words, the increase in rent will be that agreed by the parties without the maximum limit of 2% that applies in the case of major landlords. However, if the landlord and tenant do not reach an agreement, the update to be applied will be 2% at the most.
Competitiveness Guarantee Index
But what does the Competitiveness Guarantee Index tell us? According to Law 2/2015, of 30 March, on the de-indexation of the Spanish economy (BOE 31/03/2015), the INE (“National Statistics Institute”) is responsible for the calculation and monthly publication of the Competitiveness Guarantee Index.
This index is equal to the Harmonised Index of Consumer Prices (HICP) for EMU minus a part of the loss of competitiveness accumulated by Spain since 1999.
If this rate falls below 0%…
- This value will be taken as the reference, which will result in the application of the non-revision rule.
If this rate exceeds the European Central Bank’s medium-term target for annual inflation…
- That value shall be taken as the reference value, i.e. 2%.
Owning a rented property isn’t always an easy task, especially if you don’t live in the area where the property you’re renting is located. Besides the complexity of contracts, paperwork and various disagreements with tenants, there are also changing regulations that you need to be aware of in order to avoid infringements that could cause you to lose part of the profits you could obtain.
To avoid this type of situation, at Hispania Homes we can manage your rental properties in Moraira-Teulada, Benissa, Jávea and Benitachell. Also, if you so prefer, we can carry out an analysis of your property with respect to the real estate market where it’s located so that you can find out whether it’s more beneficial for you to rent or to sell.
Would you like us to get to work? Get in touch with us.
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