The Law 4/2013 of 4th of June has updated the Urban Leasehold Law (the «LAU») to increase the flexibility and promote the housing rental market, in particular:
- Strengthening freedom of contract and giving priority to the autonomy of the parties.
- The term of lease, reducing the mandatory extension from five to three years and the tacit extension from three years to one year.
- The circumstances in which the property can be regained by the lessor for use as permanent residence,
- The establishment of a breach clause in favor of the lessee after the initial six months of the term of the agreement have elapsed and at least thirty days´advance notice is given to the lessor.
The Law sets in place a different legal regime for leases depending on whether or not they have been registered at the Property Registry, meaning that (i) unregistered leases of urban properties cannot be effective against third-party purchasers registering their rights; and (ii) any third party buying a residential property that meets the requirements laid down in art. 34 of the Mortgage Law cannot be adversely affected by the existence of an unregistered lease.
Furthermore, private accommodations for tourism which may be concealing unauthorized lettings or unfair competition are specifically excluded from LAU but governed by industry-specific legislation or, failing that, the regime governing seasonal leases.