Housing preliminary draft bill. Key new measures affecting the constitutional right of housing and, in particular, dwelling lease agreements

The Ministry of Transport, Mobility and Urban Agenda, together with the Ministry of Social Rights and Agenda 2030 submitted on 26 October 2021 to the Council of Ministers the housing preliminary draft bill (the "Preliminary Draft Bill") for its first reading, which has been subsequently submitted to public consultation until 18 November 2021, and subsequently raised again to the Council of Ministers for its approval and referral to the Spanish Parliament.

Among other measures, the Preliminary Draft Bill introduces some relevant amendments to the Spanish Law 24/1994, of November 24, 1994, on Urban Leases (the "LUL").

In particular, the following conditions shall apply to dwelling leases whose main object is located at an area declared to be a stressed residential market area (as described below): 

• The lessee shall be entitled to renew lease agreements whose mandatory or tacit extension has expired according to the terms set forth in LUL for additional annual periods up to a maximum of 3 more years. During this term the same terms and conditions of the lease in force shall apply, unless otherwise agreed or a new lease with rent limitations is signed or in the event that the lessor has communicated the need to occupy the leased dwelling to use it as a permanent dwelling for himself or his family members.
• The lessor shall be entitled to increase the rent of a new lease agreement up to a maximum 10% over the last rent of the previous lease agreement in force in the last 5 years, when:

1. Rehabilitation works have been made in the dwelling and these have been terminated 2 years previous to the date of celebration of the new lease agreement;
2. 2 years prior to the signing of the lease agreement, the lessor has carried out rehabilitation or improvement works in the dwelling and has achieved a 30% saving of non-renewable primary energy provided that this condition has been accredited by means of an energy efficiency certificate;
3. 2 years prior to the signing of the lease agreement accessibility improvement works had been completed in the dwelling; and
4. The lease agreement has been signed for a period of 10 years or more, or in the event there is a renewal allowing the lessee to extend the lease agreement under the same terms and conditions for a period of 10 years or more.

• The rent agreed at the beginning of the new contract may not exceed the maximum limit of the price applicable according to the CPI system in the event that the lessor is a large legal entity (gran tenedor), i.e., has more than 10 properties or a built-up area of more than 1,500 sq.m.

As regards to the stressed residential market areas, the competent public administrations shall only be entitled to declare these in the event of existence of a special risk of insufficient supply of housing for the population, stablishing conditions that would make it affordable for its access in the market. The following circumstances shall apply in order to declare a stressed residential market area:

• the average burden of the cost of mortgage or rent plus basic expenses and supplies exceeds 30% of the average income or average household income; and 
• the purchase or rental price of the property has experienced a cumulative growth percentage of 5% higher than the growth of the Consumer Price Index in the previous 5 years.

These are the main measures that affect the housing lease contract; however, it will be necessary to keep an eye on the changes that may be introduced to the Draft Bill by the Council of Ministers and the Spanish Parliament until the text is definitively approved.