Updating the rent: New 2% limit, how it is updated and other keys.

Updating the rent under the new law

MeiT Team

19 April 2022

Hello Meiter, in this article we tell you how to update the rent with the new rent update law that was approved in March 2022 by the council of ministers.

 

How is the rent updated?

 

Legally, as stated in the contract. This makes it difficult to know how this is translated into practice because leases are private agreements, they are often not registered and, in addition, many landlords are not aware that each year is due to expire in order to claim the increase. Inany case, it is clear that those who do so mostly use the Consumer Price Index (CPI). This inflation indicator began to soar last autumn as a result of the rebound in economic activity after the first onslaught of the pandemic. And just when everyone expected it to start to ease, the war in Ukraine has caused it to continue to grow.The inflation rate, boosted by international energy prices, began to rise.

The CPI is, moreover, the indicator that was taken as the maximum reference in the last legal change to the rule, which was made in March 2019 when inflation did not seem to be a problem in the short or medium term. For the update, it is normal to take the latest reference for the year-on-year variation published by the INE. For this April, for example, the February figure would be taken (with the variation in prices between March 2021 and February 2022), because the statistics institute will not release the data for the current month until the middle of the following month (although this Wednesday it is giving the advanced figure for March, it is not yet definitive).

 

How will the new cap be calculated?

 

The government's idea to solve this drawback has been to temporarily link the ceiling of the increase not to the CPI (which is skyrocketing), but with the Competitiveness Guarantee Index (GCI).. This is another indicator that the INE also publishes to measure price variation. But it does not do so directly (the CPI compares the same basket of products at two points in time and calculates the difference in cost) but by subtracting the competitiveness that the Spanish economy has lost with respect to the eurozone since 1999. The GCR was created precisely to guarantee the competitiveness of the Spanish economy and for this reason it has another characteristic: legally it is always applied at values between 0% and 2% (even if it is negative or exceeds this percentage). This is why the income update is temporarily capped at 2%, as it is currently above (2.02%) and is not likely to fall.

 

What happens if my rent is updated before or after the new cap?

 

The new legislation, pending the final text in the BOE, is not retroactive. If the contract was updated in March and has been updated according to the CPI, the tenant cannot ask for the 2% cap to be applied now. However, this situation has been dragging on for months and has often been resolved by private agreements. The Agencia Negociadora del Alquiler, a private company that mediates leases, calculates that in the last quarter "around 85% of landlords have not applied the full CPI increase". And of these, 27% (that is, a total of about one in five landlords) have waived any increase.

 

Can you raise my rent more than 2%?

 

If the landlord is a private individual, and according to what the government has explained, this would be possible. The royal decree-law, as has been the case with almost all rental legislation in recent years, will differentiate between small and large landlords. The latter will include individuals or companies that own more than 10 urban properties, or a surface area equivalent to 1,500 square metres, excluding garages and storage rooms. For small landlords, the regulation foresees any possibility of agreement with the tenant, although it says that if there are discrepancies, the GCR is applied as a limit. This is why the government believes that increases above 2% will not be accepted. For large landlords, who are supposed to have a greater capacity to negotiate and put pressure on the tenant, it is established that the agreement can never exceed the new legal ceiling.

 

We hope it has helped you understand a little better how to update your rent under the new law. We will continue to upload news and articles to help you become a better and more informed Meiter.

Greetings from the MeiT Team!

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