This episode of Rent Game is dedicated to the rent update.
As you may recall, the Government passed Royal Decree Law No. 11/2022, extending the anti-crisis measures, among which was the limitation of the Consumer Price Index (CPI) update in residential leases. Specifically, and unless otherwise agreed, the rent update was linked to the Competitiveness Guarantee Index (CGI), which in turn is limited to 2%.
In view of the approval of this measure, in force until December 31, 2022 (unless a new extension is approved), we wanted to take this opportunity to explain the rent update regime in accordance with the provisions of the Urban Leases Law (LAU)..
Article 18 of the Urban Leases Law (LAU) provides that the rent may only be updated by the landlord or the tenant on the date on which each year of the contract expires, under the terms agreed between the parties. The consequence of the absence of an agreement to update the lease rent is the non-application of the provisions of said article, and the rent cannot be updated.
In the event that there is an agreement to update the rent, but without detailing the reference index or methodology to do so, the rent will be updated based on the Competitiveness Guarantee Index at the date of each update.
In our experience, the most usual thing is that, in the contracts that do make reference to the updating of the rent, this is linked to the percentage variation experienced by the Consumer Price Index (CPI) on the date of each update.
Finally, it is very important to remember that the updated rent will be due as from the month following the one in which the interested party notifies the other party in writing, stating the percentage change applied, their interest to update the rent. That is to say, if the rent should have been updated in January, and the update is not notified until April, it will not be until May when the updated rent based on the applied index will be due.
The Urban Leases Law authorizes that this notification can be made by note in the receipt of the preceding monthly payment. However, and especially in conflicting lease relations, we recommend to make this kind of notifications by means of burofax with acknowledgment of receipt, as well as by means of message and/or telephone call. In this way, if disputes arise as a result of the rent update, the tenant will always be able to prove reliably having made the communication required by article 18.2 of the LAU.
We hope that this blog post has been able to resolve some of the doubts you may have regarding the rent update. There will be more blog entries about contractual and extra-contractual relations between tenant and landlord in the future, but in case you need an in-depth legal assistance adapted to your specific case, in Méndez Padilla Abogados & Asociados we are experts lawyers in urban leases and we are at your disposal to advise you on any problem you may have regarding this matter. You can contact us through Whatsapp, phone call or email.