rent controls and punishment for empty flats



The housing law has received this Tuesday the second approval of the Council of Ministers despite being surrounded by controversy. It is no longer just the real estate companies that doubt its legality, but the General Council of the Judiciary (CGPJ) itself has rejected the draft for claiming an “expropriation of regional powers” in this matter.

Despite this, both the Minister of Social Rights, Ione Belarra, and the Minister of Transport, Raquel Sánchez, have assured that the Government has not changed the main lines of the project that the Council of Ministers approved on Tuesday. “There are no substantial changes in the law,” Transport sources reiterate to ABC. These are the main keys to the controversial rule.

Who do rent controls affect?

Only those owners who are companies and have more than ten homes will be affected by the price limits. In addition, these will not be implemented throughout the territory, but in areas classified as stressed. The communities will be the ones that will request the denomination of a stressed zone from the Government, a qualification that will last for three years and can be extended.

It will be in these stressed areas where the owners established as legal persons who have more than ten homes will have to charge a maximum price as rent that will be determined by an index that will be drawn up in the future. In some cases they will have to lower rents, while in others they will not be able to raise them.

Will the rest of the owners be able to raise prices in stressed areas?

Yes, as long as they meet a series of conditions. The Government requires that the owner has carried out renovations, improvements related to energy efficiency in the dwelling, or signs a new ten-year contract with the new tenants. In these cases they may raise the rent, although only a maximum of 10% compared to the previous contract.

In the rest of the territory, that is, in those areas that are not stressed, landlords will be able to freely set rental prices with their tenants.

What about the contracts that are about to expire in these zones?

Contracts located within stressed zones will be automatically renewed when they come to an end. Both those of small owners and those of funds and banks. The extraordinary extension will be for three additional years and the tenant during this period will continue to pay the same rent, as long as any of the circumstances (reforms or ten-year contracts) described above do not occur.

How will it be determined that an area is stressed?

The Government will ask the communities for two requirements. To begin with, in these locations the average rent (or mortgage) plus utilities will have to ‘eat’ more than 30% of the average household income. In addition, it must be accredited that in the last five years the rent has increased by the regional CPI plus 5 points.

Of course, only the communities that so wish will request the category of stressed area and, therefore, apply these controls to rentals. It will be a voluntary measure. The PP has already warned that there will be no price limits in their regions.

When will price controls be applied?

There are still years. The law will not come into force until well into the year, and when it does the government will offer a moratorium of up to 18 months to large owners. That is, the price controls will not be in force until the end of 2023 or the beginning of 2024.

I have a house on the beach. Will they charge me more taxes for it?

The law establishes a surcharge of the Real Estate Tax (IBI) of up to 150%. But the fiscal punishment only affects very specific homes. To begin with, they must be flats in the hands of owners with more than four homes and that have been uninhabited for more than two years. Likewise, only the municipalities that so wish will apply this surcharge to the IBI.

In addition, the owner can get rid of the tax penalty if he justifies that the house is empty for some reason. For example, for reasons such as temporary relocation for work or training reasons, change of address due to a situation of dependency or reasons of health or social emergency, real estate intended for second home uses with a maximum of 4 years of continuous unemployment , real estate subject to work or rehabilitation actions… in short, punishing the owner will be avoided when he is conditioned by circumstances that prevent the effective occupation of the property.

Nor will the IBI surcharge be applied to properties that are the subject of litigation or have any cause pending judicial or administrative resolution that prevents the use and disposal of the home. Or in the case of real estate for sale, with a maximum of one year in this situation, or for rent, with a maximum of six months in this situation.

And in the case of second homes, the surcharge will only be applied if they have been unoccupied for more than four years.

What about homeowner tax credits?

As a rule, they go down. Specifically, the Executive will limit the current reduction that landlords have from 60% of personal income tax to 50%.

Of course, the Government foresees specific cases in which this reduction rises. If homes are rented to young people in stressed areas there will be reductions of 70%, the same as if a protected home is rented. In addition, if there have been reforms or rehabilitation tasks in the home in the last two years, the reduction will rise to 60% again.

What is incentivized affordable housing?

It is a figure that creates the new law. The definition includes those homes in private hands to which the Administration offers a series of benefits (tax, urban…) in exchange for allocating them to reduced rents. They will be aimed at groups with low incomes. The price that these rentals will have is not yet known, since that will remain in the hands of the Administrations.

How does the law affect me if I am going to buy a house?

Buyers of new-build homes will benefit from the new rule, because the law is very strict with developers.

To begin with, the promoter must return to the buyer the advance payment made, including taxes and legal interest, if the construction does not start or finish within the agreed terms of the contract. In addition, there will be a bank guarantee or insurance to protect deliveries on behalf of buyers.

The promoter will also have to give the buyer a document that certifies the guarantee of the amounts that have been advanced. If the works are delayed or do not start, the buyer may request the return of the guarantee within a maximum period of 30 days.

If the construction had not started or the house had not been delivered, the purchaser may choose between rescinding the contract with the return of the amounts paid on account, including taxes and interest, or granting the promoter an extension, which will be recorded in an additional clause of the granted contract, specifying the new period with the date of completion of the construction and delivery of the home.

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