Law 4/2013, of 4 June, on measures to promote and increase the flexibility of the residential rental market, was published in the Spanish Official Gazette on 5 June, 2013, and entered into force on the day after its publication.

The major purpose of this Law is to make the residential rental market more flexible and dynamic, in order to ensure a balance between the need for leased housing and the assurances to be offered to lessors to encourage them to make their properties available in the lease market.

The most relevant changes introduced by this Law are those related to the articles in Law 29/1994, of 24 November, on Urban Leases ('LAU', in its abbreviated form in Spanish); and those contained in Law 1/2000, of 7 January, on Civil Procedure; as well as the creation of a special Register for final judgments regarding default in rent payments.

The major changes to the LAU are:

  1. Applicable legal regime: The freedom of agreement between the parties is reinforced by giving priority to the parties' intent (within the framework of Title II of the Law).
  2. Term of lease: The statutory extension of the term is reduced from 5 to 3 years, and the tacit extension, from 3 to 1.
  3. Rent update: The parties may expressly agree on the procedure to calculate the rent update. If no express agreement exists, the consumer price index (IPC) increase will apply.
  4. Recovery of the property by the lessor: The statutory extension does not apply in certain cases, in which the lessor will be able to recover the property to use it as a permanent residence. Those cases are: when the lessor wants to recover it for the lessor's own use, for the use of the lessor's first-degree relatives or in the event of an adoption, or for the lessor's spouse in the event of a final judgment of separation, divorce or annulment, provided that at least one year has elapsed since the execution of the agreement, without it being necessary to include it expressly in the agreement.
  5. Lessee's withdrawal from the agreement: The lessee may withdraw from the agreement at any time, provided that at least 6 months have elapsed and notice is given to the Lessor at least 30 days in advance. The parties may agree on some form of compensation in the event of withdrawal.
  6. Secure legal documents and transactions: Any leases of urban properties which have not been registered in the appropriate Land Registry will not be enforceable with respect to acquiring third parties that register their right; and the third party acquiring a house that meets the requirements of Article 34 of the Spanish Mortgage Act (Ley Hipotecaria) may not be harmed by any non-registered lease (they shall only be subrogated to the rights and obligations of the lessor if the lease has been registered).
  7. Housing for tourism use: The lease of housing for tourism use (known as holiday homes or tourist apartments) is expressly excluded from the scope of the new Law. This type of housing will be regulated by the specific rules applicable to the sector or, failing those, seasonal lease regulations will apply (which have not been changed by the new Law).
  8. Full termination: A new section has been added whereby, for urban leases registered in the Land Registry, if the agreement provides for termination of the lease upon default in rent payment, and for the property to be returned to the lessor immediately, full termination will be in place once the lessor has requested (either through court or by means of a notary public) that the lessee make the appropriate payment or duly comply with the agreement by serving notice at the lessee's address provided to the Land Registry to that effect, if (i) the lessee fails to respond within 10 working days; or (ii) the lessee responds by accepting full termination of the lease (again, through the same court or notary public that issued the formal request).

Law 4/2013 also provides for the creation of a Register of final judgments regarding default in rent payments. Its organisation and operation will be regulated by means of a royal decree.

This Register is intended to provide information about the risk involved in leasing properties to people who have previously defaulted in rent payments, against whom a final judgment has been entered in eviction proceedings, or an arbitrator's award if the default in rent payments has been solved by means of the relevant competent arbitration bodies.

The relevant court clerk or arbitration bodies, as the case may be, will provide the Register with the information related to said final judgements or arbitrator's awards regarding default in rent payments.

Property owners who wish to enter into lease agreements regarding their property will have access to the information held in the Register, and will be required to submit a proposed form of lease agreement identifying the potential lessee.

The persons included in the Register may request that the registration be cancelled once they have paid the debt for which a judgment was entered against them in the relevant proceedings. Nevertheless, data will remain in the Register for up to 6 years, and will be automatically cancelled upon expiry of that period.

All registrations must be subject to the provisions of Organic Law 15/1999, of 13 December, on Personal Data Protection.