Buy to Rent: key concepts (II)

Following on the heels of the previous article, today we delve into four crucial aspects of the new housing law that could affect rental property owners. These points not only reflect the dynamism of the real estate sector, but are also fundamental to understand the current reality of the rental market, the limitations you will have when it comes to updating the rent and the rent limit. Read on to stay informed and avoid falling prey to the current legislation.

Having broken down the introductory aspects of the new housing law, we delve into the specifics. Here are four crucial aspects you need to know.

1. Stressed Residential Market Zones.

The autonomous communities and certain city councils with competencies in housing have the power to define these zones, which can range from entire municipalities to more specific areas. The reason? Situations where there is a risk of insufficient supply of affordable housing. The Ministry of Transport will update the zones declared as stressed on a quarterly basis. An area will be considered "stressed" if, among other conditions, in the last five years it has had a rise in the price of housing for sale or rent of at least 3 points above regional inflation.

2. Large Housing Holders.

If you own more than ten urban residential properties or more than 1,500 m2 of constructed residential use (excluding garages and storage rooms), you are a "large holder". In stressed areas, the autonomous communities may consider large holders to be those who own five or more properties. If your property is in a stressed zone, you will have to comply with specific obligations, such as collaborating with the administration and providing information on the use and destination of your properties.

3. Duration and Extension of the Contract.

The new regulation affects contracts entered into after May 26, 2023. Contracts that previously lasted up to 5 years (or 7 if the lessor is a legal entity) may now be extended under certain conditions. One of these conditions is the location of the property, i.e. whether or not it is located in a stressed area.

4. Specific Extension in Stressed Areas.

If your rented property is located in one of these zones and the end of the initial or tacit extension period is approaching, there is an extraordinary extension. This allows the tenant to request annual extensions of the lease for a maximum of three years. This request must be accepted by the landlord, unless a new agreement is reached.

This legislation is a step towards detailed regulation of the rental market. It is true that all these measures deepen the state interventionism of a market (real estate) that is already highly intervened; it is also true that many owners, especially the less informed and less fearful ones, have taken, or are going to take, their homes out of the rental market to put them on sale directly. This opens new windows of opportunity for savvy investors: an increase in supply can generate good buying opportunities for these investors and, a decrease in rental supply, an increase in the profitability of this type of investment. If you are one of the latter, keep in mind that the most important factor today is tenant selection, which we will discuss in future articles. A bad selection can turn your investment into a real nightmare full of non-payments, cost overruns and unilateral contract extensions with no solution in the short or medium term.

If you are a homeowner, it is essential to be aware to make informed decisions. And if you need advice or face any inconveniences, remember that Valido Home, with its expert team in real estate law, is ready to help you. Do you have any doubts, what are you waiting for to arrange your free and non-binding call?