September 27, 2023

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Transforming Houses Into Homes

The Law on Rental Deposits in Spain

Many people moving to Spain are sometimes quite confused regarding the need to pay an initial deposit to secure a rental or letting agreement. Over the years, the actual amount corresponding to a number of months rental has varied also depending on the type of rental agreement. The legislation that specifically governs rental or letting deposits can be found in the law for urban rentals (‘LAU’) 1994 under article 36. The following are some of the main points to be borne in mind.

When you are signing a rental or letting contract for a house, flat or office, it is important to remember that in Spain you are required to pay a deposit at the beginning of the term which acts as a guarantee of payment of any outstanding bills on finalising the contract as well as a safeguard that the property will be returned to the owner in the same state as before the effective occupation of the property. It is also a safeguard that the tenant will abide by the general conditions of the rental contract signed. The deposit then is a monetary payment which will be equivalent to one month’s rent for housing and two months’ for offices and business premises although the landlord can request a higher payment (i.e. these are minimum legal amounts).

This money must be lodged by the owner in a non-interest bearing account with the local authority, for the first 5 years will not require a revision to bring it in line with increases in the actual amount paid in rent. Thereafter, rental increases will require the necessary and corresponding increase in the deposit. At the end of the rental contract, and on ensuring that there are no outstanding debts and that the property is in a good state of repair, the deposit must be returned to the tenant, accruing interest after one month of the finalization of the contract.

You should also be aware that in Spain landlords are also permitted to request further guarantees if they see fit. These guarantees can be in the form of bank guarantees, personal guarantees by a property owner, personal references.

A last thing to note is that although landlords are required to return the deposit on finalization of the contract and on establishing that everything is in order, unfortunately in Spain some of them can be quite reticent to do so and indeed some of them can invent cost in order to have to pay the money back. For this reason, in practice though not strictly speaking legal, a lot of tenants who have paid the one month deposit on handing in notice simply do not pay the last month’s rent.