Important changes in Spain’s Urban Lease Law (LAU)

THIS ARTICLE HAS BEEN PUBLISHED BEFORE THE APPOINTMENT OF THE DECREE LAW BY THE CONGRESS. HERE, YOU CAN READ MORE


On December 18, the Real Decreto Ley 21/2018, of December 14, of urgent measures in the field of housing and rent has been published in the BOE, which incorporates very important changes in the field of housing lease in the Spain’s Ley sobre Propiedad Horizontal (Urban Lease Law).

This Real Decreto Ley has entered into force the day after its publication and has no retroactive effect, so it will not be applicable to lease agreements signed prior to that date.

The most significant modifications are:

  • It returns to the principle of freedom of pact in housing leases of more than 300 sqm or initial rent exceeding 5’4 times the minimum interprofessional salary.
  • The lease of tourist use, in all cases, is definitely excluded from the LAU (Urban Lease Law). The minimum mandatory duration of the contracts is extended at 5 years if the owner is a person and at 7 years if it is a legal entity.
  • The duration of the legal extension is extended to 3 years
  • It is established that in reduced-income contracts (these are those where rent is below that established), the update will be made by applying the IPC while the mandatory term of duration lasts- 5 or 7 years respectively.
  • Expenditure on real estate management and contract formalization will be paid by the landlord when it is a legal entity, except for those services that have been hired directly by the lessee.
  • A maximum of 2 monthly payments is made to supplementary additional guarantees. If the contract lasts more than 5 or 7 years, these guarantees may be extended.
  • An exemption from the payment of the ITP to the tenants is approved.
  • The procedural regulation is modified in the handling of evictions. Social services will intervene in the procedure at the request of the defendant, in the event of a situation of vulnerability, and the procedure can be suspended (1 month if the owner is a person or 2 months if he is a legal person) until social services consider appropriate mesures. After the deadline the procedure will continue its processing.
  • A new right of withdrawal is introduced in favor of the administration in certain cases of joint sale.

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Thoughts about Meeting Point, and more

It took me longer than usual to make this latest Diary of Change as we wait to assess the results of the Meeting Point held in October and to know about the latest decisions of the Administration that affect the real estate sector.

This last Meeting Point Edition has produced contradictory sensations. On one hand, it is true that the BMP was positive because the layout of the stands was different from other years and we thought it looked better. In addition, they have been larger and brighter. It looks like we’re getting better! On the other hand, the Symposium talks have been very interesting and, due to the BMP last one day less, allowed us to better concentrate the efforts.

As always, there are two “Meeting Point”: the professional one and the one focused on the  general public. The days focused on the professional sector have been very active, with a lot of networking. It has been very helpful. On the other hand, the days for the general public have been weaker than in other years since there have been fewer visits. If we analyze it from the commercial point of view, it shows that nowadays attending to a fair makes less sense for potential costumers. What do they find? A concentration of supply when the real estate websites and portals also have it? Even so, today we can say that we have made 3 sales that came directly from the BMP contacts.

Also for us, for AMAT, it was the space where we were able to present two innovations:

  • GreenDEX, it is a green indicator that relates housing and health. With the GreenDEX and the GreenMAP we inform about the quality and quantity of the green next to the properties that we commercialize in the city of Barcelona. From our point of view, the existence of green areas in a housing environment improves the environmental health and famílies well-being.
    At the moment we are the only ones who offer this service in order to inform our customers, but we hope that the rest of the sector will join us soon.
  • The new regulation of 30% of social housing

After months of talking, filling pages and pages in the media, on December 5 there was an agreement between the City Council and the Generalitat. Surely we could get to agree with its heart but surely we are not with the way to do so.

It will take time to assess the consequences for the real estate sector and also the social benefits but as a first reflection we are struck by several things:

  • That an important and transcendental topic like this is approved 6 months after the local elections.
  • That there has not been a great debate. Interestingly there have been discussions after the approval by the City Council.
  • That the limit where the application of this regulation is necessary is 600 sqm.
  • That this burden is imposed on the promoters as a result of having been the Administration unable to get a public-private collaboration to develop social housing, as it exists in education and health issues.
  • We are concerned about the issue, as we have historically been worried about the lack of rental housing in Barcelona and the distrust, also historical, in relation to the real estate sector (and we have never been promoters …).

Immaculada Amat

Vice-president

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Greendex, an added value for our costumers

One difference between our company and the rest of the sector is the importance we give to innovation. For us, betting and investing in innovation is an added value to our services and, therefore, directly affects the satisfaction of our customers.

In these moments, taking advantage of the proximity of the Barcelona Meeting Point to make the presentation, in Amat we bet on a new innovative concept: the GreenDex index.

Green spaces have been the focus of numerous studies that demonstrate that contact with natural environments is related to health and well-being of people and confirms that it can improve it. The existence of green areas improves the capture of CO2, which affects environmental health, mitigating the air pollution of cities and, in addition, provides a lower energy consumption. This is why housing location is where to put the focus of attention as it influences many aspects at a vital level.

GreenDex is an indicator of the amount of green areas surrounding homes. For all in the light of above, it is a very important tool at the time of deciding to acquire a property. On the other hand, in addition to the amount of green, it is important to know the quality of it.

Therefore, the GreenMap system will provide our customers with the visualization of the quality of the vegetation around their future home.

As we said, having this visualization is an added value for the user and, from now on, both can be consulted on our website.

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New trends in Real Estate market

On this mail find attached here our Real Estate Market Report of 1st semester where we explain how the real estate behaved, always based in our data and operations. Now I would like to forecast the trends for the next months in Barcelona and its outskirts:

Rental prices stability

Since the beginning of this year we have very clear that prices, in a certain way, have reached the top. We have been saying it a long time ago; prices are related to salaries and when a family has to invest 40% of it in renting a property indicates that limit is reached. That happened in the end of 2017.

Rental resignations before contract expires grow

It is curious to see how, many times, media says that the most of tenants have important issues for rental renewals, but it is not like that in our company, and it doesn’t mean our clients are much different from others. We can assure that an important number of tenants resign before the expiring date, which are about 50% aprox. We have been very interested in knowing why clients resign before expiring date and we have discovered 2 basic reasons: because clients buy a property or they can’t assume the rental cost.

Sell trends slow down

It is true that this year we’ve been selling a lot, with a good rhythm; developers have raised prices and we keep selling the same. But this trend has changed in the last months. We sell well, slower though, but that is not a bad thing. We have always thought that encompass it with markets is a must. We can’t forget that sell prices are related to debt capacity through the mortgage and this capacity is leaded by salaries and, in our country, salaries only rose a bit.
Due to this behaviour, we are surprised of some market stakeholders’ answers when asked about scope for price increase answering that there is still room to reach prices of 2007! As it was the axiom! We understand prices will rise until potential buyers could not afford it, because we are sure that financial entities will be more careful tan before crisis.

Lot of owners and property investment funds interested in properties for rental purposes

Many years ago we haven’t seen so much interest in rental promotion, and that’s positive. The market is lack of rental properties. We are still far from European Standard. Every time it is announced that a new company is coming to set its HQ in Barcelona – mainly of the Technology field- which means to settle many workers from abroad, we ask ourselves: where are they going to live?

There’s a need of quicker public policies than since now and, most of all, it is necessary to facilitate private investments in rental market with guarantees and juridical security. We must change the vision of private funds as simply speculators and seeing them as possible partners.

We would see right there would be tax benefits for owners who make a rental contract for more than 5 or 10 years, etc. Surely with this type of contract we would solve the problem that no one talks about: the problem of the owners of flats, with pensions and increasingly smaller incomes, to which selling their property and renting would be a very good option. They only need to have the opportunity of long-term contracts, which does not force them to fear for the future.

As usual, approaching the local elections, making works and inaugurations is a non-stop. This trend is historical but it keeps surprising us.

Immaculada Amat

Amat Immobiliaris Chairwoman

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What’s the difference between valuation and appraisal?

In many cases there is a confusion between what is a valuation and an appraisal, especially when we want to buy or sell a property. Although both actions serve to know the value of a property, there are substantial differences that we believe should be defined. Do you want to know the difference between valuation and appraisal?

Mainly and, summarizing in a few lines, the main difference is its legal value.

Valuation

The most important characteristic of the valuation is that it establishes the value of the property in an indicative manner without having to visit the property. The cadastral data of the same already offer their objective value. Therefore, there are online valuations that simply filling a form determine its value. By not complying with a regulated procedure, they lack legal value.

Appraisal

The appraisal, on the other hand, is a legal certificate for the valuation and is made with a specific methodology that complies with the legal regulations. It must be carried out by a certified architect or technician, who assigns a value to the home by means of an official objective scale (ECO / 805/2003).

Knowing this, the client will make a valuation or appraisal depending on their needs. Generally, the valuation is carried out on a regular basis to sell the property while the appraisal has other purposes.

The appraisal we need to do to apply for a mortgage, for the distribution of a hacienda or distribution of goods.

So, if we need to know the value of the property in an official way, an appraisal will be necessary, if we want to know the value on a personal level, we will only need an appraisal.

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