Limitation on rental price indexation in Spain
Spain has been struggling with its housing problems for some time now. As a result, several proposals for legislation on housing have been discussed by the parliament (as a result of the corona pandemic, among other things). The economic and social consequences of the current war between Russia and Ukraine are now also being taken into account. At the end of March, a Royal Decree was approved by the Government to take urgent measures regarding housing in Spain. In addition, the increase in the CPI, the Consumer Price Index, (often called IPC in short in Spanish) also plays a huge role and the Government has therefore taken these actions in order to prevent excessive increases in rents on annual basis.
In the Royal Decree that came into force on 30 March 2022, measures were taken to prevent excessive rent increases. For example, it stipulates that the rent of the contract may not increase by more than 2%. This applies to all leases that are subject to an annual rent increase. An annual rent increase may be applied if specified in the rental agreement. However, this increase is normally linked to the CPI indexation (IPC). However, the indexation this year is quite high. For this reason, the government has set a limit on this rate.
This new Royal Decree ensures that a limit is put on the maximum allowed annual rent increase. This limit is valid until 30 June 2022. After this date, a possible extension is to be expected.
The limitations we explain in this article only apply if the lease enters a new lease year between 30 March 2022 and 30 June 2022. If the contract enters a new lease year at any other date, then the restriction does not apply, and the rent can be increased in accordance with the actual IPC indexation (unless the defined limit is extended in time).
In short, if the lease enters a new lease year between 30 March 2022 and 30 June 2022, and there is a clause in the lease regarding the possibility to increase the rent annually with the indexation, this increase may not exceed 2%.