One of the most frequently asked questions by tenants and landlords is when the price of the rental agreement can be increased. It’s always possible? Can the rent be increased at any time? How much can the rental price increase? We resolve all doubts.
It is very common for owners to want to raise the price of their rental flat to adjust their rents to the market price. Can? Yes, but it depends. There are two basic concepts: rent update and rental price increase.
Rental price update
In all the rental contracts that are signed, it must appear indicated if the rent is updated. If there is nothing to specify it, it will not be updated. “During the term of the contract, the rent can only be updated by the landlord or the lessee on the date that each year of the contract expires, in the terms agreed by the parties. In the absence of an express agreementrent updating will not be applied to the contracts”, stipulates the article 18 from Urban Leasing Law (LAU) in the BOE.
If the lease contract states that the price can be updated, it must be set which index to use for the update. The most frequent is the Consumer Price Index (CPI); however, if there is no express agreement on the index, the Competitiveness Guarantee Index (IGC) will be used by default.
Yes in the contract does not specify if it can be updated or you want to change the index, this can be done by creating an annex. For this, both parties must agree.
Does the rental price always go up with an upgrade?
It doesn’t have to. If one of these two indices is taken as a reference, it can take the case that they are down. Therefore, instead of increasing the rent, it will decrease and the rental price will be cheaper.
How to report the rise
Once the update is calculated, the owner will have to notify the tenant with one month in advance of the day on which it is your turn to pay the new monthly paymentexplaining the alteration percentage applied and accompanying, if the tenant requires it, the appropriate INE certification.
Rent update indexes
Hay three large indexes to update the lease income:
- The Competitiveness Guarantee Index (IGC): It is calculated as the average of the CPI of all the countries that have the euro, but corrected to adjust for the loss of competitiveness that Spain has accumulated since 1999.
- The Consumer Price Index (CPI): It is a statistical measure of the evolution of the set of prices of goods and services consumed by the Spanish population.
- Rent Updater Index of Rental Contracts (ARCA): It measures the net income prices of the set of rental properties and the variations that occur.
How much can my rent go up?
According to the LAU, the increase produced as a consequence of the annual update of the income, may not exceed the result of applying the percentage variation experienced by the CPI on the date of each updatetaking as the reference month for the update the month that corresponds to the last index published on the contract update date.
Increase in the rental price
The aforementioned refers to the update of the rent. The increase in the rental price can be made when the contract approaches its renewal or completion. At the moment, the owner can raise the priceas well as some contract modificationswhich may be carried out if both parties agree to continue with the lease relationship.
That is to say, the rent may be updated (up or down, depends on the situation of the index) annually using the agreed index as a reference, but only the rental price can go up when the contract is approaching a renewal or is nearing completion.
Rental price increase CPI 2022 in Spain
The rental contracts that are updated until December 31, 2022 are separated from the IPC and can only be increase rent by 2%, unless agreed by both parties. This is the limit set by the Government in its aid package to deal with the economic crisis.
Rent price increase 2023
Government wants to extend the limit of 2% tax for rentals throughout the year 2023. Until now, that cap reached until December 31, 2022.
CPI rent increase 2022 commercial premises
The Government limit only affects housing leases. commercial premises they can still be updated by the CPI, or by the rate agreed in the contract. If the CPI is taken as an indicator, it will be necessary to look at the value that it has two months before an annuity is due. This data is published in the INE.
How much should the rent go up in 2022?
Until December 31, 2022, all contracts that are updated they will not be able to raise their price above the 2% limit imposed by the Government. Later, they will be able to go up according to the indicator agreed in the contract, although the limit may be present in 2023.
When can the rental price be raised?
He rental price can be updated annually taking as reference the data of the index agreed in the contract. In addition, close to its renewal or completion, the owner can propose a price increase, which the tenant will accept, if he is interested, or reject, which will mean the end of the lease.
How is the rent increase calculated?
If the CPI is used as a reference (ignoring the Government’s 2% limit), the value of the index of two months before the update will be applied. If it is positive, this percentage will be applied to the current rent (what the renter pays).
When does the 2% CPI apply to rentals?
Until December 31, the updates are unlinked from the IPC. By law, 2% will be applied to leases, regardless of whether the CPI is much higher. This 2% is applied to all contracts that are updated in 2022.
