In our previous post we have seen that leases, including residential leases, can be freely negotiated by the parties, and that some of the clauses that are not usually paid attention to at the initial stages of the contract can have economic repercussions throughout the life of the contract.

Firstly, it is necessary to point out that the freedom of covenants with regard to residential leases is relative, since the amendment introduced by Law 4/2013, on measures to promote and streamline the housing rental market states, with regard to residential leases that "they shall be governed by the covenants, clauses and conditions determined by the will of the parties, within the framework of the provisions of Title II of this law and, supplementarily, by the provisions of the Civil Code".

Therefore, although there is great freedom of agreement, it is limited by "the framework of the provisions of Title II", so there are some issues that cannot be negotiated, such as the successive annual extensions during the first three years (from 2019, five or seven years, depending on the case), or the new power of withdrawal.

What can be negotiated in a residential lease?

Compensation for early cancellation

The amendment introduced by Law 4/2013 allows for unilateral withdrawal by the tenant, provided that at least 6 months have elapsed in the term of the rental contract.

However, such termination may not be free of charge, as the Law expressly provides for the possibility of agreeing on compensation, which will therefore be one of the aspects to be negotiated.

Community expenses

They can be of two types:

• Ordinary common expenses: These are a more or less regular fee over the years to cover general maintenance (cleaning, lift, common electricity, porter service, etc.).

• Extraordinary common expenses: These are the instalments approved to cover unforeseen expenses (repairs to the façade, cracks in the communal swimming pool, etc.), so it is necessary to analyse well what part is being assumed by each of them.

If there is no regulation, it is understood that the lessor assumes all of them.

On the contrary, if it is stated that the lessee assumes the payment of "the common expenses", it is understood that he/she assumes all of them, so it is always necessary to clarify.

Taxes

As a general rule, the Property Tax corresponds to the owner of the property, while the rubbish tax (where it exists) usually corresponds, by Law, to the occupant of the property.

In any case, both taxes are payable in the name of the landlord, although the parties are free to choose to pay them.

However, as non-payment would directly affect the lessor, it is advisable for the lessor to advance payment and, if applicable, pass the cost on to the lessee.

Utilities

Since it is the tenant who will make use of them, there is usually no problem in assuming that the tenant will be responsible for them. However, there are cases in which the cost of water or heating is an expense that is charged together with the common expenses.

In such cases, it will first be necessary to confirm whether they are specified separately and, if so, to agree who will be responsible for them, as well as what will happen to those expenses that, initially included in the common expenses, are individualised once the tenancy has begun.

Updating the rent

Although the usual rule for updating the rent is to apply the year-on-year variation of the CPI, this is a clause that can be expressly negotiated.

In short-term housing leases it is not very relevant, but if a long-term contract is signed, an update can be agreed as long as it is not higher than the variation of the CPI.

With the reform implemented in 2019, there is no longer much room for negotiation, as the CPI will always operate as a maximum limit.

Handover

The conditions of handover of the property may not seem relevant at the time of signing the lease, but in the long run they have a great impact, as they may involve additional costs at the end of the contract.

In a residential lease, it is rare that conditions of return are included, beyond "adequate state of conservation, except for normal use", but it is possible to include specific conditions of concern to the landlord, such as an extraordinary cleaning of the property or the obligation to repaint the walls or cover holes if pictures have been hung.

Deposit and other guarantees

The provision of a security deposit is non-negotiable, and is limited to one month's rent for residential leases and two months' rent for non-domestic leases.

However, the provision of any other type of additional guarantee (guarantees, deposits, letters of guarantee, etc.) is completely optional, so the parties must reach an agreement that satisfies both parties, although after the 2019 reform, financial guarantees (guarantee or security deposit) for an amount greater than two additional monthly payments cannot be requested.