The limitation of the rental price on housing in Catalonia

In the last reform of the Law for Urban Rents, on May 2019, in its Second Additional Provision, in relation to the rental price index, it was stated that the Autonomous Communities could define their own reference index in a specific way and adapted to their territory, for the exercise of their powers and for the purpose of designing their own public housing policies and programs.

Consequently, the Generalitat of Catalonia has approved a Decree Law 9/2019 of May 21, published in the DOGC on 05/23/2019, of urgent measures regarding the containment of income in housing lease contracts, in order to limit the price of housing rents.

How does it work?

First of all, before a limitation of the rental prices of housing rents can be established, the areas or areas of “tense market” housing (these are the municipalities or the areas of municipalities where the supply is at risk of insufficient rental housing in affordable conditions); for this, various aspects must be stated:

• as if the growth of the rental price and its cost in the family budget is clearly higher than the average in Catalonia;
• as if that there is a disproportion between the increase in the population and the number of available rental homes, or
• as if the cost of rentals increases above the CPI of the affected area.

Once the “tense market” zone or area has been fixed, the rent of the housing lease contracts may only exceed the Reference Index of the Rental Prices by 10%. An additional increase of 5% can be allowed due to special characteristics of the house (views, community areas equipped with a garden, swimming pool, etc …).

Newly built?

Likewise, newly built and fully rehabilitated homes may be rented at 20% above those established by the Reference Index, but only for 5 years after the completion of the works.

The rent review of these leases can only be carried out if expressly agreed, and with reference to the annual variation of the competitiveness guarantee index.

The Sagrada Familia, one of the many wonderful site to see in Barcelona

Already rented?

In homes that were already rented, and when the rent was higher than the price set by the reference index that should be applied, the last rent of the previous contract can be set as the initial rent of a new contract (producing, as evidence, the amount of the last receipt).

If the lessor collects rents above the limits established, the lessee will have the right to recover the difference between the legal limit and the rent he paid, with interest. It may be required by Courts, but the Department of Justice will promote mediation and other alternative dispute resolutions systems.

As a transitional regime, it is established that leases concluded prior to the entry into force of the Decree will continue to be governed by previous legislation. In case of renewal that involves extending the duration or modification of the rent, after the declaration of the area in which the house is located as a tense market, the provisions of these regulations shall be applied.

This Legislative Decree entered into force the day after its publication, that is, on May 24, 2019.

Morning natural lights in the master work of Gaudi: the Sagrada Familia

Different sectors have already objected this regulation, real estate professionals, owners and social organizations (Sindicat de Llogaters, Tenant Association, etc.) and all agree in their rejection for different reasons, but agree that it will not solve the problem of rental prices, since it is will most probably increase prices due to a reduction on the offer and, therefore, the real expectations of limiting rental prices will not be reached.

The different sectors coincide, however, that one of the measures to contain rental prices should be to increase the offer of social leased housing by the administration.

This article is written by one of our independent partners in Spain, Juan, who is one of our Legal partners in Catalunia. Check his full profile here.

Do you want to get in touch with him? Ask us for an introduction and benefit from the power of our network.

Juan

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What is the property value in Spain with respect to the Transmission Tax?

Cadastral Value or market value of the property?

The Spanish Tax Administration applies taxes on the property transmissions in accordance with a valuation method utilising the cadastral value of the property multiplied by coefficients.
It turns out that, according to art. 10 of the corresponding Law of Patrimonial Transmissions, the taxable base of the Tax is constituted by the market value of the property of the transferred good, but, according to art. 57.1 of the General Tax Law, the real value of the property transferred is determined by applying a multiplier coefficient to the assessed value of the property.
This enters into evident contradiction when the real value does not coincide with the official calculated value. The cause is easy to guess: the Administration is slow in determining the coefficients. In fact, in Spain, we have benefited for many years from significantly low calculation coefficients, which allowed us to declare values well below the real ones. The Administration reacted in the years of the real estate bubble, which caused that, in the following years of crisis, the values were excessive.
What should we do, then, when the real estate that we acquire has a lower price than the one obtained according to the valuation method by multiplying coefficients on the assessed value assigned to it? What is the value we must declare? The amount actually paid or the value that the Administration would give you in case of a check?

The Supreme Court of Spain analysis

A recent judgment of the Supreme Court of July 2, 2018, has established, finally, that the value that we must declare is the actual value actually paid, even if it is lower than the value determined by the Administration; and this because, according to the Sentence,
“The real value of a property is the one which would be agreed upon by two independent law subjects in a free market context and this is obviously conditioned by circumstances of varying magnitude and significance and, among others, the severe and prolonged economic crisis suffered since the second half of the previous decade, which means that the real value, far from being immutable, can vary depending on the temporal, spatial or other nature to which it refers. ”
This legislation is inspired by reality.
And the Court insists on indicating that the method of applying abstract coefficients on the Cadastral Value is a legal method but not an ideal method, by its abstraction, to establish the real value.

Who should prove the Value?

Finally, there is the issue of who has to prove the value: On this, the Supreme Court establishes that the Administration can not reverse the burden of proof, that is, that it can not force the taxpayer to prove that the proven value obtained by it does not corresponds to the real value, but it is the Administration that must justify why it does not accept the declared value and prove that the declared price is not the one actually paid, or that it does not correspond to the real value.
Given that the burden of proof falls on the Administration, the taxpayer is not legally obliged to justify that the declared value of the property coincides with the real value, but, if it is dissatisfied with the taxation of the administration, it can avail itself of any admissible evidence that would help to contribute for determining an official valuation.
It is very possible that current buyers find that the price for which they acquire a property is less than the amount obtained by applying the multiplier to the cadastral value applied by the Administration. In this case, we would advise opposing the Administration tax.

This article is written by one of our independent partners in Spain, Juan, who is one of our Legal partners in Catalunya. Check his full profile here.

Do you want to get in touch with him? Ask us for an introduction and benefit from the power of our network.

Juan

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The post How can we calculate the Transmission Tax on a Spanish Property? appeared first on How to buy in Spain.