Residential lease agreements in Spain: term, deposit, rent and termination under the Urban Leases Act

Residential lease agreements in Spain are governed by the Urban Leases Act, Law 29/1994 of 24 November (LAU), substantially reformed by Law 12/2023 of 24 May on the right to housing. Understanding the regime —what the statute imposes and what the parties may freely agree on duration, deposit, rent updates and termination— is the best way to avoid disputes and to ensure both landlord and tenant know where they stand. This guide sets out, in an orderly way, the legal framework in force for the residential tenancy.

What a residential lease is and what it covers

A residential lease is the contract by which one party, the landlord, grants the other, the tenant, the use of a habitable dwelling in exchange for rent, with the primary purpose of meeting the tenant's permanent need for housing. This is the scope defined by Article 2 of the LAU, which separates this tenancy from leases for use other than housing —business premises, offices or seasonal second homes— subject to more flexible rules. The distinction matters: the protective regime of terms, extensions and rent set out below applies only where the property is the tenant's habitual residence.

One essential practical rule should be borne in mind: in residential tenancies the LAU is mandatory in the tenant's favour and, under Article 6, any clause worsening the tenant's position relative to what the law recognises is void. Anything agreed below the statutory minimum does not bind the tenant, even if signed.

The term of the tenancy: minimum duration and extensions

The term is freely agreed, but the law guarantees the tenant a minimum tenure. Under Article 9, where the agreed term is shorter than five years —or seven years where the landlord is a legal entity— the contract is compulsorily extended by annual periods until that minimum is reached, unless the tenant gives thirty days' notice of an intention not to renew. The landlord may recover the dwelling before that term only if it reserved in writing the need to occupy it as a home for itself or first-degree relatives.

Once the minimum term is exhausted, the tacit extension of Article 10 applies: if neither party gives notice of an intention not to renew —the landlord four months in advance, the tenant two— the contract is extended by annual periods up to a maximum of three further years. Only after those three years of tacit extension is the contract fully terminated, once the landlord gives notice.

Rent updates: from the CPI to the new IRAV index

Under Article 18, rent may be updated only on each anniversary of the contract and only if this has been expressly agreed. Absent an agreement, the rent is not revised. Where it is agreed, since the 2019 reform the update has been subject to an objective cap that has kept changing.

Emergency legislation exceptionally capped that annual increase at 2% during 2023 and 3% during 2024, to contain rent inflation. The structural change came with the new index provided for in Law 12/2023: the IRAV —the Residential Lease Reference Index (Índice de Referencia de Arrendamiento de Vivienda)— defined by the Resolution of the National Statistics Institute of 18 December 2024 and in force since 1 January 2025. The IRAV replaces the CPI as the cap on updates for habitual-residence contracts signed after Law 12/2023 came into force, on 26 May 2023. It is calculated by taking the lowest of several indicators —including the CPI and core inflation— so that its result stays below general inflation. Contracts signed before that date continue to be updated as agreed, usually by the CPI.

The deposit and additional guarantees

On signing, a cash deposit is compulsory: under Article 36, one month's rent for a residential lease and two for a lease for other use. During the first five years of the contract —seven where the landlord is a legal entity— the deposit may not be updated. Regional legislation —including in the Region of Murcia— may require the landlord to lodge that deposit with the competent body.

Royal Decree-Law 7/2019 of 1 March curbed a common practice: requiring guarantees additional to the deposit. Article 36 allows complementary guarantees to be agreed —a bank guarantee, a further deposit or additional months— but in a residential lease, for contracts of up to five years (or seven where the landlord is a legal entity), the value of that additional guarantee may not exceed two months' rent. Adding deposit and additional guarantee together, the landlord may not require more than three months up front.

Obligations of the parties: upkeep, works and expenses

The landlord must carry out, without any right to increase the rent, all repairs needed to keep the dwelling habitable, under Article 21. The tenant, in turn, bears the minor repairs required by ordinary wear and tear of the dwelling and must make good any deterioration caused by fault. Under Article 23, works that alter the layout of the dwelling require the landlord's written consent; failing that, the landlord may require, at the end of the contract, reinstatement to the previous state.

As to expenses, Article 20 allows the parties to agree that the general expenses of the property and the services it enjoys fall to the tenant, but only if this is set out in writing with the annual amount stated on signing. Without that express, quantified agreement, general expenses fall to the landlord.

Tenant withdrawal and termination of the contract

The tenant is not bound indefinitely. Article 11 grants the right to withdraw —to leave the contract— once at least six months have elapsed, on giving at least thirty days' notice. The parties may agree that, in such a case, the tenant compensates the landlord with one month's rent for each year remaining, and the proportional part for periods of less than a year. That compensation is owed only if expressly agreed and within that statutory limit.

Termination for breach is governed by Article 27: the landlord may terminate, among other grounds, for non-payment of rent or equivalent sums, for unconsented sub-letting or assignment, or for wilful damage to the dwelling; the tenant, in turn, may terminate if the landlord fails to carry out necessary repairs or disturbs the tenant's use. How to quantify the loss when the tenant leaves early without contractual cover has been clarified by the Supreme Court: Judgment of the First Chamber 1469/2025 of 21 October 2025 (ECLI:ES:TS:2025:4569), although concerning a lease for other use, takes Article 11 of the LAU itself as a guiding benchmark for the landlord's loss of profit, moderating the compensation to the reasonable time needed to re-let the property.

Areas of stressed residential market

Law 12/2023 introduced a tool for intervening in rent levels: the declaration of a stressed residential market area, a power of the Autonomous Communities. In such areas, the rent on new contracts may not exceed that of the previous contract on the same dwelling over the past five years, updated in line with the agreed clause, under Article 17.6. Where the landlord is a large holder —a natural or legal person owning more than ten urban residential properties, a threshold the Autonomous Community may lower to five in the declared area— the rent is additionally capped, under Article 17.7, by the state system of reference price indices. Its application depends on the Autonomous Community having formally declared the area; to date only some have done so, so across much of the country, including the Region of Murcia, the initial rent remains freely set.

How we help with residential lease agreements at RCM Legal

There are recurring points of friction in residential tenancies that almost always stem from a poorly drafted contract: duration clauses that ignore the compulsory extension, rent updates applied without an express agreement or above the IRAV, deposits and additional guarantees exceeding the legal limit, withdrawals without notice and disproportionate compensation, or termination for non-payment poorly handled and dragged out in the courts. A precise contract aligned with the LAU prevents most of these disputes; a careless one causes them.

At RCM Legal, property lawyers in Murcia, we draft and review residential lease agreements for both landlords and tenants, verify the legality of terms, rent, deposit and guarantees, and represent you in claims for non-payment, withdrawal or return of the deposit. We also advise non-resident owners and tenants who let or rent a home in Spain, in coordination with the legal keys to buying property in Spain. Talk to us about your case.