Spain extends rent cap beyond stressed areas to avoid tenant compensation

Landlords who want to recover their property without compensating the tenant will have to offer a new contract with rent capped under Article 17.6 of Spain's Urban Leasing Law (LAU), even if the property is not in a stressed area. If they choose not to renew without offering that option, the minimum compensation is 12 months' rent.

The **Royal Decree-Law 27/2026**, published in the **Official State Gazette (BOE)** and in force since the day after publication, extends for the first time beyond the areas declared as stressed residential markets one of the rent price limits introduced by the Housing Law. The measure is part of the second royal decree-law passed by the Government and fundamentally changes the duration regime for primary residence leases.

Until now, the rules of Article 17.6 of the **Urban Leasing Law (LAU)** applied only in areas that regional governments had declared stressed. That article states that the rent of a new primary residence lease cannot exceed the last rent in force over the previous five years in the same property, once the corresponding annual update has been applied.

The change has a direct consequence for any landlord who wants to avoid the new compensation to the tenant: they will have to adjust the rent of the new contract to that rule, even if the flat is in a city no one has declared stressed. The BOE text says it clearly: the total amount of the new monthly rent must be adjusted to the rules of Article 17.6 "even when the property is not located in a stressed residential market area."

## Five years of automatic extension, seven if the landlord is a company

The law fundamentally changes the duration regime of contracts. Once the first **five years** of the contract have elapsed (seven when the landlord is a legal entity), the lease is automatically extended for successive new periods of five or seven years if neither party gives notice that they want to end it.

The landlord retains the possibility of recovering the property at the end of the term, but conditions have tightened. They will have to give at least **six months'** notice and, except in certain cases, compensate the tenant with an amount equivalent to at least **12 months'** rent for a similar property.

The decree does, however, open a door to avoid that compensation. The landlord will not have to pay it if, after giving notice of their intention to end the lease, they formally offer the tenant the signing of a new contract for the same property and the tenant rejects the offer, whether expressly or tacitly.

## The two conditions to escape compensation

But that offer is not free. The Government imposes two conditions for the landlord to be released from payment. The first is temporal: the new lease must guarantee the tenant a minimum stay of five years when the landlord is a private individual and seven years when it is a legal entity.

The second concerns the price. The BOE establishes that the amount of the new monthly rent must be adjusted to the rules of Article 17.6 of the LAU, even outside stressed areas. In other words, signing a new contract cannot be used as a way to suddenly bring the rent up to market prices.

In practice, a landlord in a city that has not been declared a stressed area may decide to terminate the contract and put the property back on the market, but will have to bear the new compensation if none of the legal exceptions apply. The decision is not trivial in markets where there is a large gap between the rents of old contracts and the prices of new deals. A landlord whose tenant pays a rent far below what they could currently obtain will have three options: maintain the contractual relationship under the new rules, offer a new contract subject to the Article 17.6 cap, or terminate the lease and pay the compensation.

## The compensation: twelve months' rent and a minimum per year

The cost of the last option can be high. The decree establishes that the compensation for non-renewal will be equivalent, at minimum, to **12 months'** rent for a similar property and must be calculated, wherever possible, using the state reference system for rental prices.

The law adds a second floor: the amount can never be lower than one month's rent for each year the tenant has lived in the property. A tenant who has lived in the property for **15 years** will be entitled, at minimum, to compensation equivalent to 15 months' rent if the landlord terminates the contract and none of the exceptions apply.

The exceptions include the need of an individual landlord to recover the property to use it as their permanent residence or that of certain family members, the tenant having another suitable home in the same municipality, or the tenant not having actually lived in the property for more than six months in the last year without justified cause. Compensation also disappears when both parties directly agree to sign a new contract. Before making any decision affecting an existing lease, it is advisable to consult the consolidated text of the LAU or seek specialised legal advice.