When the rent of property is updated, this cannot exceed a 2% rise with regard to the price which was agreed upon when signing the contract. We can say that this is the most striking information regarding the issue of bringing up to date rental income. However, this is not the only relevant information. What must we take into account if we wish to update the rental income of our property? Today, in this article we will explain all the details. First of all, we must make it clear that that rental updating will be imposed by the New Decree on Special Measures, which has been created due to the energy crisis. This Decree will remain in force until next 30th June, but there is a possibility that the Government may decide to extend the deadline so as to lengthen its time in force. As regards the rental price, this will be the one which was agreed upon when signing the contract, as we have already said. Nonetheless, the owner can update the rent and thus increase the price which was stipulated. However, this update can only be carried out annually; that is, the price can be updated each year of the contract, but only under some conditions. The way in which the rent is updated must be written and included in the contract and it will be carried out starting from the month following the notification given to the tenant. In general, up till now, the rise that had taken place was according to the adjustment of the Consumer Price Index (CPI); usually the figures that were taken as a reference were the the year-on-year change of the CPI which was published by the National Statistical Institute. Unfortunately, the problem we currently have is that the CPI has got out of control due to the health crisis and the war in Ukraine. These two issues have made the Government raise to the maximum the Competitivenes Guarantee Index (CGI), and apply this Index as a reference instead of the CPI. This measure is part of the Decree on Special Measures which came into force due to the energy crisis, as we have already mentioned. Here is where the the most relevant nuance lies because the CGI always ranges in values between 0% and 2%.

UNDERSTANDING THE CGI

The CGI, the same as the CPI, indicates the variation in prices. However, the CGI, unlike the CPI, does not do this in a direct way. To understand this better, the CPI compares a product at two different moments and calculates the price difference so as to know its variations. On the other hand, the CGI deducts from the product the competitiveness that the Spanish economy has lost during that period. When this economic indicator was created, it was done so as to guarantee the competitiveness of our economy. In addition, in the CGI the price variations ranged from 0% and 2%, and thus implying that rental prices can only rise to a maximum of 2%. So, does this mean that the owner cannot increase the rental price above this percentage? Currently, there is only one way to do this: through an agreement with the tenant. If an agreement is reached without any discrepancies, then an increase of more than 2% can be carried out but always with a full agreement between the parties. If an agreement is not reached, then the maximum increase can only be of 2%. Nonetheless, we must point out that this agreement can only take place between small holders, that is, individuals or companies that own less than 10 urban properties or a built surface of less than 1.500 m2.

THREE AND A HALF MILLION RENTAL CONTRACTS

It is calculated that currently in Spain there are around three and a half million rental contracts. Among these, a quarter of them could have the price revised based on the rules laid down on the New Decree. In order to get an idea of what this change implies, if the rental price of property is, for instance, 900 euros, then once the revision of the rental price has taken place if it is according to the February CPI ( 7,6% ) then the price would increase up to 968,4 euros. Whereas, if the maximum of 2% is applied, then the rent would be 918 euros. It is important that the Government extends this measure for a longer period, because as we have just seen in this example, the difference in the rental price increase varies significantly depending on the update of either the CPI or the CGI.

Picture 01: feepik

Picture 02: jcomp