What is a "large holder" according to the new housing law? Consequences.

The new Housing Law raises many questions, especially regarding the definition of "large property owner." Is the same definition applied in all regions? What types of properties are included in the equation? What does it mean to be a large owner? We clarify the doubts.

So what is a large property owner?

According to the letter of the law, a large property owner is any individual or company that owns more than 10 residential properties, excluding garages and storage rooms, or properties with a total area of more than 1500 square meters. However, the number of properties is reduced to five if they are located in stressed regions declared by the relevant regional authority.

This means that in a tight housing market, if such a situation is declared, the number of residential properties may be reduced (depending on the competent regional authorities) to five (here, five is already enough to be considered a large owner). Or more residential properties, but they must be located in the same tight residential area. In other words, five or more residential properties owned by one person must be in the same area.

Who is considered a major owner in Catalonia?

In Catalonia, a person who owns 5 or more residential properties located in high-demand areas is considered a large owner, with corresponding consequences. Social and private developers whose goal is to sell residential properties rather than rent them out are not considered large owners.

What types of real estate are included in the definition of a major owner?

Only residential properties located in cities or towns that can be inhabited (having a residence permit) are included in the calculation. Properties such as garages, storage rooms, and commercial spaces are excluded, as they are not intended for living.

Is primary residence included in the definition of large property owners? José Méndez, a partner at the law firm "Méndez Lit," notes that the letter of the Housing Law makes no distinction, so primary residence is indeed taken into account. Thus, someone who owns five residential properties, even if one of them is their primary residence, will be considered a large property owner, provided that all properties are located in areas declared tense by the relevant competent authority.

What if I own inherited or jointly owned property?

Although the legislation does not specify how to handle such property, it is likely that any property we own, whether it is joint ownership or primary residence, will be taken into account.

Article 19 of the new Housing Law states that in high-demand areas, the government may request information from large property owners about their properties and their intended use in order to examine each situation individually.

How does my quality as a major owner affect me?

The first consequence for large property owners will be the limitation on increasing rent.

Regions of a tight housing market.

The law allows competent authorities in the field of housing construction to declare areas of a tense housing market if one of the following conditions is met: the average costs of mortgage or rent in a personal or household budget, as well as basic expenses and utilities, exceed 30% of the average family income; the purchase or rental price of housing in the area has increased by at least 3% above the corresponding price index over the past 5 years.

Compliance with any of these conditions does not automatically lead to the recognition of a tense housing market zone; it is necessary for the relevant authority (regional management authority) to explicitly declare this. The validity period of the first declaration is 3 years, with the possibility of annual extension.

The declaration of a high-demand housing market brings about two things:

• Change in the terms of contract extensions.
• Rent price cap.

Upon the expiration of the mandatory extension period or the implied extension, the tenant may request a special extension for one year with the possibility of further extending it for a maximum of 3 years, during which the same conditions as in the current contract apply. The landlord is obliged to accept this extension, except in cases where different conditions have been agreed upon or if the owner has lawfully notified the need to occupy the property for themselves or family members and use it as their primary residence, or if a new contract has been concluded with a rent limitation.

If new lease agreements are made, the consequences will vary depending on whether the landlord is a large owner or not. It is worth noting that regions may lower the threshold from 10 to 5 residential properties owned by large owners in high-demand areas, whether they are individuals or legal entities.

An increase in rental prices by 10% in new contracts. If the landlord is a large owner, the rent under the new contract must not exceed the maximum price limit, which will be determined in the future by the reference price index system. These rules will apply to contracts concluded after the law comes into effect (May 26, 2023), when the index system is approved (it will take into account the conditions and characteristics of the rented housing and the building in which it is located). The same limitation according to the reference price index system will apply to rental agreements for housing if the property is located in a tense housing market area where there have been no active rental agreements for the past five years.

If the landlord is not a large owner, the rent should not exceed the amount from the previous contract, after applying the annual update, except in certain cases where it can increase by a maximum of 10% (for example, if renovation or improvement work has been carried out in the last 2 years that has led to a reduction in the use of non-renewable primary energy; if accessibility improvements have been made in the last 2 years; or if the contract term is 10 years or more). Additionally, charging the tenant for payments or expenses not specified in the previous contract is not allowed.

Who is considered a small owner?

Small owners are considered to be those who own fewer than 10 residential properties (or 5 in high-demand areas). There are specific rules for such landlords:

• Change in price for existing rental agreements.

It is prohibited to increase the rent every year (regardless of whether the area is in a high-demand zone or not) by more than the following percentages:

• 2023: a maximum increase of 2%
• 2024: maximum increase of 3%
• 2025: an increase determined based on a new index, about which nothing is known yet.

For new lease agreements:

In tense areas: the rental price should not exceed the previous agreement increased by a certain percentage (2% in 2023, 3% in 2024, and an index to be determined from 2025 onwards).

Outside of high-demand areas, owners have the freedom to set a price they consider fair.

Additionally, these owners are entitled to tax benefits when renting out their properties. These incentives include discounts of 60% to 90% on rental income, depending on certain conditions, such as renting to young people or reducing the rental price in a high-demand area by at least 5% compared to the previous contract.