These are rental agreements signed more than four decades ago that remain in force today and can allow tenants to pay monthly rents considerably below current market prices. But what exactly qualifies as an old-rent tenancy?
José Manuel Orta, tax adviser and CEO of Ortafyc, explains that an old-rent tenancy is generally understood to be a residential rental agreement signed before 9 May 1985 that was still in force on 1 January 1995.
Spain’s 1994 Urban Lease Act (Ley de Arrendamientos Urbanos, or LAU) established a specific regime for these agreements. They remain largely governed by the previous legislation, although the 1994 law introduced a number of significant changes.
Why are the rents so low?
One of the main differences between these agreements and modern rental contracts concerns the amount of rent paid.
Under an ordinary rental agreement, the initial rent is agreed between the landlord and tenant and can subsequently be adjusted in accordance with the applicable rules.
Old-rent contracts, however, start from amounts that were agreed several decades ago. These agreements were signed at a time when rental prices were extremely low compared with today’s prices, even when inflation is taken into account.
Although these contracts include mechanisms allowing rents to be updated, the particular characteristics of the system, combined with the fact that the original amounts were established so long ago, explain why some properties can still have monthly rents that are dramatically lower than the price the same property would command if it were placed on the market today.
The 1994 Urban Lease Act itself established a specific system for revising these old rents.
Does an old-rent agreement last for life?
This is probably one of the issues that causes the greatest confusion.
Older rental agreements could remain in force throughout the lifetime of the original tenant. However, this does not mean that they can automatically be passed down indefinitely from one generation to another.
The legislation established transitional rules determining who could remain in the property following the tenant’s death.
Under certain circumstances, the tenancy may be transferred to the tenant’s spouse or certain family members, provided that they meet the legal requirements regarding their relationship with the tenant and their previous cohabitation in the property.
However, there are limits on successive transfers of the tenancy, and the law expressly establishes situations in which no further transfer of the rental agreement is permitted.
Consequently, the fact that a son, daughter or other relative has been associated with or lived in the property for many years does not automatically mean that they will be entitled to retain the old-rent agreement following the death of the current tenant.
Each case therefore requires an examination of who is officially named as the tenant, whether the tenancy has previously been transferred, and the particular family and cohabitation circumstances involved.
What happens if the landlord sells the property?
Another particularly sensitive situation arises when a property subject to an old-rent agreement changes ownership.
The sale of the property does not, in itself, automatically terminate the rental agreement.
As a general rule, the new owner assumes the legal position previously held by the former owner in relation to the tenancy.
This means that purchasing a property occupied by a tenant under an old-rent agreement is not the same as purchasing a vacant property that the new owner can immediately use as they wish.
For this reason, before completing this type of transaction, it is essential to establish the precise contractual situation of the property and the rights retained by the existing tenant.
Can the landlord recover a property subject to an old-rent agreement?
The special protection enjoyed by these agreements does not mean that they can never be terminated.
There are circumstances in which an old-rent tenancy may come to an end.
These include certain breaches by the tenant, such as failing to pay the rent, no longer using the property as their residence or improperly transferring its use to another person.
There are also certain circumstances related to the landlord’s need to use the property themselves, as well as other specific grounds for termination applicable to these historic rental agreements.
Therefore, “old rent” does not necessarily mean “rent for life.”
Every agreement must be examined individually. In particular, it is necessary to establish what has happened since the original contract was signed: who the original tenant was, who currently occupies the property and whether any transfers of the tenancy have taken place.
The original rental agreement can therefore remain decisive more than 40 years after it was signed.
Why keeping the original documents matters
The age of these rental relationships can itself become one of their biggest complications.
After several decades, landlords and tenants may have died, properties may have been inherited or sold, tenancy rights may have been transferred, and important documents may have remained untouched by families for many years.
For this reason, anyone currently living under an old-rent agreement is advised to locate and preserve the original rental contract, proof of rent payments and all subsequent documentation concerning changes of ownership, transfers of the tenancy or modifications to the contractual conditions.
If a landlord informs the tenant that the tenancy may be terminated, tenants are also advised neither to ignore the notification nor to leave the property hastily.
Questions involving termination, transfers of tenancy or changes in ownership should be reviewed by a lawyer or legal professional specialising in this area, as any documents signed subsequently may have significant legal consequences.
More than four decades after the last rental agreements capable of falling under this system were signed, old-rent tenancies continue to affect thousands of landlord-tenant relationships in Spain.
And precisely because the economic conditions under which these agreements were originally signed bear little resemblance to today’s housing market, determining who has the right to remain in the property, for how long and under what conditions can ultimately be just as important as knowing how much rent is paid each month.