Renting out long-term in Spain: contract, deposit, rent caps — a landlord’s guide

01What you sign up for: the tenant can stay five years

When you rent out a flat as someone’s main home — a habitual-residence lease (arrendamiento de vivienda habitual) under Spain’s tenancy law (LAU, Ley 29/1994) — the duration written in the contract is only the opening move. Under art. 9 LAU the tenant has the right to extend year by year up to five years — or seven years if you rent out as a company (persona jurídica) — counted from the contract date or the handover of the keys. A “one-year contract” is really a five-year commitment that the tenant, and only the tenant, can cut short earlier.

The clock does not stop there by itself. Under art. 10 LAU, when the five (or seven) years are up, the lease rolls over tacitly in annual steps for up to three more years unless one side speaks up in time: as landlord you must give notice at least four months before the end date; the tenant, at least two months. Put those notice windows in your calendar the day you sign — missing yours means at least one more year.

A genuinely temporary rental is different. A seasonal let (arrendamiento de temporada) — to someone posted to the city for months, doing a course, or renovating their own home — does not carry the five-year floor. But be warned: dressing an ordinary long-term rental up as “temporada” to dodge art. 9 is a well-known and risky move. If it ends in a dispute, courts look at the reality — whether the flat is in fact the tenant’s main home — not at the label on the document. And nightly or weekly lets to tourists are a separate regime altogether, with its own registry and licences: see our tourist-rental guide before you go down that road.

02Money at the start: deposit, extra guarantees — and who pays the agency

Spanish law is precise about what changes hands at signature, and two of the three rules below surprise almost every foreign landlord:

• The deposit (fianza) is one month — in cash. Art. 36 LAU makes a cash deposit of one monthly rent mandatory for a home lease (two months for non-residential use). In many autonomous communities you must then lodge it with the regional housing body — check your region and do it, because the fianza is the money the end-of-lease argument will be about. It is not updated during the first five (seven) years.
• Anything extra is capped at two months. You may ask for additional security on top of the fianza — a bank guarantee (aval bancario) or extra months — but for a home lease of up to five (seven) years the additional guarantee may not exceed two monthly rents (art. 36.5 LAU). One month fianza plus two months extra is the ceiling, not the starting point for negotiation.
• You pay the agency — not the tenant. Since the Ley 12/2023 rewording of art. 20.1 LAU, property-management and contract-formalisation costs are the landlord’s: “los gastos de gestión inmobiliaria y los de formalización del contrato serán a cargo del arrendador”. A clause pushing the agency fee onto the tenant does not make it legal.

03Rent during the contract: the update clause and the IRAV ceiling

Here is the clause foreign landlords most often forget, and it is worth real money: the rent can be updated annually only if the contract says so. A contract that is silent on updates means the same rent for the whole term — potentially five years or more of frozen income. One line in the draft decides this.

Even with an update clause, you no longer choose the index freely. Ley 12/2023 ordered the national statistics institute (INE) to define a reference index that acts as the legal limit for annual updates of home leases: the IRAV, published monthly since January 2025 (it replaced the transitional caps of 2% in 2023 and 3% in 2024). Whatever formula your contract names, for a home lease the update cannot exceed the IRAV ceiling.

Setting the rent for a new contract has its own layer. Where a region has declared a stressed rental market area (zona de mercado residencial tensionado) under Ley 12/2023, new-contract rent is capped: a small landlord is broadly held to the previous contract’s rent with the adjustments the law allows, while a large holder (gran tenedor) is capped by the official index. Declarations are made region by region and the list evolves — check whether your municipality is declared before you set the asking price, not after a tenant challenges it.

04Your duties vs the tenant’s: repairs, entry, selling up

The LAU also draws the day-to-day lines — and knowing them in advance is what keeps a good tenancy from souring:

• Habitability repairs are yours. Under art. 21 LAU you must carry out the repairs needed to keep the home habitable — the boiler, the damp patch, the failing wiring — without raising the rent for it. Small repairs from ordinary wear and tear are the tenant’s.
• The flat is now the tenant’s home. Once you hand over the keys, you enter with the tenant’s agreement — arranged in advance — not with your spare set. “It’s my property” is not an entry ticket, and treating it as one is how landlords end up on the wrong side of a dispute.
• If you sell, the tenant goes first. Under art. 25 LAU the tenant holds statutory first-refusal rights (tanteo y retracto): a right to buy on the terms you agreed with your buyer. It can be waived in the contract where the law allows — decide that at drafting stage; if it is not waived, you must notify the tenant of the sale terms.
• Sign an inventory with photos. A signed inventory plus a dated photo record (acta) at handover is practice, not a legal requirement — but it is the single document that decides most deposit arguments three years later. Do it at check-in and repeat it at check-out.

05Screening a tenant without crossing legal lines

You are allowed to choose your tenant on solvency — and you should, because once the contract is signed the five-year clock starts. Asking for proof of income is normal Spanish practice: an employment contract and recent payslips, the latest tax return for the self-employed, and references from a previous landlord.

You can reinforce the file within the legal caps from the money section: the one-month deposit (fianza) plus additional guarantees of up to two monthly rents — a bank guarantee or extra months, whichever the tenant can realistically provide. Many landlords also take out non-payment insurance (seguro de impago de alquiler): the insurer vets the tenant’s solvency itself and covers unpaid rent if things go wrong. That is market practice rather than a legal requirement, but it disciplines the screening and prices the risk.

What you may not do is discriminate. Filtering on documented ability to pay is legitimate; refusing a tenant over nationality, ethnicity, family status or similar grounds is not — and “the owner prefers…” instructions to an agency do not launder it.

06Taxes on the rent — and the exit ramp if the tenant stops paying

If you are not a tax resident of Spain, your rental income is taxed under the non-resident income tax (IRNR), and the difference by residence is dramatic. Residents of the EU/EEA pay 19% on the net income — deductible expenses (community fees, insurance, repairs, depreciation and the like) come off first. Everyone else pays 24% on the gross rent, with no deductions at all. The filing runs through form 210 — our modelo 210 guide covers the mechanics and deadlines.

One budgeting trap: the generous IRPF reductions on long-term rental income that Ley 12/2023 introduced apply to Spanish residents only. As a non-resident landlord you do not get them — never build them into your yield calculation.

And the exit ramp. If the tenant stops paying, the owner’s sequence — the formal demand, the pre-court step, the eviction claim and its deadlines — has its own rules, which have changed more than once recently. Do not improvise it from this page: our guide on what to do when the tenant stops paying walks through the sequence step by step.