Have you signed a housing rental contract and have you forgotten to update the rent? Have you agreed to an update and don’t know how to apply it? Housing rental contracts establish a rent that the tenant must pay and agree on a way to update it each year so that it is in line with the market rent. In this article we are going to analyze how the income update works with the CPI and the latest regulatory changes that have occurred on this topic.
Update of rent with the CPI according to the Urban Leases Law
The updating of rent with the CPI is regulated in article 18 of the Urban Leases Law, which establishes the rules to follow, which are as follows:
The rent can only be updated by the landlord or tenant annually under the terms agreed upon. If they have not agreed on anything in this regard, the rent will not be updated.
If a specific method is not expressly agreed, the Competitiveness Guarantee Index (IGC) will be applied.
The increase produced by the income update may not exceed the Consumer Price Index (CPI).
The updated rent may only be required from the tenant starting from the month following the month in which the update is notified in writing, which must contain the percentage of alteration and, if the tenant requests it, the certification from the National Institute of Statistics (INE). .
Notification of the rent update may be made by means of a note on the previous month’s rent receipt. Typically, the tenant is notified in writing in the month prior to the update becoming effective.
News regarding the income update
In addition to the previous regulation, we must consider what is established in article 46 of Royal Decree-Law 6/2022 regarding the extraordinary limitation of the updating of rent in housing rental contracts, which establishes the following:
If the landlord is a large holder (owner of more than ten urban properties for residential use) the increase in rent will be the one agreed upon by the parties, but it may not exceed the result of applying the annual variation of the IGC.
If the lessor is not a large holder, the increase will be the one agreed upon by the parties and if there is no agreement, the increase may not exceed the result of applying the annual variation of the IGC.
Until June 30, 2023, there was a 2% limitation on the rent update and from January 1 to December 31, 2024, a 3% limit on the increase is established.
Practical example of updating income with CPI
The update of the income in accordance with the CPI can be carried out by following the following steps:
The first thing to see is what the contract establishes regarding the update date and the update mode. For example, let’s imagine a housing rental contract that was signed on July 1, 2022 and that has a rent of 1,500 euros per month.
Next, you can check the variation of the CPI on the INE website, just enter the dates and the income to be updated. If, in the aforementioned contract, the rent is 1,500 and the variation in the CPI for June is 1.9%, the updated rent will be 1,528.50 euros.
Finally, the tenant must be notified of the updated rent in writing along with the justification for the CPI variation.
Income update assumptions
Based on the regulation that we have analyzed, several assumptions can be made regarding the updating of rent in housing lease contracts. The most notable are the following:
The contract does not agree to update the rent. In the event that nothing is agreed in the signed rental contract regarding the updating of the rent: the rent will not be updated.
The contract agrees on the update, but not the method to do it. In this case, the income will be updated according to the Competitiveness Guarantee Index that can be consulted on the INE website and which for the period from May 2022 to 2023 has been 3.83%.
The landlord updates the rent, but does not communicate it to the tenant. In this case, the law says that the rent update can only be required from the tenant starting from the month following the month in which the interested party notifies the other party in writing.
Frequently asked questions about updating income according to the CPI
To make it completely clear how the income is updated with the CPI, we are going to ask frequently asked questions and answers related to this topic.
Does the CPI limitation apply to rentals of premises or offices?
The CPI limitation only affects rental contracts for primary residences. The rents of premises and offices will be updated based on what the landlord and tenant have agreed upon.
How much has the CPI changed in 2023?
The variation in the months from January to June 2023 (both included) has been as follows: January 5.9%, February 6.0%, March 3.3%, April 4.1%, May 3.2% , June 1.9%.
How is the increase in income calculated with the CPI?
The first thing is to read the contract and see what has been agreed, if the update is in accordance with the CPI, consult the INE website to calculate the variation between the month prior to the update and the same month of the previous year and, finally, apply the resulting percentage to the current income.
When can the rent be updated?
The rental income may be updated every time the contract expires one year.
What content should the communication of the income update have?
As we have seen, the rent update must be communicated to the tenant. The communication must contain: the reference of the contract and the rented property, the current rent, the percentage of update of the index that has been agreed in the contract, and the rent resulting from applying that index, as well as when it is applied.
When is the rent update communicated?
The updated rent can only be required from the tenant from the month following the communication, so if it must be updated in July, for example, the communication should be made in June and, if the CPI is applied, the variation must be applied of the current month of May compared to the previous month of May. In short, updating the rent with the CPI is a simple calculation that must be done correctly to avoid errors and misunderstandings with the tenant. If you need help to calculate a rent update according to the CPI, to rent your home or to make a home rental contract, contact our team of lawyers who are experts in real estate law and we will analyze your case to advise you based on your needs. .
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