The rental of the property does not simply expire

The implicit renewal of the lease

16 / Jul

Spanish legislation has a specific law for housing rentals which has changed several times over the years, especially when it comes to the duration of contracts. For example, the minimum duration of a property rental contract in 1995 was 5 years, which was changed to 3 years in 2013, and back to 5 years in 2019 and even 7 years when the landlord is a company.

Next, the law also determines the maximum duration, both until 2013 and from 2019, the law states that a 5-year contract may be extended for a maximum of 3 years. In the years between 2013 and 2019, it alternated between a maximum 1-year or 3-year extension.

In other words,

the law specifically stipulates how long a rental property contract can continue without the need for a new contract. Currently, the maximum duration is 5 years plus 3 years of extension, i.e. 8 years. This is due to the legislator’s position that leases should be temporary and not continue indefinitely.

What happens after the maximum duration expires?

The law is very precise when it comes to setting the maximum duration of the lease, but then says nothing about what should happen after that. What if the maximum duration has expired and both the tenant and landlord ignore it? Is the tenant then suddenly living illegally? Does the tenant still have to continue paying rent, or is he/she then suddenly a squatter? This issue is exactly what the Spanish Supreme Court ruled on in its judgment of 31 March 2021.

Brief situation outline of the judgment

The said judgment concerns a case where a property is first rented out and then sold to third parties 18 years later. These third parties want the tenant to surrender the property because the contract has allegedly expired, but the tenant, who has been living comfortably and paying his rent all this time, wants to stay put.

In this particular case, the 1995 legislation applies, which meant that the contract had a maximum term of five years and three years of extension. Based on these calculations, the contract would have expired in 2006, and it was not until 2018 that eviction proceedings were initiated.

The implicit renewal of the lease

The judgment relies on article 1566 of the Spanish Civil Code, which literally states that:

“When a tenant, with the landlord’s approval, continues to use the leased property for fifteen days after the expiry of the contract, it is understood that it is tacitly renewed for the term referred to in articles 1577 and 1581, unless prior notice has been given.”

The Supreme Court then quoted its own judgment of 26 September 2018 in which it already ruled that after the expiry of the term, there is a renewal of the contract, i.e. not a renewal but a new contract, with tacit approval by the contracting parties.

To speak of tacit approval, it is sufficient that the tenant remains in the property for 15 days after the expiry of the contract and that the landlord does nothing during the term to enforce the termination of the contract or ask the tenant to leave the property.

The duration of the new contract

The same conditions apply to the new contract as to the old contract. What may change here, however, is the duration. This is because the minimum and maximum duration must be determined by the legislation applicable at the time.

This could mean, for example, that a contract for which a minimum of 3 years and a maximum of 4 years was set at the time of signing, turns into a contract for a minimum of 5 years with a three-year extension. This is a term twice as long as the previous contract.

Example calculation

In the case before the Supreme Court, the contract had been signed in 1998. The proceedings were only started in 2018, but already in 2017 a letter was sent by the landlord terminating the lease. To clarify what has been explained above, we will set out the calculations of the terms in the said case. For clarity, given changes in articles of law, we will assume that the lease expired on January 1 of the respective years.

A contract dated 1 January 1998 has a maximum term of eight years, which therefore expires on 1 January 2006.

A new contract dated 1 January 2006 has a maximum duration of 8 years, which expires on 1 January 2014.

A new contract dated 1 January 2014 has a maximum duration of 4 years, which expires on 1 January 2018.

If landlords send a letter in 2017 claiming the property after the contract expires, no tacit renewal will take place on 1 January 2018 (officially 15 days later, as explained), and so the contract has ended, and the tenant must vacate the property. They do have to wait until January 1st, 2018 to receive the property, because the legal one-year extension already started.

Selena Escandell Beutick