Long-Term Rental Contract in Spain (LAU) Explained

If you are letting out a Spanish property — or renting one as your home — the document that protects you is the long-term rental contract, governed by Spain’s Ley de Arrendamientos Urbanos (LAU). Get the contract right and the law gives both landlord and tenant clear, enforceable rights. Get it wrong and you can lose months of rent, your deposit, or your ability to recover the property.

At Platinum Legal Spain, our English-speaking property lawyers draft, review and register residential rental contracts across the Costa Blanca, Costa Cálida, Almería and beyond. This guide explains exactly how a Spanish long-term rental contract works in 2026 — the duration rules, the deposit (fianza), rent increases, what must be in writing, and how to end a tenancy lawfully.

Which law governs your rental — and which contract you need

Residential lettings in Spain are governed by the Ley de Arrendamientos Urbanos (Law 29/1994, the “LAU”), supplemented by the Civil Code and, since 2023, the national Housing Law (Ley 12/2023). The single most important decision is which type of contract you are signing, because each is treated very differently:

• Long-term residential rental (arrendamiento de vivienda habitual) — the tenant’s permanent home. This carries the strongest tenant protections under the LAU and is the focus of this guide.
• Seasonal / temporary rental (arrendamiento de temporada) — for a defined, non-permanent purpose (a winter let, a work posting, a study period). It does not get the 5-year protection, but it must have a genuine temporary cause or a court can re-classify it as a habitual home.
• Tourist / holiday let (vivienda de uso turístico) — short stays marketed to visitors. This is governed by regional tourism rules and a licence, not the LAU. See our guide to long-term rental vs holiday let in Spain.

Choosing the wrong category is the most common and most expensive mistake we see. Labelling a permanent home as a “seasonal” let to avoid the 5-year rule does not work — Spanish judges look at the real situation, not the label on the contract.

How long does a Spanish rental contract last?

This is where Spain differs most from the UK, US or Ireland. Even if you sign a 12-month contract, the tenant has the right to stay longer:

• Up to 5 years where the landlord is an individual (persona física).
• Up to 7 years where the landlord is a company (persona jurídica).

The contract term you agree (commonly one year) renews automatically each year (prórroga obligatoria) up to that 5- or 7-year ceiling, at the tenant’s option. The landlord cannot simply refuse to renew during that period — only in narrow cases, such as needing the property as a home for themselves or close family, and only if that right was written into the contract and the first year has passed.

If, at the end of the 5 or 7 years, neither party gives notice (at least 4 months from the landlord, 2 months from the tenant), the contract rolls on by tacit renewal (tácita reconducción) for up to 3 further years, one year at a time. In practice, a well-advised landlord diaries these notice dates carefully.

The deposit (fianza) and extra guarantees

The LAU sets clear rules on security:

• A mandatory deposit (fianza) of one month’s rent for residential lets (two months for commercial).
• The landlord must lodge the fianza with the regional housing authority (for example the IVIMA/EVHA equivalent in each region). Failing to deposit it can trigger penalties and weakens the landlord’s position in a dispute.
• An additional guarantee (extra cash, a bank guarantee or aval) may be requested, but for contracts up to five years it is capped at the equivalent of two further months’ rent.

The fianza is returned at the end of the tenancy, less any lawful deductions for unpaid rent or damage beyond normal wear and tear. Disputes over the deposit are common, which is why a clear inventory (inventario) and check-in/check-out condition report is worth its weight in gold.

Rent and rent increases in 2026

The rent is freely agreed at the start, but annual increases are tightly controlled. Historically rent was updated by the consumer price index (IPC). The 2023 Housing Law changed this:

• Transitional caps applied (2% in 2023, up to 3% in 2024).
• From 2025, a new official reference index — the IRAV (published by the INE) — replaces the IPC for updating residential rents, designed to keep rises below inflation.
• In areas declared “stressed” (zonas tensionadas), additional caps can apply, especially for large landlords. Catalonia was the first region to apply these limits.

The contract must state how and when the rent will be reviewed; if it is silent, the rent cannot be increased. Always confirm the current index and any regional cap before agreeing an uplift — we check this on every contract we handle.

What must be in a Spanish rental contract

A robust LAU contract should set out, as a minimum:

• Full identification of landlord, tenant and the property (with its referencia catastral)
• The type of tenancy (habitual home vs seasonal) and its purpose
• The rent, payment method, date and the rent-review index
• The fianza and any additional guarantee
• The duration and renewal terms, plus the landlord’s own-use clause if relevant
• Who pays utilities, IBI, community fees and minor repairs
• An inventory and condition report
• Rules on pets, subletting, works and insurance
• The energy performance certificate and habitation certificate references

For non-resident landlords, the contract also intersects with tax: rental income must be declared in Spain. See our guides to rental income tax in Spain and non-resident property owners’ obligations.

Ending the contract early — lawfully

Both sides have defined exit rights:

• The tenant may withdraw after the first 6 months, giving at least 30 days’ notice. The contract can provide for compensation of one month’s rent per remaining year, but only if agreed in writing.
• The landlord can recover the property for their own or close family’s use after the first year, with two months’ notice, only if the contract reserved that right.
• Either party can act on a serious breach — most often the tenant’s non-payment of rent, which can lead to eviction (desahucio).

If a tenant stops paying or refuses to leave, the landlord cannot change the locks or cut services — that is illegal. The lawful route is a court eviction; we explain the process and timeline in our guide to property disputes in Spain.

Why use a property lawyer for your rental contract

A rental contract that looks fine in English can quietly forfeit your rights under Spanish law. As your independent lawyers we draft a bilingual, LAU-compliant contract, register the fianza, set the correct rent-review index, build in the clauses you actually need (own-use recovery, guarantees, exit terms), and — for non-resident owners — align the letting with your Spanish tax position. We can act for clients abroad under a power of attorney.

Rent guarantees: deposit, aval and rental insurance

Beyond the legal fianza, landlords increasingly protect themselves against non-payment with one or more of the following, all of which can be built into the contract:

• An additional deposit — capped at two months’ rent for contracts up to five years.
• A bank guarantee (aval bancario) — the tenant’s bank guarantees a number of months’ rent.
• Rental default insurance (seguro de impago) — a policy that pays out if the tenant stops paying and often funds the eviction. This is popular with non-resident owners who cannot manage problems in person.
• A personal guarantor (avalista) who is jointly liable for the rent.

For an overseas landlord, a default-insurance policy plus a clean, well-drafted contract is often the most cost-effective protection of all.

What happens at the end of the term

The end-of-term mechanics catch many landlords out, because failing to give notice can lock you into more years than you intended:

• To end the tenancy at the 5-year (or 7-year) ceiling, the landlord must notify the tenant at least 4 months beforehand; the tenant must give at least 2 months.
• If neither party gives that notice, the contract enters tacit renewal (tácita reconducción) for up to three further years, renewing annually.
• Once in tacit renewal, either party can end it by giving the required notice at the next renewal point.

We diary these dates for landlord clients so a missed notice never costs them another year of an unwanted tenancy.

The clauses that cause most disputes

A surprising number of rental arguments come down to clauses that were vague or missing. Pin these down in writing:

• Who pays what — utilities are normally the tenant’s; the IBI property tax and community fees are usually the landlord’s, unless clearly agreed otherwise.
• Early-exit compensation — valid only if expressly agreed, and limited to one month’s rent per remaining year.
• Pets, works and subletting — silence tends to favour the tenant, so state the position.
• The inventory — a dated, photographed condition report is your best defence in a deposit dispute.

Tax on the rental income

A long-term let is not just a contract — it is a tax event. Non-resident landlords declare the income quarterly on Modelo 210, with EU/EEA owners able to deduct expenses and taxed at 19%, and others at 24%. Resident landlords declare it in their annual return, where long-term residential letting can attract a significant reduction. Setting the letting up correctly from day one keeps the tax efficient and compliant.

Frequently Asked Questions

Can a landlord end a Spanish rental contract after one year?

Generally no. Even on a one-year contract, the tenant of a habitual home can extend annually up to 5 years (7 if the landlord is a company). A landlord can only recover earlier for their own or close family’s use, after the first year, and only if that right was written into the contract.

How much deposit can a landlord ask for in Spain?

One month’s rent as the legal fianza (which must be lodged with the regional authority), plus, for contracts up to five years, an additional guarantee capped at two further months’ rent.

How much can rent be increased each year in Spain?

Only by the index stated in the contract. From 2025 residential rents are updated using the new IRAV reference index rather than the IPC, and in declared stressed areas extra caps may apply. If the contract sets no index, the rent cannot be raised.

What is the difference between a long-term and a seasonal rental?

A long-term (habitual home) rental gets the LAU’s 5/7-year protection. A seasonal rental is for a genuine temporary purpose and does not, but it must have a real temporary cause — a court can re-classify a disguised permanent let.

Does a rental contract have to be registered in Spain?

The contract itself does not have to be registered to be valid, but the deposit must be lodged with the regional housing authority, and a rental can optionally be entered in the Land Registry for added protection. Non-resident landlords must also declare the income for tax.

Can I sign a Spanish rental contract from abroad?

Yes. We routinely prepare and sign rental contracts for clients overseas under a bilingual notarised power of attorney, and handle the deposit, registration and tax setup remotely.

Who pays the IBI and community fees in a Spanish rental?

By default the landlord pays the IBI property tax and the community fees, and the tenant pays the utilities, unless the contract clearly agrees otherwise. Any cost passed to the tenant must be stated in the contract.

Is a verbal rental agreement valid in Spain?

A verbal tenancy can be legally valid, but it is very hard to prove and leaves both sides exposed. A written, signed contract — ideally bilingual — is strongly advised and is needed for the deposit registration, utilities and tax.

What is tácita reconducción?

It is the tacit renewal that begins if, at the end of the protected term, neither party gives the required notice. The contract then rolls on annually for up to three further years until properly ended.

Can I charge the tenant a penalty for leaving early?

Only if it is expressly agreed in the contract, and it is limited to one month’s rent for each year still left to run. Without that clause, a tenant who leaves after six months with notice owes no penalty.