Glossary and latest regulations Renting in Spain, explained in plain English
At Alquiler Riesgo Zero we know that a worry-free tenancy depends on strict compliance with the law. In this glossary of Spain’s Urban Leases Act (LAU) we bring together and update the legal concepts, procedures and regulations you need to let a home safely in Mallorca and the rest of the Balearic Islands.
01
Glossary of key terms (LAU)
Knowing the legal vocabulary is the first step towards a risk-free tenancy. These are the key concepts in the Urban Leases Act.
LAU (Urban Leases Act, Ley de Arrendamientos Urbanos)
The main law governing the rental market in Spain. It sets out the rights and obligations that cannot be waived, for both landlords (arrendadores) and tenants (arrendatarios).
Statutory deposit (fianza legal)
An amount equal to one month’s rent (for a main home) that the tenant pays when the contract is signed. It covers possible damage to the property; it is not for paying the last month’s rent. For rentals other than a main home (commercial premises, seasonal lets), the deposit is two months’ rent.
Additional guarantee (garantía adicional)
On top of the statutory deposit, the law allows the landlord to ask for extra guarantees to secure the rent. For contracts on a main home, this guarantee cannot exceed the equivalent of two months’ rent.
Tenant's early termination (desistimiento)
The tenant’s right to end the contract once the first 6 months have passed, provided they give the landlord at least 30 days’ notice. The contract can include compensation for the landlord equal to one month’s rent for each remaining year of the contract.
Mandatory extension (prórroga obligatoria)
The length of the contract is freely agreed, but if it is shorter than 5 years (when the landlord is an individual) or 7 years (a company), the contract is automatically extended year by year until it reaches that minimum length, if the tenant wishes.
Landlord's need (causa de necesidad)
An exception to the mandatory extension. A landlord who is an individual can recover the home after the first year if they show they need it for themselves or first-degree relatives, provided this clause is expressly included in the contract.
Rent guarantee insurance (seguro de impago)
A policy that protects the landlord against a tenant falling into arrears, covering unpaid rent and the legal costs of a possible eviction. In our Pack Premium we include this protection for your peace of mind.
02
Specific requirements and procedures in Mallorca
Renting in the Balearic Islands has its own regional rules, especially on deposits and tax.
Lodging the deposit with IBAVI
By law, the landlord must lodge the deposit with the Balearic Housing Institute (Institut Balear de l'Habitatge, IBAVI). This must be done within 30 days of signing the contract. Failing to do so leads to fines and blocks tax deductions for both parties.
Affordability check (debt-to-income ratio)
For a zero-risk rental, the rent must not exceed 30–35% of the tenant household’s provable net income. Recent payslips, an employment contract (preferably permanent) or, for the self-employed, the latest income tax return are required. This is how we select each tenant.
Energy Performance Certificate (CEE)
Throughout Spain, a valid certificate is mandatory (it is valid for 10 years), and its rating must be shown in any advert for the property in Mallorca.
Certificate of habitability (cédula de habitabilidad)
A document issued by the Consell de Mallorca certifying that the home meets the technical and hygiene requirements to be lived in. It is essential for connecting utilities (water, electricity) and for a legal tenancy.
03
Latest regulations: recent changes under the Housing Law
The legal framework for renting changed with the approval of Law 12/2023 on the Right to Housing (Ley por el Derecho a la Vivienda). These are the points you need to know today.
Paying agency fees
By law, the costs of property management and of drawing up the tenancy agreement (the agency’s fees) must now be paid by the landlord.
Annual rent review
Annual rent reviews are no longer tied to the CPI (IPC). Reviews now follow a new reference index designed by the National Statistics Institute (INE) to avoid disproportionate increases in periods of high inflation.
Stressed housing areas (zonas tensionadas)
Although national law allows rents to be capped in areas declared “stressed residential markets”, applying this measure is up to each autonomous region. Currently, rent caps linked to stressed areas do not apply in the Balearic Islands.
Income tax (IRPF) benefits
Landlords who sign new contracts can benefit from significant income tax (IRPF) relief, a reduction of between 50% and 90% on net rental income, depending on factors such as the tenant’s profile (young people) or whether the rent has been lowered compared with the previous contract.
Legal note: the information on this page is for general guidance only and is a translation of the Spanish version. Regulations may change. For personalised advice and a legally watertight tenancy, contact the Alquiler Riesgo Zero team.
Questions about your specific case?
Every home and every contract is different. Tell us about your situation and we will explain it without jargon, in English by email or WhatsApp.