Legal loopholes threaten the effective application of rent control

The legal loopholes in the Housing law can render rent control inoperative: the law does not include a penalty regime, so if a private owner breaches it, those affected in most cases can only go to court.

Oliver Thansan
Oliver Thansan
01 April 2024 Monday 11:20
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Legal loopholes threaten the effective application of rent control

The legal loopholes in the Housing law can render rent control inoperative: the law does not include a penalty regime, so if a private owner breaches it, those affected in most cases can only go to court. But in addition, the administration will not check the key aspects in setting the rental price, such as whether the owner is a large holder, the rent that was paid in the previous contract or the real quality of the home.

Spokespersons from the Department of Territories acknowledged that "in the first few days we have had problems and doubts when it comes to applying the law, due to the lack of a sanctioning regime", but they advanced that "we will try to explore other ways" to guarantee that the index is effectively executed, such as "applying the consumer code and the Catalan Housing Law in the aspects that were not declared unconstitutional, for example in the obligation to inform the price of the old contract and of the index", a breach that will entail sanctions for all types of owners.

In the rents made by individuals, which according to the Territory of Catalonia account for 85% of the total, the law allows the previous contract's income, updated with the CPI, to be applied as income. The owner must provide this figure, but "Incasòl will not verify that the rental income is within the limits of the previous contract. And neither does it comply with the limits of the index, in the case of large holders", pointed out spokespeople for Territory, since it does not have the competence or the means to take care of it. However, they did not rule out providing it with additional means and powers in the future. Enric Aragonès, spokesman for the Tenants' Union, pointed out that the tenant can ask the Incasòl to inform him of the income from the previous contract. "The request is made by email and the Institute can be overwhelmed if it receives many requests", he acknowledged.

If the owner is a large holder, that is to say, owner of five more houses, it will also be the tenant who has to find out by tracing the property registry, since the Government will never create the registry of larges that provided for the law of 2022 social emergency in the field of housing. "In the end, in practice, the obligation to ask the owners of the flats we rent has been transferred to the agencies about their previous income, the existence of other homes they own and even personal issues" like their marriage regime, pointed out Guifré Homedes, director general of Amat Immobiliaris.

The status of major holder, indeed, may depend on the owner's marital regime: whether it is separation of assets or partnership of profits. Thus, according to the spokespersons of the Ministry of Housing and according to the Guiding Criteria approved by the judges of first instance in Barcelona to apply the state housing law, "in the case of shared ownership, the properties of an aliquot part higher than 50%". For those responsible for the Ministry of Land, however, the mere ownership of an undivided share should be counted as a property, since the opposite would be, in their opinion, "an attempt to mock the law" .

Territory recognizes that there will be no way to objectively determine the state of conservation or the quality of the building, which determines the price range of the index, so, as the minister, Ester Capella, lamented, " all contracts will end up being signed at the highest level of the fork”.

Private owners, regardless of the homes they own, will be left out of all the "sanctioning formulas" that the Generalitat is trying to "explore", as recognized by spokesmen of the Catalan Consumer Agency. "We only have powers to act in those cases where there is what we call a 'consumer relationship'", that is, when there is a consumer on the one hand and a company or professional on the other".

"The tenant will be able to go to court to denounce the breach of the law, and surely the private owner will correct his position with the mere threat of a lawsuit, because he knows he will lose," assures Enric Aragonès. The claim should be submitted to the civil courts, explains Miquel Miró, a lawyer specializing in real estate law, "an expensive way because you need to go there with a lawyer and a solicitor". In his opinion, "the tenant's other option can be to pay what he considers to be fair and to challenge the owner, if he is in disagreement, to initiate an eviction procedure", and for this reason he advances that the entry into force of the law will trigger conflicts between owners and tenants and the judicialization of rent.

Aragonès recognized that ultimately the effectiveness of the law will depend enormously on the tenants themselves and regretted that their misinformation is the most important burden for it to be effective. "Even the Barcelona City Council launched an erroneous information campaign, in which it said that from now on the index should be applied to contracts, when this is often higher than the rent of the previous contract, which is the one that must be applied updated", he lamented. That's why, according to him, "many owners are taking advantage of the confusion to raise rents".

Catalan law is particularly strict with agencies that do not comply with the regulations, which can be sanctioned even with the cancellation of their registration in the register of Real Estate Agents, a mandatory requirement to operate in Catalonia, so that the agencies are becoming the main guarantors that the flats offered by individuals comply with the legislation, sources from the Catalan Apis Association pointed out.