Terminating a rental agreement as a property owner isn’t straightforward, as it’s subject to various laws and regulations that protect both parties, such as the Urban Leases Act (LAU) and other applicable rules. This process requires some specific legal steps to avoid conflicts and ensure that both parties' rights are respected.

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Here’s a guide on how to terminate a rental agreement while complying with Spanish regulations.

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Review the rental agreement clauses

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The first step is to carefully review the rental agreement signed with the tenant, as this document outlines the rights and obligations of both sides.

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• Duration of the lease: the LAU regulates residential rental agreements, establishing a minimum duration of five years (if the owner is an individual), provided the tenant wishes to stay. However, the contract may include specific exceptions for termination.

• Early termination: if the contract includes clauses allowing for termination before the end of this period, ensure that the situation you are facing is covered by these clauses. Contracts often provide for early termination due to reasons such as non-payment, unauthorized subletting or significant damage to the property.

• Notice period: if termination is permitted, a notice period must generally be observed, as specified in the contract. This period is usually two months.

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Consult the Urban Leases Act (Ley de Arrendamientos Urbanos (LAU))

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The Urban Leases Act (LAU) in Spain is the primary regulation governing residential leases. Termination of a rental agreement by the owner is only possible under specific circumstances outlined by this law, such as:

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• Non-payment of rent: if the tenant fails to pay the rent, the owner can initiate legal proceedings to terminate the contract. This is one of the most common reasons for termination and is well-regulated by the LAU.

• Unauthorized subletting or transfer: if the tenant sublets the property or transfers it to others without the owner's permission, it constitutes a serious breach and allows for termination.

• Intentional damage or unauthorized renovations: if the tenant intentionally damages the property or makes unauthorized alterations, the owner can terminate the contract.

• Dangerous or illegal activities: engaging in dangerous, unsanitary or illegal activities within the property provides grounds for the owner to end the lease.

• Owner’s need: according to Article 9.3 of the LAU, if the owner needs the property for their own use or for a close family member, they can recover it after the first year of the lease, provided they give two months' notice. This reason only applies to standard residential leases, not to temporary rental contract.‍

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Formally notify the tenant

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Once you have a valid reason to terminate the lease, you must formally notify the tenant. This notification must meet certain legal requirements:

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• Written notification: the notification must be clear, detailed and preferably sent via formal means such as a burofax with acknowledgment of receipt, to provide proof of delivery.

• Reason for termination: you need to specify the legal grounds for terminating the lease, whether it's due to non-payment, unauthorized subletting or personal need for the property.

• Notice period: indicate the time the tenant must vacate the property, adhering to the notice period stipulated in the contract or required by the LAU.

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If the reason for termination is the owner’s or their close family members’ need for the property, and after three months from the notification the owner or their family does not occupy the property, the tenant may have the right to return to the property within 30 days. If this does not happen, the tenant is entitled to request compensation, which may cover relocation expenses or, in some cases, receive one month's rent for each year of the contract that was not fulfilled.

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Conduct a final inspection of the property

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Before the tenant vacates the property, it is advisable to conduct a final inspection to assess the condition of the property and manage the return of the security deposit. The LAU allows the owner to retain part or all of the deposit if the tenant has caused damage beyond normal wear and tear or has outstanding debts.

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If you find any damage, it is important to document it with photos or videos, as this will be crucial if you decide to withhold part of the deposit. If everything is in order, you have 30 days to return the deposit to the tenant. If there are necessary repairs, you must provide a justification for any deductions made from the deposit.

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Terminating a rental agreement in Spain as a property owner can be complex, but by following the correct steps and adhering to the Urban Leases Act (LAU), you can avoid future issues. To ensure a smooth process, it’s crucial to thoroughly review the contract, consult the applicable legislation, formally notify the tenant and conduct a thorough final inspection of the property.

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