Companies that own rental properties in Spain are facing new changes that may affect both the duration of their tenancy agreements and the cost of bringing them to an end. The new 2026 rental rules extend automatic renewal periods and introduce compensation for tenants when the landlord decides not to renew, although these obligations do not apply in every case.
The reform also introduces tax changes that may affect property companies and SOCIMIs, Spain’s listed real estate investment companies. As a result, the implications go beyond the tenancy agreement itself and may also affect companies’ financial and asset planning.
Below, LEIALTA explains what is changing in Spain, which companies may be affected and how the new measures could impact their legal, accounting and tax obligations. We also look at when each change applies and what companies should review to anticipate its potential consequences.
How long can a residential tenancy agreement be extended in Spain when the landlord is a company?
One of the main changes concerns the length of time for which a tenancy agreement relating to a tenant’s main residence can remain in force.
Until now, where the landlord was a company or other legal entity, the tenant was entitled to remain in the property for a minimum of seven years, if they complied with their obligations. Once that period had expired, the agreement could continue through annual extensions for up to a further three years.
The new rules change this second period, rather than the initial minimum term.
If neither party gives notice of its intention to terminate the agreement within the statutory deadlines, the tenancy will be automatically extended for:
- A further seven years where the landlord is a company or other legal entity.
- A further five years where the landlord is an individual.
These extensions may also be repeated successively if neither party gives notice of its intention to terminate the agreement.
This does not mean that a company is always required to renew the tenancy. It may decide not to renew at the relevant expiry dates, but it will need to comply with the statutory requirements and, where applicable, pay compensation.
The notice periods also change. The landlord must give at least six months’ notice, while the tenant must give at least two months’ notice.
How much compensation must a company pay a tenant if it decides not to renew?
This is another of the changes with the greatest potential financial impact for property owners.
Generally, under the new regime, where a company validly decides not to renew a tenancy agreement for a tenant’s main residence, it will be required to compensate the tenant financially.
The compensation will be calculated using the higher of the following two amounts:
- Twelve monthly payments calculated using the highest value within the applicable range for the property under Spain’s official rental price reference system.
- One monthly payment calculated using that same value, for each year the tenant has lived in the property, including the proportional amount for periods of less than one year.
If an individual value cannot be obtained from the reference system, the current monthly rent under the tenancy agreement will be used instead.
For example, if the reference amount is €1,000 per month, the compensation would be €12,000 for a tenant who has lived in the property for eight years. However, if the tenant has been living there for fifteen years, the compensation would rise to €15,000.
Therefore, the compensation is not necessarily capped at twelve months’ rent. The cost may increase depending on how long the tenant has occupied the property.
As a rule, payment will be made when the tenant vacates and returns the property.
When can a residential tenancy in Spain be ended without paying compensation?
The obligation to compensate the tenant does not apply to every termination of a tenancy agreement.
The legislation provides several exceptions. For example, compensation may not be required where the tenant has another suitable property available in the same municipality and can occupy it, or where they have not actually lived in the rented property for more than six months during the previous year without a justified reason.
Compensation may also be avoided where both parties enter into a new tenancy agreement or where the tenant rejects a formal renewal offer that complies with the statutory requirements on duration and rent.
However, there is an important difference between individual landlords and companies. The possibility of recovering the property for personal or family needs is reserved for landlords who are individuals. A company cannot rely on this exception.
Special rules also apply where the tenant is entitled to certain extraordinary statutory extensions.
In all cases, the reasons relied upon for not paying compensation must be clearly stated and evidenced in the notice of non-renewal.
Do the new Spanish rental rules affect tenancy agreements that are already in force?
Yes, although not every existing tenancy will be affected in the same way.
The new extension and compensation regime scheduled for 15 November 2026 may also apply to agreements entered previously in relation to expiry dates falling after that date.
However, the legislation provides for several situations that need to be reviewed individually:
- Valid notices of non-renewal issued before 7 October 2026 remain effective and do not trigger the new compensation requirement.
- Agreements already benefiting from the previous annual extension regime will continue under that regime until the relevant period comes to an end.
- Where fewer than six months remain before expiry on the date the new rules enter into force, the landlord may give four months’ notice of non-renewal.
In addition, Royal Decree-Law 29/2026 provides for an extraordinary extension of up to two years for certain existing tenancy agreements, provided that the relevant requirements are met, including that the tenant is up to date with rental payments. This measure does not automatically accumulate with the new five- or seven-year extensions.
Companies should therefore review the original signing date, any previous extensions and any notices already issued before communicating the termination of a residential tenancy in Spain.
Can residential rents be increased in Spain in 2026 and 2027?
The second decree also introduces an extraordinary restriction on certain annual rent increases until 31 December 2027.
Where the rent already exceeds the maximum applicable amount under the rental price reference system, no further increase will be permitted.
In other cases, the parties may negotiate an increase. If they do not reach a new agreement, the increase may not exceed 2%.
The rules governing temporary rentals and room rentals are also being strengthened. Seasonal tenancy agreements must respond to a genuine and demonstrable temporary need, preventing them from being used to disguise what is actually a tenancy for a main residence.
These distinctions are particularly important for companies in Spain that manage properties under different rental models.
How should a company account for compensation paid for non-renewal?
The consequences of the reform are not limited to tenancy agreements. They may also affect the financial planning and accounting of companies that own residential property in Spain.
Where a compensation obligation arises, the company will need to assess when the expense should be recognised and how it should be reflected in its accounts.
For example, if a company gives notice that it will not renew a tenancy and becomes obliged to pay compensation, it may be necessary to recognise a liability or a provision, depending on the circumstances.
A provision is an amount recognised in the accounts where there is a present obligation, payment is probable and the amount can be estimated, even if the exact timing of the payment is not yet known.
However, the fact that the legislation provides for possible compensation does not mean that every property-owning company must automatically recognise a provision for all its tenancy agreements.
Each company will need to assess whether an obligation already exists, its estimated amount and when it should be recognised.
Is compensation deductible for Spanish Corporate Income Tax purposes?
From a tax perspective, compensation linked to a rental activity could constitute a deductible expense for Spanish Corporate Income Tax purposes, provided that the statutory requirements are met.
It will therefore be important to verify that the expense is properly substantiated, correctly accounted for and allocated to the appropriate tax period.
The existence of a statutory compensation obligation does not therefore mean that the expense can automatically be deducted at any time. Its tax treatment will depend on the circumstances of the transaction and the applicable rules.
What changes in VAT and Spanish property tax for companies renting out residential properties?
In addition to the contractual requirements, Royal Decree-Law 29/2026 introduces tax changes affecting certain real estate transactions in Spain.
For VAT purposes, the rental of a property used exclusively as the tenant’s habitual residence generally remains VAT exempt, even where the landlord is a company.
However, from 1 December 2026, changes will apply to rentals of furnished apartments or residential properties where the stay by the same tenant does not exceed 30 nights. These rentals will become subject to the reduced 10% VAT rate, subject to the exceptions provided for in the legislation.
Subject to certain requirements, the application of the reduced VAT rate is also extended to renovation and repair work on properties intended for long-term residential rental, including where the owner is a company.
The reform also changes the potential surcharges under Spain’s Property Tax (IBI) for vacant residential properties and tourist accommodation.
Municipalities will be able to impose surcharges where the statutory conditions are met. This does not therefore amount to an automatic IBI increase for every company that owns residential property in Spain.
How do the new housing tax rules in Spain affect SOCIMIs?
SOCIMIs, the Spanish listed real estate investment companies specialising in property investment, are also affected by the tax changes.
Royal Decree-Law 29/2026 modifies their tax regime and introduces a special 25% tax charge on certain undistributed profits arising from the rental or granting of rights to use residential properties and other residential real estate.
This includes income from different types of residential rentals, such as tourist accommodation and short-term rentals.
The measure applies to profits that are not distributed to shareholders, to the extent that they meet the relevant tax conditions. It should therefore **not** be interpreted as a general increase to 25% in the overall taxation of SOCIMIs.
What tax advantages can SOCIMIs retain?
The new rules also provide for reductions in the special tax charge for SOCIMIs that allocate a significant proportion of their residential portfolio to affordable housing.
Broadly speaking, two reductions are available:
– A 50% reduction in the special tax charge where more than 80% of the residential properties available for rent meet the affordable housing requirements.
– A 100% reduction where, in addition to meeting that percentage, the undistributed profits are reinvested in affordable rental housing within three years.
However, a transitional period provides for lower percentages to qualify for these reductions: more than 60% in certain financial years beginning in 2026 and more than 70% in those beginning in 2027.
The new tax charge may already affect tax periods beginning in 2026 that had not ended when the decree entered into force.
SOCIMIs will therefore need to review both their profit distribution policies and the composition of their residential portfolios and investment plans.
The new Spanish Personal Income Tax reductions relating to rental income, meanwhile, are intended for individual taxpayers and should not be confused with the tax incentives applicable to companies.
What should companies that own residential properties in Spain review now?
The new rules may affect an asset-holding company, a residential property rental business or a SOCIMI in different ways. It is therefore important to anticipate their potential effects before renewing or terminating tenancy agreements.
Companies should consider reviewing:
- Existing tenancy agreements and their expiry dates, in order to identify which may become subject to the new extension periods.
- Notices of non-renewal, checking the applicable deadlines and whether compensation will be required.
- The accounting and financial impact, particularly where compensation payments may arise.
- Tax obligations according to the type of rental, the properties concerned and the company’s tax regime.
- The position of SOCIMIs, taking into account the new rules on undistributed profits and affordable housing.
Although some measures are already in force, others will apply later, and both sets of rules are still subject to parliamentary ratification. Their legislative development will therefore need to be monitored closely.
LEIALTA: corporate, accounting and tax advice for companies in Spain
Changes to Spain’s housing and rental regulations may have consequences that go beyond the duration of a tenancy agreement. They can also affect asset planning, costs and wider business decisions.
At LEIALTA, we provide comprehensive advice to assess these implications from a corporate, accounting and tax perspective. We help companies understand their obligations in Spain and anticipate the impact that regulatory changes may have on the management of their property portfolios.
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