Legal development

Deadline opens for landlords to apply for compensation for the suspension of evictions

Insight Hero Image
    • Introduction

    At last, the Spanish Government has approved the necessary implementing regulations to make effective the right of certain landlords to request compensation for the suspension of evictions due to the Covid-19 health crisis. These compensations were announced at the end of last year (more details  here). The implementing regulation was approved yesterday in the Council of Ministers and has been published today in the Official State Gazette (Royal Decree 401/2021).

    These compensations, as planned, will be paid from the remainder of the State Housing Plan 2018-2021 endowment (initially set at 1,373,629,658 euros for all items and increased by 100,000,000 euros from the Contingency Fund in March last year). The Autonomous Community of Navarre and the Autonomous Community of the Basque Country are not included in the scope of application of the State Housing Plan 2018-2021 and will deal with these requests in accordance with the provisions of the economic agreement with Navarre and the economic agreement with the Basque Country.

    • What compensations are we referring to?

    The new regulation aims to make effective the compensation for landlords affected by: (i) the Covid-19 general suspension and/or (ii) the Covid-19 specific suspension affecting only legal persons and individuals holding more than 10 residential units. Those suspensions are currently in force to alleviate the effects of the health crisis and, in principle, will remain in force until 31 October 2021.

    The general suspension is the one that affects any landlord when its vulnerable tenant has requested the extraordinary suspension of its eviction in verbal trials dealing with claims of rents or the expiration of the term of the lease agreement, and the judge has granted the measure. Social services inform during this process and public administrations have three months to adopt the measures indicated. If the administration has not taken the necessary measures within three months, landlords can ask for compensation.

    The specific suspension only affects legal persons or individuals holding more than ten residential units. In relation to them, occupants can apply for a suspension of their eviction in criminal proceedings concerning the habitation of a residential unit without legitimate title. In order to request the suspension of eviction in these cases, it is not enough that the persons living in the unit are vulnerable, but it is necessary that at least one of the inhabitants is a dependent person. Social services provide information during the procedure also in these cases, and the right to compensation is activated if, within three months, the administration has not taken the relevant measures.

    • How much will the compensation be?

    In principle, the compensation will be the average residential rental income in the area in which the property is located, determined from the relevant reference indexes or other objective references that are representative of the rental market, plus the current expenses of the property that the landlord can prove that it has assumed. All of the above by reference to the duration of the suspension.

    However, in the case of general suspension, if the rent previously being received by the landlord is lower than this average value, the unpaid rent will be taken as the reference.

    • What is the deadline for requesting compensation?

    In principle, Royal Decree 401/2021 comes into force tomorrow, so the Autonomous Communities should start accepting applications for compensation immediately. However, the regulation itself foresees that these communities may issue procedural development rules, so it is foreseeable that many regional housing public departments will wait for this development before activating the application forms.

    In any case, only compensation applications submitted by 30 November 2021 (inclusive) will be accepted.

    • What requirements do landlords need to meet in order to request compensation?

    It is sufficient to have been affected by an ordinary suspension for which the administration has not provided a solution in due time. In the case of a specific suspension (which only affects legal persons or individuals holding more than ten residential units), it is also necessary to prove that the suspension has caused economic damage as the property was in the market when the entry into the property took place.

    It is important to note that the procedure is at the request of the party, i.e. there will only be a right to compensation if the landlord requests it in due time and form.

    The application must be addressed to the regional housing public department of the Autonomous Community where the unit is placed, including a reasoned justification of the right to compensation and the amount thereof. In addition, the expenses incurred must be accredited, if applicable. Finally, requests for compensation for the specific suspensions affecting legal persons and individuals holding more than 10 residential units must be accompanied by accreditation that the residential unit was offered for sale or rent prior to the entry into the property.

    Royal Decree 401/2020 does not include standard forms or other indications, so it will be up to the Autonomous Communities to provide other details.

    • How will requests for compensation be dealt with?

    Requests will be dealt with in accordance with the general provisions ruling proceedings before the Spanish Public Administration (Law 39/2015, of 1 October, on Public Proceedings).
    Applications for compensation from legal persons are only admissible if submitted electronically. However, natural persons may opt for physical submission.

    The maximum period for the Administration to resolve and notify the interested party is three months, although, exceptionally, the competent body may agree to extend this period for another three months.

    Once this period has elapsed without the express notification of the decision having been received, the interested party may consider the decision to have been upheld by positive silence.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


    Stay ahead with our business insights, updates and podcasts

    Sign-up to select your areas of interest