lease agreement legal deposit fianza

The legal deposit (fianza) in the lease agreement in Spain

The legal deposit aka fianza legal: Things to bear in mind before signing a lease agreement

T he legal deposit or  fianzaAs commonly know in Spain is the money delivered by the tenant to the landlord to guarantee fulfilment of the obligations undertaken by the tenant in a lease agreement.

The deposit guarantees that:

  • The economical obligations assumed by the tenant under the agreement are duly fulfilled, i.e. rent payment, utilities (water, electricity), taxes (Impuesto de Bienes Inmuebles) and other possible expenses.
  • Upon the termination of the lease, the property is returned in the same condition as it was delivered or according to the conditions set forth by the parties in the lease agreement (freshly painted, normal wear and tear, empty, etc.).
  • Any contingencies that may arise upon the termination of the contract, i.e. tenant not vacating the property in due time, extraordinary expenses incurred by the landlord to recover the property…

Knowing the purpose of the deposit in a lease agreement we will address:

  1. How much is the amount of the deposit?

  2. Can further deposits (bank guarantees, money transfers) be required to the tenant?

  3. Where is the deposit due to be kept during the term of the agreement?

  4. When should be the deposit returned to the tenant?

  1. Tips to avoid disagreements between the parties

1. How much is the amount of the deposit?

The article 36 of the Spanish Urban Leases Law Ley de Arrendamientos Urbanos (LAU) specifies that the amount of the deposit must be one month rent for residential leases and two months’ rent for commercial leases. As it can be seen residential and commercial lease agreements have different treatment as per the LAU.

NOTE : In both cases, the deposit must be delivered by the tenantcannot be negotiated in cash and upon signature of the lease agreement, even if the agreement is signed before the handover of the keys.

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2. Can further deposits (bank guarantees, money transfers) be required to the tenant?

In this case, we must again differentiate between lease agreements for commercial and residential purposes:

Residential Leases

Further deposits can be agreed by the parties (required to the tenant most likely) but following the LAU this further deposit could never be more than twice the amount of monthly rent.

Commercial Leases

Common market practises in commercial leases is for the tenant to deliver extra guarantees on top of the legal deposit set forth by the LAU.

As opposed to residential leases there is no limit to what the tenant would have to deliver as an extra guarantee. Although common practise tells us that most landlords would require an extra 4 to 6 months’ rent. In most cases as a bank guarantee aval bancario.

NOTE : Further deposits can be made in any kind, not only cash.

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3. Where is the deposit due to be kept during the term of the agreement?

Legal deposits are not to be kept in the landlord’s bank account but to be deposit in the organism where the property is located created by the local governments to this purpose.

These organisms e.g. INCASOL in Barcelona, IVIMA in Madrid, are located in every territory Comunidad Autónoma in Spain.

NOTE : Landlords must give proof to their tenants of the deposit before the relevant organism within two months since the signing of the lease agreement. Penalties apply for landlords failing to deposit the lease agreement deposit in the due organism.

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4. When should be the deposit returned to the tenant?

As seen at the beginning of this article the deposit guarantees the economical obligations undertaken by the tenant, contingencies that may arise and that the property is returned as agreed in the lease agreement, but, what about its return to the tenant? when is it legally due?

The LAU provides no term to that question but it says that legal interest will accrue after one month since the handover of the keysnot the termination of the agreement .

NOTE : In case any amounts are deducted from the deposit this must always be justified with the relevant invoices.

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5. Tips to avoid disagreements between the parties

The termination of a lease and the return of the deposit is usually a highly contentious matter. The landlord wants to keep the deposit to cover the amount of the damages, while the tenant states that it disagrees with the damages as they were already there when they received the property.

The following tips might help to ease those unpleasant situations:

Tips for the tenant

Take as many detailed photos as possible of the state of the property, attach them to the lease agreement and sign it. Especially those items in poor condition or heavily used.

Negotiate in the contract the concepts to be guaranteed by the deposit (cleaning, painting, household appliances, etc.) so upon termination it will be easier to assess them.

Let the landlord know in an email of formal letter of anything unseen before accessing the property.

Tips for the landlord

Keep records of all invoices and expenses deducted from the deposit.

Write down the readings in the utilities meters when the keys are returned.

If the property is not in the agreed condition make a video on your phone in which the damages are clearly seen.

A common practice when returning the keys of a property is to sign a document where the parties acknowledge the handover of the property, possible damages and how fixings should be made and conditions to return the deposit. This document is commonly referred to as acta de entrega de llaves.

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At Legaliaspain we have a team English speaking real estate lawyers with years of expertise negotiating and concluding residential and commercial lease agreements. Do not hesitate to contact us for a consultation.

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