Rental Security Deposit in the Balearic Islands (IBAVI)

Since the commencement of the Spanish Urban Leases Act (LAU) on 1 January 1995, landlords in the Balearic Islands must comply with both national Spanish law and regional administrative requirements regarding security deposits. Failure to register the security deposit with the regional authority not only risks fines but also prevents the landlord from claiming tax deductions on rental income.

1. Mandatory Cash Deposit (Fianza)

Under Article 36 of the Ley de Arrendamientos Urbanos (LAU), the collection of a security deposit is mandatory, not optional. For residential properties intended as a primary home, the deposit is fixed at one month's rent.

• Payment Method: The law specifies this must be a "cash" (metálico) deposit, meaning a liquid guarantee, though it is usually paid via bank transfer.
• Additional Guarantees: Parties may agree on additional financial guarantees (bank guarantees or additional cash), but for residential leases of up to 5 years (or 7 years if the landlord is a legal entity), these are capped at a maximum of two months' rent (Art. 36.5 LAU).

2. Mandatory Registration with IBAVI

In the Balearic Islands, the landlord is legally prohibited from keeping the security deposit in their personal bank account during the tenancy.

• The IBAVI Requirement: Landlords must deposit the fianza with the Institut Balear de l'Habitatge (IBAVI) using Modelo F-1. This is a public custody service that ensures the money is protected.
• Deadline: The deposit must be registered within 30 business days (días hábiles) from the date the contract is formalized and comes into effect.
• Sanctions: Failure to deposit the fianza or comply with formal requirements is a minor infraction (infracción leve) under Articles 86 and 90 of Ley 5/2018. The penalty is a fine ranging from 60 to 3,000 euros, with the specific limitation that the fine cannot exceed 35% of the amount of the fianza. Additionally, the landlord will lose the right to regional tax deductions (deducciones autonómicas) in their IRPF tax return.

3. Return Procedures and Deadlines

The return of the deposit is triggered by the end of the lease and the return of the keys.

• One-Month Rule: According to Article 36.4 of the LAU, the landlord has one month from the date the keys are returned to return the deposit to the tenant.
• Legal Interest: If the landlord fails to return the funds within this one-month window, the amount will begin to accrue legal interest at the rate established in the General State Budget.
• Offsetting Debts: The landlord may deduct unpaid rent, outstanding utility bills (electricity, water), or the cost of repairing damages caused by the tenant that exceed "normal wear and tear." All deductions must be justified with evidence.

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