Rent Caps and CPI Limits in Canary Islands Rentals

Residential rentals in the Canary Islands are primarily governed by the Spanish Urban Leases Act (Law 29/1994 - LAU) and Law 12/2023 on the Right to Housing. These laws limit the ability of landlords to increase rent freely, requiring an explicit clause in the contract for any annual adjustments. Since January 1, 2025, all annual rent updates must be calculated using the new Índice de Referencia para la Actualización Anual de los Contratos de Arrendamiento de Vivienda (IRAV) developed by the National Statistics Institute (INE).

1. The Requirement for an Update Clause

Under Article 18 of the Urban Leases Act (LAU), rent can only be updated if the lease agreement explicitly includes a clause permitting such increases. If the contract is silent on this matter, the rent remains fixed for the duration of the lease.

• Contractual Basis: The update typically occurs on the anniversary of the contract.
• Absence of Clause: If no update mechanism is defined, the landlord loses the right to apply inflationary adjustments throughout the mandatory extension periods (typically 5 years for individuals or 7 years for companies).

2. Statutory Caps and the IRAV Index

Historically, rent increases were tied directly to the Consumer Price Index (IPC/CPI). However, Law 12/2023 has decoupled residential updates from the IPC:

• 2024 Limit: Annual rent increases were capped at a maximum of 3%.
• 2025 and 2026: As of January 1, 2025, the IRAV index is the mandatory reference for all residential rent updates. This index is designed to be more stable and lower than general inflation. For 2026, the applicable IRAV limit is approximately 2.14% (subject to monthly publication).
• Mutual Agreement: While landlord and tenant can theoretically agree on a different update method, it can never exceed the statutory cap defined by the IRAV index for that year.

3. Stressed Zones and Large Holders

The Canary Islands government is currently designating Stressed Residential Market Zones (Zonas de Mercado Residencial Tensionado) in municipalities like Adeje, Arona, and parts of Gran Canaria.

If a zone is declared "Stressed":

• New Contracts: For properties that have been rented within the last five years, the new rent cannot exceed the previous contract's rent (plus the legal update index), unless specific improvements were made to the property.
• Large Holders: Individuals or entities owning 5 or more residential properties in a stressed zone are subject to stricter limits. Their rent increases and new contract prices are strictly limited by the official price reference system, and they may be required to apply rent reductions if the current price exceeds the reference table.

Landlords must ensure all communications regarding rent updates are sent via a reliable method (such as Burofax with acknowledgment of receipt and certificate of content) during the month immediately preceding the month in which the update is to take effect (Art. 18.2 LAU).

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