Madrid Lease Agreement Requirements

Residential leasing in Madrid is primarily governed by the Ley 29/1994, de 24 de noviembre, de Arrendamientos Urbanos (LAU), and significantly amended by the Ley 12/2023, de 24 de mayo, por el derecho a la vivienda. All disputes are subject to the Civil Procedure Act (Ley 1/2000 - LEC) and the jurisdiction of the Juzgados de Primera Instancia of the property's location.

Mandatory Lease Clauses and Formality

While Article 37 of the LAU allows verbal agreements, either party can compel the other to formalize the contract in writing. In Madrid, a written contract is mandatory for the administrative deposit of the security deposit with the Agencia de Vivienda Social (formerly IVIMA) under Decreto 181/1996.

• Prohibition of Agency Fees: Under Article 20.1 of the LAU, real estate management and lease formalization costs must be borne by the landlord, regardless of whether they are a natural person or a legal entity.
• Security Deposit (Fianza): A mandatory one-month deposit for residential leases must be collected (Art. 36 LAU) and deposited with the regional authority within 30 days.
• Energy Performance Certificate (CEE): A copy must be provided to the tenant and annexed to the contract (RD 390/2021).

Duration and Mandatory Extensions

• Minimum Duration (Art. 9 LAU): If the landlord is a natural person, the tenant is entitled to a minimum of 5 years. If the landlord is a legal entity, the minimum is 7 years. The tenant may prevent annual extensions by giving 30 days' notice before the end of any term.
• Tacit Renewal (Art. 10 LAU): If neither party gives notice (4 months for landlords, 2 months for tenants) at the end of the 5/7 year term, the lease is automatically extended for annual periods up to 3 additional years.
• Landlord Recovery: The landlord may only block mandatory extensions if they explicitly stated in the contract the future need to occupy the home for themselves or first-degree relatives, providing at least 2 months' notice (Art. 9.3 LAU).

Rent Indexation and Caps (2026)

Following Law 12/2023, rent increases are no longer tied solely to the CPI (IPC):

• For contracts signed on or after May 26, 2023: The annual update is capped by the IRAV index (Índice de Referencia para la Actualización de Arrendamientos de Vivienda), which is set at 2.14% for the 2026 fiscal year.
• For contracts signed before May 26, 2023: Updates generally follow the CPI (IPC) as specified in the contract, as the Community of Madrid has not declared "Stressed Market Areas" (zonas tensionadas) that would impose the 3% or IRAV caps on older agreements.

Jurisdictional Compliance

All disputes arising from residential leases in Madrid must be adjudicated by the Juzgados de Primera Instancia corresponding to the property's location. Any clause waiving these statutory protections or attempting to submit the parties to a different jurisdiction is null and void (Art. 6 LAU).