The Spanish Cabinet has today approved an aid plan for tenants having trouble paying the rental fee. The following points stand out:

  • Suspension of evictions for 6 months from the end of the alarm state
  • The automatic 6-month extension of rental contracts to prevent abusive increases
  • Direct aid of up to € 900 after the crisis

This plan includes microcredits guaranteed by the State at zero cost.

The objective is that all unemployed people, those affected by a temporary employment record and the self-employed who have seen their income significantly reduced due to COVID-19, can benefit.

These measures have been announced, after the Council of Ministers, the spokesperson and Minister of Finance, María Jesús Montero, the second vice president of Social Rights, Pablo Iglesias, and the third vice president, Nadia Calviño.

A distinction has been made between small and large owners. The small owners will be guaranteed the full collection of the rents, and the investment and home funds, which will assume part of the impact of these measures and you will have to carry out restructuring of the debts of the tenants. The idea is for the State to take over with public funds the debts of all those tenants in situations of vulnerability due to the Covid-19 crisis, a situation that can lead to exemption from payment to thousands of households.

An automatic 6-month extension of all rental contracts has also been approved, which means that no tenant with a current contract can raise their rent for the next 6 months.

Regarding microcredits (without interest costs or commissions) they can be repaid in up to 6 years. If after these 6 years they have not been returned, an additional term of 4 more years will be enabled.

The conditions for tenants’ access to microcredit programs are also expanded, which will be less restrictive than in other cases in which the concept of “vulnerable housing” is applied. In this case, all unemployed people, from ERTO or with reduced working hours, and the self-employed who do not reach the limit of three times the IPREM (increase for children and dependent dependents) are allowed to participate.

In any case, these tenants will always be able to take advantage of the ICO credit lines, and families who cannot afford to pay the microcredits will have direct state aid to pay off the debt with the ICO.

It is anticipated that the amount of the aid could reach a maximum amount of € 900 per month and up to 100% of the principal and interest of the subscribed loan. In addition, a grant of € 200 per month could also be approved to cover the costs of maintenance, community and basic supplies with the limit of 100% of these.

If you want to know the measures that the Spanish government has aproved due to the Covid-19, real the next article.

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According to numerous reports, sources close to the coalition government confirm that the possibility of suspension of rent is being studied for those people who have become vulnerable due to this economic crisis caused by the coronavirus pandemic, regardless of who their landlord is.  This means that all those who cannot afford to pay the rent for their houses due to the loss of their job, an ERTE or a reduction in working hours will be able to be accommodated. This measure will also include the self-employed and SMEs that are suffering a substantial drop in their income.

It is proposed to establish an extendable moratorium period of two months and compensation to owners. The suspension of the payment of home rentals will be extended to the payment of premises and offices in the case of self-employed persons and SMEs, who, as mentioned before, have a significant loss of income.

For lessors, gradual financial compensation would be offered, which could range from 100% of the amount in the case of a two-property owner, to just 5% for large holders or those with more than eight rented properties.

The initiative includes the duration of said suspension of the payment of the rent: during the next two months, extendable to the following month once the state of alarm ends. In addition, all those contracts that end during the validity of the alarm status may be automatically extended for three months.

It remains to be specified how the vulnerability situation can be proven, although it is intended to facilitate access through the presentation of documents or with a responsible statement. Another point from which the initiative starts is that abusive rent increases will be prevented in the six months following the implementation of this measure

Within the package of economic measures approved by the Government is included the moratorium on the payment of mortgages, but not that of rents, something criticized by unions and different associations. However, Nadia Calviño asks for one more week to study the measures on minimum income and rents. The economic vice presidency and the Ministry of Finance requested more time to study the proposals that were discussed at a meeting on Monday and design them avoiding “side effects.” Its objective, as these last departments transferred, is that the measures put in place are well designed to respond effectively to social needs and without generating other possible side effects.Aid for rent can also be used for housing, beyond the premises and offices of SMEs and the self-employed, but it will be necessary to distinguish between small owners and large holders of housing who, at a time like this, have to settle the shoulder so no one is left behind.

As reported on March 24 in the newspaper El Confidencial and regarding the creation of a minimum vital income, the Government intends to allocate it to those people who have not been able to avail themselves of the first package of social measures approved last Tuesday.  Therefore, it would not have a universal character and, moreover, its duration would be temporary, depending on the duration of the effects of the economic crisis as a consequence of the coronavirus pandemic. It would be, according to Executive sources, a form of minimum income “to protect those who have no income or have seen their incomes reduced.” This proposal is counting on allies of a transversal spectrum, which ranges from the third sector and social groups to the vice president of the ECB Luis de Guindos, who has defended a “minimum emergency income”.

Due to this situation, from Orience International, as advisers in legal, financial and strategic matters for international investors, we are available to all our clients and to all involved people who want to get advice, whether they are residents of Spain or have any investment in the country and consider it important and useful to have the help of a team of professionals in the Real Estate sector.

To do this, you can contact us via email sr@orienceinternational.com sending your questions or requesting more information about our professional advisory services.

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