Published the new reference index for the annual update of housing leases

The Ministry of Economy, Trade, and Business has published today, Friday, December 20, in the Official State Gazette (BOE), the much-anticipated new reference index for the annual update of residential lease agreements. This Resolution complements Law 12/2023, of May 24, on the right to housing, as its Eleventh Additional Provision already stipulated:

"The National Statistics Institute will define, before December 31, 2024, a reference index for the annual update of residential lease agreements, which will be set as the reference limit for the purposes of Article 18 of this law, to prevent disproportionate increases in the rent of lease agreements."

What contracts does it affect?

We remember that this Resolution will affect all those contracts that have been signed after the entry into force of Law 12/2023, that is, as of May 26, 2023.

As a result of the publication of this new index by the INE, the reference index to be used as the limit for the annual update of residential lease agreements will be the lowest of the following:

• The annual variation rate of the Consumer Price Index (CPI).
• The annual variation rate of the core Consumer Price Index.
• The adjusted annual average variation rate.

Effects starting in 2025

This measure will take effect from January 1, 2025, but we will have to wait for the publication of the Consumer Price Index and the core Consumer Price Index, which we estimate will be released in mid-February of next year, to compare with the adjusted annual average variation rate and thus determine which index will be used as the limit for the annual update of residential lease agreements.

Therefore, the first contracts whose rent will be subject to review will be those signed after May 26, 2023, with a rent review scheduled for January. However, until the CPI for January 2025 is published, it will not be possible to determine the annual update limit.

Practical scenario:

• Contract concluded January 1, 2024
• Contractual income 1,000.00 euros
• Income review January 2025
• CPI January 2025 ---- 2.40%
• Core CPI January 2025 ---- 2.40%
• Adjusted average annual variation rate ---- 2.20%

For the purpose of updating the rent of €1,000.00, the percentage increase will be the lowest of the three values, in this case, the adjusted annual average variation rate (2.20%), as it is lower than the CPI index.

Although the applicable index is modified, the procedure for updating rents will remain the same as before, allowing arrears to be claimed, provided it has not been otherwise stipulated in the contract.