Judgment 37/2022 of the Constitutional Court on the Catalan law 11/2020
The Law 11/2020 of September 18 of the Parliament of Catalonia, on urgent measures regarding the containment of rents in housing lease contracts, implied that homes located in an area of ”housing tension” would see the rents capped and limited.
In practice, this meant that a large part of the houses that were rented in Catalonia saw their rental price limited to values set up by the administration. They could be previously consulted online, and that were largely lower than those that were agreed upon before the new legislation came into force.
In Judgment 37/2022, of March 10, the Constitutional Court (TC) (ECLI:ES:TC:2022:37) set up a partial unconstitutionality of the law.
What practical effects does this ruling have? Do I have to change a contract already signed in application of Law 11/2020? Can the parties freely agree on the price for the leases signed from now on? All these questions are what we will try to answer in today’s article.
The rental price was limited by art. 6 of the law. In its ruling, the TC declares that article null. But it does not do so because of the rental limit itself, but rather declares it null for a purely competence issue. The TC considers that Catalonia has exceeded the limits in the exercise of its powers, and therefore, art. 6 of the law, among others less relevant, must be declared unconstitutional.
However, it should be noted that the same TC does not close the door so that, in order to ensure the right to housing (art. 47 Spanish Constitution “CE”) and the social function of private property (art. 33.2 CE), the state legislator can approve a norm with the same content that in principle could be constitutional. In fact, that is the main debate undergoing in Madrid Parliament now.
What happens to contracts already signed? And with those signed from now on?
The effects of the sentence are, in any case, for the new rental contracts that are agreed from the publication in the Official Gazette (“BOE”) of said sentence: April 8, 2022.
This means that, in any case, the contracts signed in accordance with Law 11/2020 (which entered into force on September 21, 2020 with the publication in the DOGC) and until April 8, 2022 (publication in the BOE of the STC), continue to be governed by the law of limitation. Whereas the new contracts that are signed from that moment on can now freely set the rent of housing rentals. It is undoubtedly an issue that is going to generate tons of pieces of legal essays and litigation. It will be necessary to see what the Courts of First Instance and Second Instance of Catalonia decide first, and the Supreme Court afterwards. There are solid arguments for both views.
Tense housing market areas are still in force, but in practice, this does not limit rents in contracts between individuals.
We will discuss on other post what happens with the rental contracts signed before April 8, 2022 and that included the so-called “Berlin clause”, or a double rent: one while the limitation lasted, and another for when the rule was declared unconstitutional. That will also spill liters of ink and litigation.
In summary, the ruling of unconstitutionality implies that in the new rental contracts concluded in Catalonia, the price can be freely set by the parties. But on the other hand, nothing prevents the Cortes Generales in Madrid from passing a law with similar content at the time.
Our recommendation is that whether you are going to be a landlord or a tenant, consult us before signing the contract, since contrary to what you may think, rental contracts can be much more complex than they seem.
