Rental Contract in Mallorca for Foreign Tenants

May 15, 2026

The position of foreign tenants in the Balearic Islands

In our daily practice, we often see a recurring pattern. Many foreign citizens move to Mallorca, Ibiza, Menorca or Formentera and sign a rental contract drafted by the landlord or their agent.

However, months later, they discover that some clauses accepted without legal review place them in a weaker position than Spanish law would have granted them by default.

Therefore, when a dispute arises, the tenant is forced to negotiate from a position they accepted against their own interests.

It is important to remember that Law 29/1994, of 24 November, on Urban Leases, offers strong protection to tenants of habitual residences. In addition, this protection has been reinforced by Law 12/2023, of 24 May, on the right to housing.

Thus, the problem is usually not a lack of legal tools. In reality, it often lies in the tenant’s lack of knowledge, in failing to exercise rights on time or in accepting clauses designed to neutralise those protections.

This article analyses the most frequent conflicts in a rental contract in Mallorca and the Balearic Islands. It also explains why a prior review by a lawyer can substantially change the tenant’s position.

Recurring sources of conflict in a rental contract in Mallorca

The deposit and its return

The deposit is one of the issues that causes the most disputes at the end of a rental contract in Mallorca.

Under article 36.1 of the Spanish Urban Leases Act, the tenant must provide a cash deposit. In residential leases, this deposit is equivalent to one month’s rent.

For its part, the landlord must receive that amount and deposit it with the competent regional body.

In the Balearic Islands, the competent body is the Institut Balear de l’Habitatge. However, since 4 April 2022, the effective management of the deposit has been handled by the Official Association of Property Administrators of the Balearic Islands.

The obligation to return the deposit arises when the contract ends. Before that, the condition of the property must be checked.

In addition, if the outstanding balance is not returned within one month from the handover of the keys, it accrues statutory interest. This is established in article 36.4 of the Urban Leases Act.

However, day-to-day reality is often different. We see landlords who retain deposits by alleging undocumented damage. In other cases, the landlord does not respond to formal requests, never deposited the deposit or claims outstanding debts without any evidence.

In many cases, the foreign tenant has already left Spain. For that reason, they often assume that claiming the deposit is not worth it.

Precisely for this reason, it is essential to reach the end of the contract from a strong position. To achieve this, it is advisable to have a reviewed contract, an inventory, photographs and formal communications.

Advance payments and early termination

In addition to the legal deposit, it is common for landlords to request additional guarantees. For example, several months of rent in advance, supplementary deposits or guarantees.

Article 36.5 of the Urban Leases Act allows these additional guarantees. However, following the 2019 reform, it expressly limits them.

In residential leases of up to five years, additional guarantees cannot exceed two monthly rent payments. If the landlord is a legal entity, the reference period is seven years.

It is also common for the tenant to need to terminate the contract early. This may happen due to relocation for work, return to their country of origin or family changes.

In these cases, article 11 of the Urban Leases Act recognises the right of withdrawal. To exercise it, at least six months of the contract must have elapsed. In addition, the tenant must give at least thirty days’ prior notice.

Compensation may be agreed. However, it cannot exceed one month’s rent for each year of the contract remaining. For shorter periods, the proportional calculation must apply.

Despite this, we often see contracts with disproportionate penalty clauses. We also find attempts to retain all advance payments. In other cases, the wording is ambiguous and the landlord interprets it in their own favour.

For this reason, reviewing a rental contract in Mallorca before signing prevents many later disputes.

Repairs not carried out

Another common source of conflict is repairs.

Article 21 of the Urban Leases Act imposes a clear obligation on the landlord. They must carry out all repairs necessary to keep the property in habitable condition.

This obligation only ceases when the damage is attributable to the tenant.

The cases that reach our office are varied. Structural damp, electrical faults, plumbing issues and defective appliances included in the inventory are common.

Insulation and air-conditioning problems are also frequent.

In many cases, the landlord refers the tenant to the home insurance company. In others, they delay intervention or dispute whether the defect already existed.

As a result, the tenant ends up assuming costs that do not correspond to them. This happens especially when their command of Spanish is limited.

Therefore, documenting the initial condition of the property is essential. It is also advisable to regulate the repair regime precisely in the contract.

Rent updates and expenses

Law 12/2023 introduced an important change to the rent update regime.

For habitual residence lease contracts signed from 25 May 2023 onwards, the annual rent update is governed, from 1 January 2025, by the Housing Rental Reference Index.

This index is published monthly by the INE. In addition, it is configured as the lowest value among three references: the annual variation of the general CPI, the annual variation of core CPI and an adjusted average with a moderating coefficient.

In practice, this index replaces the general CPI in these contracts. It also usually stands below it. Therefore, it offers effective protection against inflationary episodes.

For contracts signed before 25 May 2023, the CPI continues to apply where appropriate. However, the extraordinary caps applicable in previous years must also be taken into account.

Despite this change, we continue to see recent contracts that ignore the limitation. Some link the update to the CPI even though they should follow the new reference index.

We also see contracts that pass expenses on to the tenant even though they correspond to the landlord. This may occur with general building expenses, community fees or property tax.

However, these expenses can only be passed on if there is a clear and express agreement. This is required by article 20 of the Urban Leases Act.

Duration and extensions

The duration of the contract is another essential point.

Article 9 of the Urban Leases Act establishes a mandatory extension regime. The minimum duration is five years when the landlord is an individual. However, if the landlord is a legal entity, the minimum duration is seven years.

In addition, after Law 12/2023, this regime is supplemented by extraordinary annual extensions in stressed residential market areas.

Nevertheless, in practice, some landlords try to bypass this regime through different formulas.

One of the most common is to classify the contract as a seasonal lease. However, in many cases, the actual use is that of a habitual residence.

We also find successive short-term contracts with the same tenant. In other cases, termination clauses are included that undermine the tenant’s right to extension.

Foreign tenants usually act in good faith. For this reason, they do not always realise that the name given to the contract does not necessarily bind the court.

What matters is not only what the document says. The actual use of the property also matters.

The tax and administrative perspective of a rental contract in Mallorca

So far, we have dealt with the civil dimension of the contract. However, there is another dimension that many foreign tenants do not consider when signing.

This is the tax and administrative dimension of a rental contract in Mallorca. In certain disputes, this dimension can be decisive.

The deposit of the rental bond in the Balearic Islands

The landlord’s legal obligation to deposit the rental bond is regulated in article 55 of Law 5/2018, of 19 June, on housing in the Balearic Islands.

This regulation develops the third additional provision of the Urban Leases Act.

The obligation corresponds to the landlord, not to the tenant. In addition, it must be fulfilled within thirty working days from the signing of the contract.

The procedure is carried out through form F-1. It can be processed online through the IBAVI or the CAFBAL.

The deposit is not a recommendation. Nor is it a secondary formality. It is a legal duty.

Failure to comply is classified as a serious infringement under article 87 of Law 5/2018. The penalty may consist of a fine of between 35% and 75% of the deposit not lodged, with a limit of 9,000 euros.

In addition, the limitation period is four years.

Apart from the administrative penalty, this breach has evidential importance. It proves that the landlord failed to comply with an express legal obligation.

For this reason, it weakens their credibility if they later try to retain amounts from that same deposit.

Three useful effects for foreign tenants

The deposit of the rental bond produces three especially useful effects for foreign tenants.

First, it has evidential value. The tenant can request information on the deposit from CAFBAL or IBAVI. To do so, they must provide the contract and their identity document.

In this way, they can verify whether the deposit was actually lodged.

If the landlord did not deposit the bond, they breached the law before the dispute over its return even arose. This circumstance can be included in an out-of-court demand or in a claim.

Second, it has a coercive effect. The tenant can report the breach to the regional administration. The administration may initiate sanctioning proceedings independently of the civil dispute.

The possibility of a fine of up to 9,000 euros often changes the landlord’s willingness to negotiate.

Finally, it has a restitutionary effect. If the deposit was correctly lodged, its return does not depend solely on the landlord’s will.

In that case, the managing body intervenes in the cancellation of the deposit through the corresponding online procedure. This adds a layer of formal control and makes arbitrary retention more difficult.

ITP self-assessment in habitual residence leases

The fiscal dimension is added to the administrative one.

Here, it is important to clarify a point that often causes confusion. A habitual residence lease is subject to Transfer Tax, under the onerous transfers category.

However, it is exempt from effective taxation under article 45.I.B.26 of the Consolidated Text of the Transfer Tax and Stamp Duty Law.

This wording was introduced by Royal Decree-Law 21/2018. In addition, it has been maintained since 6 March 2019.

However, the exemption does not remove the formal obligation.

The tenant remains the taxable person. Therefore, they must file form 600 with the Tax Agency of the Balearic Islands.

The deadline is one month from the signing of the contract. The filing must indicate the applicable exemption and obtain a zero tax liability.

Failure to file may result in a formal penalty. In addition, it leaves the tenant without administrative proof of the certain date of the contract.

This information may be relevant if a dispute arises later. For example, regarding the nature of the contract, its validity or whether it was a habitual residence or seasonal lease.

A technical review allows this regime to be verified from the beginning. This avoids omissions that may weaken the tenant’s position years later.

In addition, seasonal leases and guarantee contracts do not benefit from this exemption. In those cases, tax is effectively payable at the corresponding rate.

Therefore, correctly classifying the contract from the outset is essential.

Fiscal traceability of the lease

The rental income received by the landlord must be taxed.

If the landlord is a Spanish tax resident, it is taxed under personal income tax. If the landlord is non-resident, it must be declared through form 210 for Non-Resident Income Tax.

In principle, this obligation does not correspond to the tenant. However, it may affect them indirectly.

A landlord operating outside their tax obligations often also fails to comply with civil obligations. For example, they may collect rent in cash, fail to issue receipts or avoid reflecting the contract.

In contrast, a well-drafted contract imposes documentary traceability.

This includes receipts, bank transfers, full tax identification of the parties and formal communications. All of this acts as a civil guarantee and, in addition, as a pressure mechanism.

Why reviewing a rental contract in Mallorca strengthens the tenant’s position

The contract is the first battlefield.

For this reason, the technical review must be carried out before signing. Doing so afterwards, when the dispute already exists, reduces the available options.

It identifies and removes abusive clauses

First, the review allows abusive clauses or clauses contrary to mandatory rules to be identified.

The Urban Leases Act contains provisions that do not allow agreement to the contrary when the lease concerns a habitual residence. Therefore, any clause contradicting them may be null and void.

However, nullity does not operate by itself. It must be invoked and, in many cases, litigated.

A cleaned-up contract avoids that cost.

It clarifies what the law leaves open to interpretation

Second, the review allows matters left open by the law to be clarified.

This includes the condition of the property on delivery, the inventory of furniture and appliances, utilities, ownership and the minor repairs regime.

The rent update system should also be regulated. For this purpose, it is advisable to include an express reference to the Housing Rental Reference Index or, where appropriate, the CPI with the applicable caps.

In addition, it is advisable to establish the communication system between the parties. This includes a valid email address for notification purposes.

The early termination regime and any agreed compensation should also be made clear.

When these matters are ambiguous in a dispute, they work against the party that has to prove them.

It ensures documentary and administrative traceability

Third, a proper review guarantees traceability.

This involves verifying the lodging of the deposit with CAFBAL or IBAVI. It also requires reviewing the online receipt, filing form 600 and checking the real ownership of the property.

In addition, the habitability certificate, energy performance certificate and tax identification of both parties should be reviewed.

These checks make a difference.

An unassisted tenant rarely carries them out. However, when a conflict arises, they can turn a weak claim into a solid position.

It anticipates the exit scenario

Fourth, the contract must anticipate the tenant’s departure from the property.

A good contract provides for the handover report and the return report. It also regulates the deadline and method for returning the deposit.

In addition, it should establish the treatment of advance payments, the competent jurisdiction and the language of formal communications.

Thus, when the tenant needs to make a claim, they already have the appropriate contractual framework.

The necessary caution regarding a rental contract in Mallorca

It is important to clarify one point.

No contract, however well drafted, guarantees the absence of conflict. Nor does it guarantee the landlord’s solvency or good faith.

A flawless contract does not prevent a landlord from improperly retaining the deposit.

Nevertheless, it changes the scenario. It turns that retention into a legally weak and procedurally defensible position for the tenant.

Therefore, the difference is not only in avoiding litigation. It lies in the quality of the position from which the tenant negotiates or litigates.

When the landlord sees that the tenant is right and has the means to enforce their rights, their willingness to negotiate often changes.

Our experience at Resitax with rental contracts in Mallorca

At Resitax, we have assisted foreign clients in recent years in deposit claims before IBAVI, CAFBAL and the courts of Palma.

We have also intervened in out-of-court negotiations regarding early termination and the return of advance payments.

In addition, we have prepared formal notices for failure to carry out repairs. Likewise, we have defended tenants against disproportionate claims made by landlords at the end of the contract.

The pattern we see is clear.

The tenant who came to the firm before signing resolved the conflict, when there was one, within weeks and out of court.

By contrast, the tenant who came after signing a deficient contract faced longer, more uncertain and less efficient proceedings.

Review your rental contract in Mallorca with Resitax

If you are going to sign a rental contract in Mallorca, Ibiza, Menorca or Formentera, especially if you are a foreign tenant or are not familiar with Spanish law, a prior review can help prevent significant disputes.

At Resitax, we offer legal, tax and real estate advice in Mallorca for foreign tenants, residents and non-residents.

We review rental contracts before signing. We also advise on deposit claims, disputes with landlords, early termination, seasonal contracts and tax obligations linked to leases.

In addition, our team analyses each contract from a legal, tax and administrative perspective. We review abusive clauses, additional guarantees, deposit lodging, form 600, legal extensions, landlord obligations and the documentation needed to protect the tenant’s position.

If you need to review a rental contract in Mallorca or are looking for specialised advice for foreign tenants in the Balearic Islands, you can contact Resitax, experts in taxation and real estate in Mallorca

A proper review can prevent an apparently simple contract from becoming a costly problem.

Frequently asked questions about rental contracts in Mallorca and the Balearic Islands

Why is it important to review a rental contract in Mallorca before signing?

Because many clauses may place the tenant in a weaker position than the one provided by the Spanish Urban Leases Act.

In addition, a prior review allows abusive clauses to be detected, ambiguities to be corrected and the rental relationship to be properly documented.

What rights does a foreign tenant have in the Balearic Islands?

A foreign tenant has the same rights as any tenant in Spain when renting a habitual residence.

Therefore, the law protects aspects such as minimum duration, extensions, the deposit, necessary repairs and rent updates.

Who must deposit the bond for a rental contract in Mallorca?

The obligation to deposit the bond corresponds to the landlord.

In the Balearic Islands, it must be done through the system established by IBAVI and CAFBAL, within the legal deadline.

What happens if the landlord does not deposit the bond?

Failure to deposit the bond may constitute an administrative infringement.

In addition, it can strengthen the tenant’s position in a claim, as it proves the breach of an express legal obligation.

When must the deposit be returned to the tenant?

The deposit must be returned at the end of the contract, once the condition of the property has been checked.

However, if one month passes from the handover of the keys without the outstanding balance being returned, statutory interest may accrue.

Can the landlord retain the deposit for damage?

Yes, but only if there is real damage attributable to the tenant and duly proven.

Therefore, generic or undocumented allegations of damage are not sufficient.

Can the tenant terminate the rental contract early?

Yes. The Urban Leases Act recognises the right of withdrawal once six months of the contract have elapsed.

In addition, the tenant must give the legally required notice. If compensation has been agreed, it must respect the legal limits.

Who must pay for repairs in a rented property?

The landlord must pay for repairs necessary to keep the property in habitable condition.

However, minor repairs arising from ordinary use may correspond to the tenant.

What is the difference between a seasonal contract and a habitual residence contract?

A seasonal contract responds to a specific temporary need.

By contrast, a habitual residence contract covers the tenant’s permanent residence. The name given to the contract is not decisive if the actual use proves otherwise.