The position of the foreign tenant in the Balearic Islands
In our daily practice, we observe a recurring pattern. Many foreign nationals settle in Mallorca, Ibiza, Menorca, or Formentera and sign a lease agreement drafted by the landlord or their agent.
However, months later they discover that some clauses accepted without technical review put them in a weaker position than that foreseen by Spanish law.
Therefore, when the conflict arises, the tenant negotiates from a position that he himself signed against his own interests.
It is worth remembering that Law 29/1994, of November 24, on Urban Leases, offers robust protection to tenants of primary residences. Furthermore, this protection has been strengthened by Law 12/2023, of May 24, on the right to housing.
Thus, the problem is not usually a lack of legal tools. Rather, it is often a lack of awareness of those tools, a failure to activate them in time, or the acceptance of clauses that attempt to neutralize them.
This article analyzes the most frequent conflicts arising from rental agreements in Mallorca and the Balearic Islands. It also explains why a prior review by a lawyer can substantially change the tenant's position.
Recurring points of conflict in a rental agreement in Mallorca
The deposit and its refund
The deposit is one of the points that generates the most conflict when ending a rental contract in Mallorca.
According to Article 36.1 of the Urban Leases Act, the tenant must provide a security deposit in cash. In residential leases, this deposit is equivalent to one month's rent.
For his part, the landlord must receive that amount and deposit it with the competent regional body.
In the Balearic Islands, the competent body is the Balearic Housing Institute. However, since April 4, 2022, the effective management of the deposit has been the responsibility of the Official Association of Property Administrators of the Balearic Islands.
The obligation to return the deposit arises upon termination of the contract. Beforehand, the condition of the property must be verified.
Furthermore, if the balance is not repaid within one month of the handover of the keys, it will accrue legal interest. This is established in Article 36.4 of the LAU (Urban Leases Act).
However, the reality on a daily basis is often different. We see landlords withholding the security deposit, claiming undocumented damages. In other cases, the landlord doesn't respond to requests, never deposited the deposit, or cites outstanding debts without any supporting documentation.
In many cases, the foreign tenant has already left Spain. For that reason, they assume that making a claim is not worthwhile.
That's precisely why it's crucial to reach the end of the contract in a strong position. To achieve this, it's advisable to have a revised contract, inventory, photographs, and formal communications.
Advance payments and early termination
In addition to the legally required security deposit, landlords often require additional guarantees. For example, several months' rent in advance, additional deposits, or guarantors.
Article 36.5 of the LAU (Urban Leases Act) allows for these additional guarantees. However, following the 2019 reform, it expressly limits them.
For residential leases of up to five years, additional guarantees cannot exceed two months' rent. If the landlord is a legal entity, the reference period is seven years.
It is also common for tenants to need to terminate the contract early. This can happen due to a job relocation, a return to their country of origin, or family changes.
In these cases, Article 11 of the LAU (Urban Leases Act) recognizes the right of withdrawal. To exercise this right, at least six months of the contract must have elapsed. Furthermore, a minimum of thirty days' notice must be given.
Compensation may be agreed upon. However, this cannot exceed one month's salary for each year remaining on the contract. For shorter periods, a proportional pro-rata amount must be applied.
Despite this, in our consultations we see contracts with disproportionate penalty clauses. We also find attempts to withhold all advance payments. In other cases, the wording is ambiguous and the landlord interprets it to their own advantage.
Therefore, reviewing the rental contract in Mallorca before signing avoids many subsequent conflicts.
The repairs not carried out
Another common source of conflict is reparations.
Article 21 of the LAU imposes a clear obligation on the landlord. They must carry out all the necessary repairs to keep the property in habitable condition.
This obligation only ceases when the deterioration is attributable to the lessee.
The range of cases that come to the office is extensive. Recurring problems include structural dampness, electrical faults, plumbing breakdowns, and defective appliances listed in the inventory.
Insulation or air conditioning problems are also common.
In many cases, the landlord refers the tenant to the home insurance company. In others, they delay taking action or dispute whether the damage already existed.
As a result, the tenant ends up assuming costs that are not their responsibility. This is especially true when their command of Spanish is limited.
Therefore, documenting the initial condition of the property is essential. It is also advisable to clearly define the repair schedule in the contract.
Rent and expenses update
Law 12/2023 introduced a significant change in the rent update regime.
In residential lease agreements signed from May 25, 2023 onwards, the annual update is governed, from January 1, 2025, by the Housing Lease Reference Index.
This index is published monthly by the INE (National Institute of Statistics). Furthermore, it is calculated as the lowest value among three references: the year-on-year change in the general CPI, the year-on-year change in the core CPI, and an average adjusted with a moderating coefficient.
In practice, this index replaces the general CPI in these contracts. Furthermore, it is usually lower. Therefore, it offers effective protection against inflationary episodes.
For contracts signed before May 25, 2023, the CPI continues to apply where relevant. However, any extraordinary caps applicable in previous years must 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 be adjusted to the IRAV (Real Estate Investment Trust).
There are also contracts that transfer to the tenant expenses that are the landlord's responsibility. This can happen with general building expenses, homeowners' association fees, or property tax (IBI).
However, these expenses can only be passed on if there is a clear and explicit agreement. This is required by Article 20 of the LAU (Urban Leases Act).
The duration and the extension
The duration of the contract is another essential point.
Article 9 of the LAU 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.
Furthermore, following Law 12/2023, this regime is completed with the extraordinary extension by annual payments in areas of stressed residential market.
However, in practice, attempts are made to circumvent this regime through various means.
One of the most common mistakes is classifying the contract as a seasonal rental. However, many times the reality is that it's a permanent residence.
We also found successive short-term contracts with the same tenant. In other cases, termination clauses are included that violate the right to renewal.
Foreign tenants often act in good faith. Therefore, they don't always realize that the contract's name doesn't necessarily bind the judge.
What matters is not only what the document says. The reality of how the house is used also matters.
The tax and administrative perspective of the rental agreement in Mallorca
So far we have discussed the civil aspect of the contract. However, there is another dimension that many foreign tenants do not consider when signing.
This concerns the fiscal and administrative aspects of rental agreements in Mallorca. In certain disputes, this aspect can be decisive.
The deposit of the bond in the Balearic Islands
The landlord's legal obligation to deposit the security deposit is regulated in article 55 of Law 5/2018, of June 19, on housing in the Balearic Islands.
This regulation develops the third additional provision of the LAU.
The obligation lies with the landlord, not the tenant. Furthermore, it must be fulfilled within thirty business days of the contract's signing.
The procedure is carried out using form F-1. It can be managed electronically through IBAVI or CAFBAL.
The deposit is not a recommendation. Nor is it a mere formality. It is a legal obligation.
Failure to comply is classified as a serious offense under Article 87 of Law 5/2018. The penalty may consist of a fine of between 35% and 75% of the undeposited bond, with a limit of 9,000 euros.
Furthermore, the statute of limitations is four years.
Aside from the administrative penalty, this breach has evidentiary value. It proves that the landlord failed to comply with an express legal obligation.
Therefore, it erodes its credibility if it then tries to withhold amounts from that same bond.
Three useful effects for the foreign tenant
The deposit of the security deposit produces three effects that are especially useful for the foreign tenant.
First, it serves as proof of deposit. The tenant can request information about the deposit from CAFBAL or IBAVI. To do so, they must provide the contract and their identification document.
This way, you can verify with documentation whether the bond was established.
If the landlord failed to deposit the security deposit, they broke the law even before a dispute arose regarding its return. This circumstance can be included in an out-of-court demand or a lawsuit.
Secondly, it has a coercive effect. The tenant can report the breach to the regional government. This can then initiate sanction proceedings independently of any civil litigation.
The possibility of a penalty of up to 9,000 euros usually alters the landlord's negotiating disposition.
Finally, it has a restitutionary effect. If the deposit was properly made, its return does not depend solely on the owner's will.
In that case, the managing body intervenes to cancel the deposit through the corresponding online procedure. This adds a layer of formal control and makes arbitrary retention more difficult.
Self-assessment of the ITP in the rental of a primary residence
In addition to the administrative dimension, there is also the fiscal dimension.
It is important to clarify a point that causes confusion here. The rental of a primary residence is subject to Property Transfer Tax, specifically the onerous property transfers modality.
However, it is exempt from effective taxation under Article 45.IB26 of the Consolidated Text of the Tax Law.
This wording was introduced by Royal Decree-Law 21/2018. Furthermore, it has been in effect since March 6, 2019.
However, the exemption does not eliminate the formal obligation.
The tenant remains liable for tax. Therefore, they must submit form 600 to the Balearic Islands Tax Agency.
The deadline is one month from the date of the contract. The corresponding exemption must be indicated in the submission, and a zero fee must be obtained.
Failure to submit this document may result in formal penalties. Furthermore, it leaves the tenant without official proof of the contract's exact date.
This information may be relevant if a dispute arises later. For example, regarding the nature of the contract, its validity, or whether it was for a primary or seasonal residence.
A technical review allows this arrangement to be verified from the outset. This avoids omissions that could jeopardize the tenant's position years later.
Furthermore, seasonal rentals and guarantee agreements do not benefit from this exemption. In those cases, they are effectively taxed at the corresponding rate.
Therefore, properly classifying the contract from the beginning is fundamental.
Review your rental agreement in Mallorca with Resitax
If you are going to sign a rental agreement in Mallorca, Ibiza, Menorca or Formentera, especially if you are a foreigner or unfamiliar with Spanish regulations, a prior review can prevent significant conflicts.
We review rental agreements before signing. We also advise on security deposit claims, disputes with landlords, early termination of leases, seasonal contracts, and tax obligations related to rentals.
Furthermore, our team analyzes each contract from a legal, tax, and administrative perspective. This includes reviewing unfair terms, additional guarantees, security deposit requirements, Form 600, legal extensions, landlord obligations, and required documentation.
If you need to review a rental agreement in Mallorca or are looking for specialized advice for foreign tenants in the Balearic Islands, you can contact Resitax, tax and real estate experts in Mallorca.
A proper review can prevent a seemingly simple contract from becoming a costly problem.
Frequently asked questions about rental agreements in Mallorca and the Balearic Islands
Why is it important to review a rental agreement in Mallorca before signing it?
Because many clauses can place the tenant in a weaker position than that provided for by the Urban Leases Law.
Furthermore, a prior review allows for the detection of abusive clauses, the correction of ambiguities, and the proper documentation of the tenancy relationship.
What rights does a foreign tenant have in the Balearic Islands?
Foreign tenants have the same rights as any tenant in Spain when renting a primary residence.
Therefore, the law protects aspects such as the minimum duration, the extension, the deposit, the necessary repairs and the updating of the rent.
Who is responsible for depositing the security deposit for a rental agreement in Mallorca?
The obligation to deposit the security deposit rests with the landlord.
In the Balearic Islands, it must be carried out in accordance with the system established by IBAVI and CAFBAL, within the corresponding legal period.
What happens if the landlord does not deposit the security deposit?
Failure to comply may constitute an administrative offense.
Furthermore, it can strengthen the tenant's position in the event of a claim, as it proves the breach of an express legal obligation.
When should 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 delivery of the keys without the corresponding balance being returned, legal interest on the money may accrue.
Can the landlord withhold the deposit for damages?
Yes, but only if there are actual damages attributable to the tenant and duly proven.
Therefore, it is not enough to allege generic or undocumented defects.
Can the tenant terminate the rental agreement early?
Yes. The LAU recognizes the right of withdrawal once six months of the contract have elapsed.
In addition, you must provide the legally required notice period. If there is an agreed-upon compensation, you must respect the legal limits.
Who should pay for repairs to a rented property?
The landlord must assume the repairs necessary to keep the dwelling in habitable condition.
However, minor repairs resulting from ordinary use may be the responsibility of the tenant.
What is the difference between a seasonal contract and a permanent housing contract?
The seasonal contract responds to a specific temporary need.
In contrast, a standard residential lease covers the tenant's permanent residence. The contract's name is not decisive if the actual use of the property demonstrates otherwise.
Is form 600 required for a standard residential lease agreement?
Yes, there may be a formal obligation to submit form 600 to the Tax Agency of the Balearic Islands.
This can happen even if the rental of a primary residence is exempt from effective taxation and the fee is zero.
Why is the exact date of the rental agreement important?
Because it may be relevant if there is a subsequent dispute about the duration, validity, or nature of the contract.
For this reason, submitting form 600 helps to administratively prove that date.
Does Resitax review rental contracts in Mallorca for foreigners?
Yes. Resitax advises foreign clients in Mallorca and the Balearic Islands on the review of rental contracts.