Spanish Supreme Court delivers judgment on rent update limitations

The Supreme Court considers that the limitation on rent updates for protecting tenants, regulated by Royal Decree-Laws of 2022, did not constitute a deprivation of the right to property nor did it violate its essential content.

The Administrative Litigation Chamber of the Supreme Court has issued a ruling endorsing the limitation on the update of rent for residential tenancy contracts, due to changes in the Consumer Price Index (CPI). This measure was included in the Royal Decree-Law of 29 March 2022 and its two extensions that same year, which approved urgent measures to address the economic and social consequences of the war in Ukraine, as well as the reconstruction of the island of La Palma and other situations of vulnerability.

The court dismisses the appeal filed by Sociedad de Arrendamientos 2007 SLU against the Council of Ministers’ agreement that denied it compensation of 631,000 euros, on grounds of state liability for legislative acts, for the damages caused by the cap on maximum rents set out in Article 46 of Royal Decree-Law 6/2022 and its two extensions.

The Supreme Court, in a ruling for which Judge Francisco Javier Pueyo served as the rapporteur, explains that “in order to combat the inflationary context in housing and protect tenants, the legislator may limit the annual update of rent for residential tenancy contracts, so that, in the absence of an agreement between the parties, it cannot exceed certain reasonable and reasoned limits”.

It indicates that for the guarantee of Article 33.3 of the Constitution to apply, a singular deprivation characteristic of any expropriation must occur, that is, the hollowing out or ablation of a right or interest. According to Constitutional Court doctrine, this singular deprivation is different from “legal measures that generally delimit or regulate the content of a right, provided they respect its essential core.”