Reparations in lieu of rent

AGAUR (Catalan Government)

“Reparation in lieu of rent” is a modality of access to rented housing that replaces the tenant’s obligation to pay the rent in money with a commitment to renovate or reform the leased home. As of 2013, through Law 4/2013, on measures to add flexibility to and promote the housing rental market,  this possibility was included within the framework of the Law of Urban Leases (LAU according to its Spanish acronym) of 1994. This same modality was already in use in practice, subject to the regulations of the Civil Code and other legal provisions, such as and the Catalonian concept of masoveria urbana (performing work or maintenance in lieu of rent), provided by Law 18/2007, on the right to housing in Catalonia.

Notwithstanding the above, this new modality in the LAU poses problems in terms of its compatibility with some other precepts, given that it is a law that is essentially intended for leases in which the rent is paid in money.

The payment of rent through renovations or reformations can be classified as one of the so-called  ad meliorandum types of lease, these being leases where the main contribution by the tenant consists of performing improvements and repairs on the property.

This modality was originally excluded from special legislation on urban leases (from the Royal Decree of 21 June 1920 until the LAU of 1964) given the existence of a mandatory lease extension in favour of the tenant that it established and the fact that, maintaining the parties’ contractual obligations, it led to a lack of reciprocity in their obligations during the time period between the end of the renovation work and the extension of the contract.

However, this mandatory lease extension was eliminated from the LAU of 1964 by Royal Decree-law 2/1985, on Measures for Economic Policy, meaning that the main reason that the idea of renovation as rent payment was understood to be contrary to the special legislation on urban leases was suddenly nullified.

The objective of the research is to study the suitability of renovation as rent payment within the scope of the LAU of 1994, in terms of aspects like establishing the mandatory deposit, its compatibility with the right to terminate the lease on the part of the lessor in cases provided for by article 9.3 of the LAU, the tenant’s right to desist after the sixth month (art. 11 of the LAU), and the possibility to resolve the contract through the eviction procedure provided in article 250.1 of Law 1/2000, on Civil Legal Procedure, etc.