Renting implies a lower economic effort compared to buying a home, but it also requires a certain sum of savings to cover the initial expenses, which can amount to several thousand euros.
Renting gives you greater flexibility than buying,and requires less initial investment, however it means relinquishing to some rights too.
The financial costs involved in renting a property will vary on each individual case depending whether the owner asks for a guarantor, extra guarantees or payment of an insurance.
The following points are the most important:
First month’s payment
The first expense we will have after signing the rent contract is the payment of the first month.
Deposit
The purpose of the deposit is to cover any expenses that may occur due to tenant’s neglect of the property or unpaid rent. It is mandatory by law and is equivalent to the amount of one month’s rent. The landlord must put your deposit in a government-backed tenancy deposit scheme. Although the deposit can be recovered at the end of the tenancy period,you must make the down payment in advance.
Additional guarantees
The Spanish law for urban rent (LAU: Ley de Arrendamientos Urbanos) allows the landlord and the tenant to agree on the payment of any additional guarantees to ensure the observance of the tenant’s obligations. Some landlords require a down payment of several months’ rent on account of this additional guarantee.
Bank Guarantee
Sometimes landlords require the constitution of a bank guarantee by the tenant to prevent non-payment of rent. In many cases, when the financial institution considers that the tenant’s solvency is insufficient to "loan" the money that the collateral implies, it requests that this sum -which can be from six months to a year’s rent- is deposited in an account at the financial institution. While this money will also be recovered in time, it means having to supply a significant sum at the time of signing.
Agency fees
If the landlord has hired a state agent to find a tenant on their behalf, the fee charged by the agent will normally be paid by the tenant. This amount will be variable, but usually it is one month’s rent or 10% of the annuity plus the corresponding VAT.
Utility supplyactivation fees
When renting abrand-new property that has never been registered for utility supplies like water, electricity or gas, it must be agreed in the contract who pays the activation fee for these services. It is advisable to get this information about costs before signing the contract, as if you as a tenant must assume these costs, be aware that they can exceed 500 €.
Tax (ITP):
This tax is unknown by most tenants, but accordingly to current legislation it must be paid within a month of signing the contract. If it’s a habitual residence the tax is calculated at 0.5% of the total rent for 3 years’ contract.
Insurance
Some owners who fear to suffer loss, damage or unpaid rent in their property, decide to contract an insurance policy that covers these risks. In some cases, they also require that is the tenant who pays the insurance premium as an alternative or supplement to the guarantee or other guarantees. This is actually becoming increasingly popular as a clause in tenancy or lease agreements.
The move
Moving, whether you hire a professional company or you do it yourself, always involves an expense. For example, in cities like Madrid or Barcelona, hiring a removals company for moving the contents of an average flat will set you back around1,000 euros.
In conclusion, the initial expenses when renting a property as a regular residence will sum up to the amount corresponding to about four months’ rent: the current month, another corresponding to the deposit that the landlord will put at the government scheme, one as additional guarantee and finally the agency’s fee (if applicable). Remember that two of them, the deposit and the guarantee, are recovered at the end of the tenancy agreement. However, we must not forget the other concepts that have been previouslyexplained in the article.
