Which expenses are paid by the tenant and which by the new owner

Legal framework for the allocation of rental expenses

Spanish legislation grants a degree of flexibility to the parties' freedom of contract, although it sets strict limits focused on property habitability and the obligations inherent in legal ownership. Generally speaking, the law distinguishes between costs arising from the ordinary occupation and use of the property and taxes or obligations tied to the ownership of the asset.

When an investor acquires a property that already has a tenant, the new purchaser steps into the contractual position of the former landlord. This means assuming all rights and obligations stipulated in the existing agreement, unless the parties agree to terminate or formally novate the contract prior to the transaction.

Which expenses are paid by the tenant under current regulations

To avoid disputes during the tenancy, it is essential to know precisely which expenses are paid by the tenant, whether mandatory or established by market practice. As a general rule, the tenant must pay for all costs linked to their personal consumption and the ordinary wear and tear caused by daily living:

• Individually metered utilities: Electricity, natural gas, mains water, telecommunications and individual heating costs are the responsibility of the tenant. It is recommended to formally transfer the account ownership with the utility companies rather than simply altering the direct debit details. In this way, liability for missed payments or service disconnections falls directly on the actual user.
• Minor repairs due to ordinary use: Under Article 21.4 of the LAU, minor repairs required due to normal daily wear and tear are the tenant's responsibility. This includes tasks such as replacing light bulbs or tubes, changing tap washers, repairing minor blind mechanisms, or performing basic maintenance on ceramic fixtures and fittings.
• Damage caused by negligence or misuse: Should a breakdown, breakage or deterioration occur as a result of negligent behaviour or misuse by the occupants, the full cost of repair or replacement must be met by the tenant.
• Municipal waste collection fee (subject to contract): Payment of the municipal waste collection tax depends on local council tax bylaws and what has been formally agreed. Since it is a service directly associated with occupying the property and generating waste, it is usually borne by the tenant, provided this condition is explicitly stated in the terms of the agreement.
• Statutory deposit and additional guarantees: Upon signing the agreement, the tenant must provide an amount equivalent to one month's rent as a statutory deposit, along with any additional contractual guarantees agreed upon, without exceeding applicable statutory caps.

Which expenses are assumed by the new owner after the transfer

Upon becoming the new title holder, the purchaser of the property assumes the structural obligations, property taxes and community service charges required to maintain the asset in optimal condition:

• Property tax (IBI): This municipal tax levies property ownership. Although the law permits agreeing to pass this cost on to the tenant if the annual amount is specified in the contract, standard market practice and investment transactions dictate that the owner pays this expense directly.
• Ordinary community fees: Maintenance costs for communal areas, lifts, concierge services, shared lighting and cleaning are the landlord's responsibility, unless the contract expressly states otherwise and details the annual amount.
• Extraordinary community levies: These are always the responsibility of the owner. Legislation prohibits passing on to the tenant extraordinary levies approved by the homeowners' association for structural repairs, facade renovations, removal of architectural barriers or roof repairs.
• Essential repairs for habitability: In accordance with Article 21.1 of the LAU, the landlord is obliged to carry out all works and repairs necessary to maintain the home in suitable living conditions, without any right to increase the rent. This includes the repair or replacement of heating systems, boilers, electrical installations, plumbing, or major breakdowns in essential appliances not caused by misuse.
• Building insurance: It is the new owner's responsibility to keep the structure of the property insured and to hold public liability coverage for potential damage to third parties caused by structural defects or fixed installations.

Specific rules in the Comunidad de Madrid for protected housing

Specifically within the Comunidad de Madrid, special rules apply when a transaction involves social or subsidised housing subject to a public protection scheme (VPO or VPP). For these properties, both the maximum sale price and maximum rental price are capped by regional government scales.

When protected housing located in the Comunidad de Madrid is let or forms part of a sale-and-leaseback agreement, passing on costs such as community fees or IBI cannot exceed the established regulatory limits. Passing on amounts above the official thresholds breaches regional housing regulations in the Comunidad de Madrid and can lead to the invalidation of contractual clauses or the imposition of administrative fines.

Expense division in sale with guaranteed rent transactions

An increasingly prominent option in the real estate investment market is structuring transactions where the owner transfers title of their property to an investor while remaining as a tenant, or where a property is acquired under a fully guaranteed rental model from day one.

In a sale-and-leaseback or guaranteed rent arrangement, establishing a clear division of costs is crucial for the financial peace of mind of both parties. Sellers who transfer ownership gain immediate liquidity and become tenants, freeing themselves from the expenses inherent in property ownership:

• The new investor or buyer assumes payment of IBI, community fees, extraordinary levies and the replacement of faulty structural installations.
• The seller, now a tenant, limits their financial commitment solely to paying the agreed rent, their own utility consumption and routine day-to-day maintenance.

This system provides budgetary predictability for the tenant while assuring the investor that the asset will be properly cared for by an occupant who knows the property intimately.

Difference between tenancy costs and purchase costs

It is important to distinguish recurring tenancy agreement costs from the initial outlay required for a real estate property transfer.

Costs borne by the buyer

The buyer must pay notary fees for issuing the public deed, Land Registry registration fees, administrative agency fees (gestoría) and relevant indirect taxes (Property Transfer Tax for pre-owned properties or VAT plus Stamp Duty for new builds).

Costs borne by the seller

The seller must pay the municipal capital gains tax (plusvalía municipal) and declare any capital gain or loss in their personal income tax return (IRPF).

Procedure for managing utility and contract transfers

To avoid conflicts when formalising the change of ownership and the commencement or continuation of the tenancy, it is advisable to follow an orderly protocol for managing daily expenses:

1. Meter readings: On the exact date of notary signing or the effective start date of the tenancy agreement, it is recommended to take water, gas and electricity meter readings to apportion prior consumption accurately.
2. Transfer of utility accounts: The tenant should be named as the direct account holder with utility suppliers, insulating the new owner from potential utility arrears.
3. Periodic contract review: Clauses concerning rent adjustments and tax allocations should be reviewed annually in accordance with statutory provisions and as agreed between the parties.

Legal certainty and rigour in contract drafting

The key to preventing disputes over cost allocations lies in thorough, precise contract drafting that fully complies with applicable law. Omitting details regarding who pays specific taxes or community charges often leads to conflicting interpretations over the life of the tenancy.

In complex real estate restructuring transactions, seeking advice backed by entities registered with the Official Register of Real Estate Intermediaries of the Banco de España (with ICI code D-286) and internationally recognised with awards such as the Sky Law European Legal Awards between 2023 and 2025 ensures that every contractual point meets the highest standards of transparency and legality.

If you wish to maximise the value of your property, release equity without moving home, or invest securely in structured tenanted real estate, we invite you to find out more about the benefits of our sale with guaranteed rent solution.