It is rare for a landlord to require their tenant to pay the Real Estate Tax, the IBI, but this practice has become increasingly common in Spain's wild housing market. It is becoming widespread to such an extent that the Community of Madrid has included it in its flagship “affordable rental” program, Plan Vive, which allows participating companies to pass on to tenants the bill for that municipal tax that taxes owners. However, a Supreme Court ruling from November last year declared these types of charges illegal in a similar case that affected Aragonese tenants of public housing promoted by the real estate company Lazora, one of the largest landlords in the country. This precedent calls into question the legality of the Madrid case, according to the Madrid PSOE and the Organization of Consumers and Users (OCU). Left-wing parties are organizing to prevent this practice from continuing in the community.
The mayor of Alcorcón, Candelaria Testa (PSOE), has led the opposition to the payment of the IBI. She has met with the tenants of her municipality and is going to take a vote to the plenary session at the end of the month to ask the Community to withdraw these charges. She has also requested an urgent meeting with the Housing Minister, Jorge Rodrigo, which has not been attended to so far. Rodrigo recommended to Testa on Friday in an interview with the Servimedia agency that he lower this local tax "because it is one of the municipalities that has the highest IBI in our region."
Testa responds to this newspaper that they are not going to take that measure. “What worries the Alcorcón City Council is that the law is complied with and defending some neighbors to whom the Community of Madrid wants to pass on a payment that does not correspond to them, since the IBI must be paid by the owner of the home, not the tenants who rent it.”
The Housing Department of the Community of Madrid tells this newspaper, through a spokesperson, that the ruling is not applicable to its Vive Plan because the Supreme Court refers to “officially protected housing (VPO)”, a term that, They say, it does not correspond to these properties. The specifications and feasibility studies of Plan Vive speak of public housing with a limited or basic price. To try to highlight the difference, the spokesperson refers to the type of contract the Community has with the companies: “The Vive Plan builds housing under public concession on land in supra-municipal networks,” she says. That is, a transfer of public land. And the result of that contract is public housing with a protected price.
Jurists consulted indicate that the Supreme Court's ruling is applicable because VPO is an umbrella label that is used in Spanish legislation for public housing with a protected price, as is this case. It is the term used by the Urban Leases Law, the 1994 rule that the Supreme Court cites to prohibit public housing tenants from paying the IBI.
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“It seems to us that they are hiding behind the name,” says the OCU spokesperson, Enrique García, who adds that after this ruling, this impact of the IBI in Madrid “must be considered illegal.”
The spokesperson for the Ministry adds that the state regulation that regulates the IBI, the Local Treasury Law, does allow this tax to be passed on, in its article 63.2. The Supreme Court does not refer to that rule and bases its ruling on that other state law, the Urban Leases Law, which prohibits this transfer of the tax to public housing tenants. In addition, the contracts, specifications and technical feasibility studies say that the rental of the Plan Vive apartments will be governed by the Urban Leasing Law. Sources from Culmia, one of the first awarded companies, respond that they are unaware of the ruling and that this transfer of the IBI payment is contemplated in the specifications designed by the Community.
A possible declaration of illegality could shake Plan Vive, a program that the Government of Isabel Díaz Ayuso launched after coming to power in 2019. The deadlines to request the first homes opened last year and in March the first keys, in Alcorcón. Ayuso initially announced that she would build 25,000 homes throughout the region in eight years, but for now she has only awarded 6,500 and some lots put out to bid have remained deserted.
To find new investors, the Community offers companies free public land and the promise of sufficient profitability. The companies assume the entire cost of construction in exchange for exploiting the rents for 50, 65 or 70 years, depending on the case. That is where the IBI represents an incentive that could disappear. Sources from the construction sector confirm the attractiveness of transferring the payment of this tax, a common practice in affordable rental projects that administrations throughout Spain are carrying out together with the private sector. “The decision to invest is usually based on the possibility of passing on these costs,” they say.
For tenants, stopping paying this tax would mean a slight relief. It would bring their rents somewhat closer to Ayuso's promise of “affordable rentals” with prices “up to 40% cheaper.” As this newspaper has reported, the Plan Vive rents are similar to market prices and in some cases Idealista offers ads up to 28% cheaper. The IBI now represents an average of 6.4% of total income (between 26 and 76 euros per month, although after three years it will double and will cost between 48 and 152 euros).
“Landlord obligations and tenant rights”
The Supreme Court concluded, in its ruling of November 6, that two individuals can freely agree that the IBI be paid by the tenant, but that agreement is prohibited in the case of officially protected housing, according to the interpretation it made of the Additional Provision First of the Urban Leases Law. The magistrates of the third contentious-administrative chamber said that this state law does not contemplate the transfer of the IBI in officially protected housing due to the social function of this type of property, “aimed at facilitating and promoting access for citizens with “less resources for decent housing.” The Supreme Court ruled after an appeal by Lazora against a ruling by the Superior Court of Justice of Aragon that had also ruled in favor of the tenants.
Lawyer Pedro Torres, who has written about the Supreme Court's ruling, believes that Plan Vive tenants would have a good chance of judicial success if they appeal against the payment of the IBI: "The ideal is that they continue paying and at the same time complain."
Más Madrid will bring to the Madrid Assembly an initiative “so that it is the rental management fund that assumes these costs [the IBI]”, as confirmed this Tuesday by the regional spokesperson Manuela Bergerot in a visit to the first urbanization delivered, in Alcorcón. Más Madrid remembers that the Community exempted the tenants of the Madrid Social Housing Agency from paying IBI.
In the specifications and technical feasibility studies of the Vive Plan, published in 2020, the Community of Madrid authorized companies to pass on the IBI to tenants, garbage rates and other municipal taxes and considered this income as part of the income that the concessionaires would receive. In the case of lot three of the first award, in 2021 - the one that is most advanced and of which two deliveries of urbanizations have already been made - they calculated that the IBI would represent 6.4% of the income; community services, 14.3%; and rents, 79.3%.
When it came time to sign the contract, the tenants were presented with an estimated figure of what the IBI would cost them each month. At the moment, the tenants of the 274 apartments delivered in Alcorcón will pay between 28 and 55 euros in IBI each month, depending on the size and other characteristics of the home. In Tres Cantos they will pay between 44 and 76 euros; in San Sebastián de los Reyes, between 36 and 57 euros; in Getafe, between 35 and 64 euros and in Alcalá de Henares, from 26 to 62 euros.
Officially protected housing, such as Plan Vive, is entitled to a bonus of 50% of the IBI during the first three years after the construction of the projects. This explains that after this period, tenants have to pay double.
This impact of the IBI on the tenant is not an exclusive practice in the Community of Madrid. For example, the Valencian Community, through the Valencian Housing and Land Entity, authorized passing on “taxes” to the tenants of the public-private collaboration line apartments of Plan 2400 for public protected housing 2021-2026.
In the Vive Plan, the first to pay this tribute have been the 274 tenants of the two urbanizations already completed in Alcorcón. “We have landlord obligations and tenant rights,” complains Miguel, a resident of the first development. He reviews his accounts: in addition to paying 772 euros in rent, each month he must also pay 49 euros in tax on a home that is not his.
Write to the authors at
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