Rental Guarantees and Deposits in Spain: Legal Limits

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Finding a rental property in Spain has become a true obstacle course, where financial solvency is no longer proven just with a payslip, but with a display of guarantees that often borders on illegality. The shortage of supply and the fear of non-payment have led many landlords to demand disproportionate conditions, such as exorbitant bank guarantees, cash deposits equivalent to several months' rent, or abusive insurance policies. However, Spanish legislation, especially after the latest reforms to the Ley de Arrendamientos Urbanos (Urban Leases Act) and the approval of the Ley por el Derecho a la Vivienda (Law on the Right to Housing), establishes very clear boundaries to protect the tenant from potential abuses. In this article, we will analyze in depth the legal limits of bank guarantees and additional guarantees in rentals, how to calculate them exactly, and what mechanisms exist to defend your rights if you are asked for more than what is permitted by law.

The Legal Framework: What Do Spanish Regulations Say About Guarantees?

To understand the limits of what a landlord can demand when signing a residential lease agreement, we must look mainly to Law 29/1994, of November 24, on Urban Leases (LAU). This law has undergone various amendments over the years, one of the most relevant being introduced by Royal Decree-Law 7/2019, which drastically limited the additional guarantees that could be requested from the tenant. Likewise, Law 12/2023, of May 24, on the Right to Housing, has consolidated this protective framework, especially regarding real estate management fees and contract formalization costs.

The core of the regulation on guarantees is found in Article 36 of the LAU, which clearly distinguishes between two concepts that are often confused: the legal deposit and additional guarantees.

1. The Mandatory Legal Deposit (Fianza)

The fianza (security deposit) is a mandatory cash deposit that the tenant must hand over to the landlord at the time of signing the contract. Its main purpose is to guarantee that the property will be returned in the same state of conservation in which it was delivered and to cover potential damages.

• According to Article 36.1 of the LAU, in residential leases, the fianza must obligatorily be one month's rent.
• In leases for use other than residential (such as commercial premises or seasonal rentals), the mandatory fianza is two months' rent.

2. Additional Guarantees (Garantías Adicionales) and Their Strict Limits

Additional guarantees are any other protective measures that the landlord requests to cover the risk of non-payment of rent (bank guarantees, additional cash deposits, personal guarantors, etc.). This is where the law puts on a very clear handbrake to prevent abuse.

According to Article 36.5 of the LAU, in residential lease contracts of up to five years in duration (or up to seven years if the landlord is a legal entity/company), the value of these additional guarantees cannot exceed two months' rent.

This means that, combining the legal fianza and the additional guarantees, the landlord cannot withhold as a deposit or demand in bank guarantees an equivalent exceeding three months' rent in total (1 month of mandatory fianza + a maximum of 2 months of additional guarantee).

Types of Permitted Additional Guarantees and Their Particulars

Although the quantitative limit is two months' rent, this limit can be covered through different financial or legal instruments. It is essential to know how each of them works:

The Cash Deposit (Depósito en Garantía)

This is the simplest formula. The tenant hands over to the landlord an amount of money in cash (additional to the fianza) which remains in the landlord's hands during the term of the contract. At the end of the rental, if there are no debts or damages exceeding the ordinary fianza, this deposit must be returned in full. The maximum limit for this deposit is two months' rent.

The Bank Guarantee (Aval Bancario)

The aval bancario (bank guarantee) is a commitment by which a financial institution obliges itself to pay the landlord an amount of money in the event that the tenant defaults on the rental payment.

• The cost for the tenant: The bank usually charges an opening fee, a quarterly maintenance commission (which typically ranges between 0.5% and 2% of the guaranteed amount), and, generally, requires the tenant to have that amount of money "pledged" (blocked) in a current account.
• The legal limit: The maximum amount for which this bank guarantee can be issued for a primary residence contract is two months' rent. A guarantee for "six months' rent" cannot be demanded if the contract is subject to the legal extension of five or seven years.

The Personal Guarantor (Avalista or Fiador Personal Solidario)

This is one of the few exceptions where the two-month limit does not apply strictly in the same way. A personal guarantor is a third party (usually a direct or indirect relative of the tenant) who signs the contract, committing to respond with all their present and future assets for the tenant's debts. Since it is a commitment by signature and not a delivery of cash or a quantified bank guarantee, case law understands that the figure of the joint personal guarantor is perfectly valid and is not subject to the two-month limit, as it does not entail an immediate retention of liquidity for the tenant, but rather a general guarantee of solvency based on *Article 1911 of the Código Civil (Civil Code)* (universal asset liability).

Rental Default Insurance (Seguro de Impago de Alquiler)

It is increasingly common for landlords to take out insurance to cover unpaid rent. The 2023 Law on the Right to Housing introduced a very important change in this regard: real estate management fees and contract formalization costs will always be borne by the landlord. If the landlord wishes to take out rental default insurance for their own peace of mind, the cost of the premium must be assumed by them. If this cost is obligatorily passed on to the tenant as a condition for renting, it could be considered a fraud of law if it indirectly exceeds the economic limits of Article 36.5 of the LAU.

Practical Examples: Calculating the Real Limits

To avoid confusion, let's look at two very common practical scenarios in the current Spanish real estate market.

Example 1: Renting from a Private Landlord

• Tenant: María.
• Landlord: Juan (a private individual renting out his second apartment).
• Agreed monthly rent: €1,000.
• Contract duration: 5 years (primary residence).

Upon signing the contract, Juan asks María for:

1. The month of legal fianza: €1,000 (Mandatory by law).
2. An additional cash deposit of €2,000 (Equivalent to two months' rent).

Is this scenario legal? Yes. The sum of the additional guarantees (the €2,000 deposit) does not exceed the limit of two months' rent established by Article 36.5 of the LAU. In total, María will pay €3,000 in guarantees at the start of the contract. If Juan had asked her, in addition to those €2,000, for a bank guarantee of another €1,000, the transaction would be illegal for exceeding the maximum permitted limit.

Example 2: Rental with a Bank Guarantee Demanded by a Property Development Company

• Tenant: Carlos.
• Landlord: A property management company (legal entity).
• Agreed monthly rent: €1,200.
• Contract duration: 7 years.

The company demands from Carlos to hand over the keys:

1. The month of legal fianza: €1,200.
2. A bank guarantee of €3,600 (equivalent to three months' rent).

Is this scenario legal? No. Since this is a residential lease contract with a duration of up to seven years (the minimum legal term when the landlord is a legal entity), the additional guarantee that can be demanded from Carlos cannot exceed two months' rent (meaning a maximum of €2,400 in a bank guarantee). Demanding a guarantee of €3,600 is null and void by law for contravening Article 36.5 of the LAU. Carlos could demand the reduction of the guarantee to a maximum of €2,400.

Practical Step-by-Step Steps to Formalize Guarantees

If you are going to sign a rental contract, it is essential that you follow these steps to ensure that both the fianza and the additional guarantees are processed in accordance with current legislation in Spain:

1. Review the draft contract: Before making any payment, request the draft of the lease agreement. Check that the fianza and additional guarantees are clearly broken down and that their combined amounts do not exceed the limits of one month (fianza) and two months (additional guarantee).
2. *Demand the deposit of the legal fianza in the regional body: The landlord has a legal obligation to deposit the month's fianza (the first month paid) with the competent body of their Comunidad Autónoma* (Autonomous Community) (for example, IVIMA in Madrid, Incasòl in Catalonia, or AVRA in Andalusia) within the established period (usually 15 to 30 days from signing). Always demand proof of this deposit, as you will need it to deduct your rent on your tax return and it guarantees that the money is protected.
3. Custody of additional guarantees: Unlike the legal fianza, additional guarantees (the two extra months in cash, if this route is chosen) are not deposited with the regional body; they remain under the custody of the landlord. It is vital that the contract expressly records the receipt of said amount and the obligation to return it at the end of the contract.
4. Formalization of the bank guarantee (if applicable): If a bank guarantee is agreed upon, you must go to your financial institution with the draft contract. The bank will draft the guarantee document. Make sure the guarantee is "payable on first demand" (a primer requerimiento, which landlords usually demand) but that it contains an expiry date coinciding with the end of the rental contract or its extensions, so that it does not extend indefinitely, accruing bank fees.
5. Signing of the key handover and inventory document: Upon moving in, make a detailed photographic inventory of the state of the apartment and appliances. Attach it to the contract. This will prevent the landlord from trying to withhold the fianza or execute additional guarantees at the end of the rental by claiming damages that already existed.

Mistakes You Must Avoid

• Paying more than three months in advance as a guarantee: Do not accept demands that exceed the limit of *one month of fianza and two months of additional guarantee (in total, the equivalent of three months' rent*), regardless of how they try to disguise the payment (deposits, "reserve funds", etc.).
• Not demanding a written breakdown in the contract: Any money you hand over must be perfectly identified in the clauses of the contract. Never hand over cash without the landlord signing a receipt specifying clearly what amount corresponds to the first month's rent, what amount to the legal fianza, and what amount to the additional guarantee.
• Allowing the landlord to withhold guarantees indefinitely: The landlord has a period of one month from the return of the keys to return the legal fianza. For additional guarantees, their immediate return must be agreed upon after verifying that there are no outstanding utility bills (electricity, water, gas) or damage to the property.
• Accepting contracts where the tenant pays the agency fees: Following the entry into force of the 2023 Law on the Right to Housing, real estate agency fees for primary residence rentals are always borne by the landlord, so they cannot demand this payment from you as a "holding deposit" or management fee.

Frequently Asked Questions (FAQ)

Can guarantees higher than two months be agreed upon if both parties agree?

No. Article 6 of the LAU establishes that contractual clauses that modify the rules of the law itself to the detriment of the tenant are null and void, unless the regulation itself expressly authorizes it. Since the limit of Article 36.5 is a mandatory rule to protect the tenant, any agreement that exceeds two months of additional guarantee is null, even if the tenant signed it voluntarily.

What happens if the landlord refuses to return the fianza or additional guarantee at the end of the contract?

If one month has passed since the keys were returned and the landlord has not returned the corresponding amounts or documented damages to the property or outstanding debts, the tenant has the right to claim judicially. If the amount claimed is less than €2,000, a verbal trial (juicio verbal) claim can be filed in the courts of first instance without the need for a lawyer or court representative (procurador). Furthermore, the fianza will accrue the legal interest on money from the end of said month.

Does the limit of two months of guarantee also apply to seasonal rentals or commercial premises?

No. The strict limit of two months of additional guarantee in Article 36.5 of the LAU applies exclusively to residential leases intended to satisfy the tenant's permanent housing need (primary residence). In contracts for use other than residential (commercial premises, offices, industrial warehouses) and in seasonal contracts (students, workers relocated for a few months), the principle of freedom of contract between the parties rules, meaning much higher guarantees can be demanded.

Can the landlord demand that a family member sign as a guarantor and also ask for a two-month cash deposit?

Yes. As mentioned earlier, the figure of the guarantor or joint personal guarantor does not fall within the quantitative limit of additional financial guarantees. Therefore, it is perfectly legal for the landlord to demand *one month of fianza, two months of additional cash deposit (the legal monetary limit), and, additionally, the signature of a personal guarantor* in the contract to guarantee payment in the event of tenant insolvency.

In Summary

• The legal fianza for primary residence rentals is mandatory and equals exactly one month's rent.
• Additional guarantees (cash deposits, bank guarantees, etc.) have a strict legal limit of two months' rent for contracts of up to five years (or seven years if the landlord is a company).
• In total, the maximum initial outlay that can be legally demanded from you as a deposit and guarantees cannot exceed three months' rent.
• Joint personal guarantors (family members) are valid and do not count toward the limit of additional financial guarantees.
• Real estate management and contract formalization fees are by law always paid by the landlord, never by the tenant.

General legal information, not personalised legal advice. For your specific situation, ask your question for free at AbogadoAI — answers grounded in Spanish law (BOE), in English.

This is general information, not legal advice. Verify on the BOE or consult a lawyer for your specific case.