Long-term rentals on the Costa del Sol: contract, deposit and Spanish tenancy law

You own a two-bedroom apartment in Fuengirola and you have spent four summers renting it by the week. It has gone well: €18,000 gross last year, high occupancy from June to September, dead months from November to February. This year you are tired of midnight check-ins, laundry and reviews, and you are considering a long-term let at €1,100 a month. That is €13,200 gross, almost €5,000 less. In exchange, no management at all.

The maths looks simple until you read the small print. The contract you sign ties you in for five years, not one. The deposit is not yours to hold. And the tax relief you had in mind — that 60% everyone talks about — probably no longer applies to you: since 2024 the general rate dropped to 50%, and the higher brackets require a stressed-market declaration that Andalusia has not made.

This article sets out what you actually take home from a long-term let on the Costa del Sol, what Spain’s Urban Leases Act obliges you to do, what the tax will cost you under the new rules, and the cases where the numbers work and where they do not. With the figures next to each claim, not in the abstract.

Long-term, seasonal and holiday lets are three different contracts

The confusion starts with the name. On the coast «long-term rental» is used for things that are legally three separate figures, and everything else follows from which one you sign.

Figure	What it is	Duration	Governed by
Residential tenancy	The property is the tenant’s permanent home	Minimum 5 years (7 if the landlord is a company)	LAU, title II
Non-residential use	Seasonal: study, work, winter. The tenant’s home is elsewhere	As agreed, no compulsory renewal	LAU, title III
Tourist accommodation	Marketed through tourist channels, by the night	Short stays	Andalusian tourism rules

The difference between the first two is not decided by the heading on the contract: it is decided by actual use. A contract headed «seasonal let» but signed with a family who enrol their children in the local school is, in law, a residential tenancy with its five years attached. Courts look at the facts.

This matters a great deal on the Costa del Sol, where the September-to-June «seasonal let» has become the usual way of side-stepping compulsory renewal. It works when the tenant is genuine — a professional posted for a season, a northern European spending the winter — and it does not work when it is a permanent home in disguise. If you go down that road, the reason for the seasonality has to be written into the contract and has to be true.

If what you want is the yield comparison between letting by the week or by the year, it is set out in the article on holiday lets versus long-term rentals on the Costa del Sol. Here we go into the mechanics of the residential contract, which is the one that binds.

The five years you sign without noticing

This is what surprises owners coming from holiday lets. The Urban Leases Act says that if you agree a term shorter than five years, the contract renews compulsorily in yearly instalments until it reaches those five years. Seven if the landlord is a legal entity.

The obligation is one-sided and worth understanding properly:

• You cannot end it when the year you signed runs out. It renews, and that is that.
• The tenant can leave. After six months they may withdraw with thirty days’ notice.
• Once the five years are up, if neither party gives notice, a tacit extension of up to three further years kicks in, again in yearly instalments.
• The notice periods differ: four months if you are the one not renewing, two months if it is the tenant.

Added up, a «one-year» contract can become eight. That is the real commitment you are taking on, and it is the main reason the move from holiday letting to long-term letting is not easily undone.

The only way out: justified personal need

There is one exception and it is narrow. You may recover the property before the five years are up if you need it as a permanent home for yourself, a first-degree relative, or your spouse following divorce or annulment. Three conditions:

1. It must be stated expressly in the contract. If you did not put it in when signing, it does not exist.
2. At least the first year must have elapsed.
3. You must give two months’ notice and genuinely occupy the property.

If nobody moves in within three months of the tenant leaving, they can ask to return for the time remaining, with compensation for costs, or claim one month’s rent for each year outstanding. This is not a decorative clause: it is the only exit, and it has to be written on day one.

The deposit: one month, and you do not hold it

The deposit on a residential tenancy is one month’s rent and it is compulsory. It is not optional and cannot be negotiated down. On non-residential lets it is two months.

What almost nobody gets right: that deposit has to be lodged with the regional housing authority. It does not sit in your account. In Andalusia it is lodged with the regional housing administration, returned at the end of the tenancy, and failing to lodge it is a punishable breach.

There are two practical reasons to do it even when nobody is checking. The first is that the lodging receipt is your proof that the contract exists and on what terms. The second is that if you ever claim for damage and the deposit was never lodged, you start the process having breached the rules yourself.

Additional guarantees: up to two more months

On top of the legal deposit you may ask for additional guarantees — extra cash deposit, bank guarantee, rent-default insurance — but on contracts of up to five years (seven if you let as a company) the total is capped at two months’ rent, not counting the compulsory deposit.

In practice, for a €1,100 rent that means a maximum of €1,100 deposit plus €2,200 in additional guarantee. Asking for six months up front, as some listings on the coast aimed at foreigners still do, is outside the law.

What changed in the income tax, and why it affects you more than you think

For years the rule was simple: let a property as someone’s home, deduct 60% of the net income. Law 12/2023 on the right to housing replaced that single figure with a scale, applying to contracts signed on or after 1 January 2024.

Relief	When it applies	Reachable on the Costa del Sol?
90%	New contract in a stressed residential market zone, reducing the rent by at least 5% against the previous contract	No, while Andalusia declares no stressed zones
70%	Property brought to market in a stressed zone and let to tenants aged 18–35; or protected or incentivised affordable housing; or let to a public body or non-profit	Only through the public body or non-profit route
60%	The property was refurbished in the two years before signing	Yes, and it is the realistic route
50%	All other cases	Yes: it is the default

The uncomfortable conclusion: the average Costa del Sol owner signing a new contract today lands on 50%. The two upper brackets are tied to a stressed residential market declaration, which is a decision for each autonomous region, and Andalusia has not adopted one. The 70% for protected housing or letting to a social entity is real, but it does not describe the owner of a two-bedroom flat in Benalmádena.

Put another way: the reform presented as an incentive for long-term letting is, in Andalusia and for a private owner, a ten-point increase in the taxable base.

The 60% for refurbishment, which is the one you can actually aim for

If you have carried out work in the two years before signing, you get the 60% back. It is the only bracket a private owner on the coast reaches by their own decision, and it fits a very common situation: the apartment coming out of holiday letting that needs bringing up to standard before going long-term.

To count, it has to be documented: invoices with VAT, in your name, dated before the contract. The order matters: the work and its invoices first, the contract afterwards.

If you have a pre-2024 contract, think twice

Contracts signed before 1 January 2024 keep the previous regime. If you have a live one with a tenant who pays, ending it to sign a new one can cost you ten points of relief for the following five years. On net income of €10,000, that is €1,000 more in the taxable base each year.

What you can deduct before the relief

The relief does not apply to what you collect: it applies to net income, that is, rent less deductible expenses. Which makes the expenses count twice.

Expense	Deductible	Detail
IBI (council tax) and refuse charge	Yes	The share for the let period
Community of owners fees	Yes	Ordinary fees; improvement levies go through depreciation
Home and rent-default insurance	Yes	Premium for the let period
Mortgage interest	Yes	Interest only, never capital repayment
Repairs and maintenance	Yes	Painting, plumbing, replacing fittings
Improvement and extension	Not directly	Depreciated over the years
Building depreciation	Yes	3% of the higher of construction cost or the cadastral value of the building
Management and agency fees	Yes	Including letting commission
Utilities	Only if you pay them	If they are in the tenant’s name, no

Interest and repair costs share a limit: together they cannot push the income on that property below zero. The excess carries forward for four years.

The 3% depreciation is the most commonly forgotten deduction and usually the largest of all. On an apartment with a building value of €90,000, that is €2,700 a year coming off your income without leaving your pocket.

The full case, euro by euro

A two-bedroom, 68 m² apartment in Fuengirola, ten minutes’ walk from the beach. Bought in 2019 for €195,000, mortgage still running. Cadastral value of the building: €84,000. Let long-term at €1,150 a month, contract signed in 2026, no prior refurbishment. The figures are a constructed example, not a real transaction.

Item	Annual amount
Gross rent (€1,150 × 12)	€13,800
IBI	−€520
Community fees	−€1,080
Home + rent-default insurance	−€410
Mortgage interest	−€1,640
Repairs and maintenance	−€600
Depreciation (3% of €84,000)	−€2,520
Letting management	−€1,150
Net income	€5,880
50% relief	−€2,940
Taxable base	€2,940
Income tax at a 30% marginal rate	−€882
Actually in your pocket	≈ €8,800

The «in your pocket» figure is €13,800 less the costs that genuinely leave the account — everything except depreciation, which is an accounting entry — and less the tax.

With the 60% for refurbishment, the base would fall to €2,352 and the tax to €706: a difference of about €176 a year. Real, but smaller than people assume. The relief applies to net income, not to gross rent, and that is where it deflates.

Non-resident owners: a different calculation entirely

A large share of owners on this coast are not Spanish tax residents. In that case you do not pay IRPF but non-resident income tax, and the difference is considerable.

Tax residence	Rate	Deduct expenses?	50% relief?
Spain	IRPF scale	Yes	Yes
EU, Iceland, Norway	19%	Yes	No
Rest (UK, USA, Switzerland…)	24%	No	No

A British owner pays 24% on gross rent, with no deduction for community fees, council tax or interest. On €13,800 that comes to €3,312, against €882 for the resident in the earlier example. It is the least-discussed tax consequence of Brexit and the one that moves the most money.

Non-resident tax is also filed quarterly, not once a year. If this is your situation, the guide on selling a property on the Costa del Sol as a non-resident covers the other side of the same problem, including the 3% retention.

Does it beat holiday letting?

The same apartment under both regimes, with reasonable assumptions for the area.

	Long-term	Holiday let
Gross annual income	€13,800	€19,500
Platform commissions	—	−€2,900
Cleaning and laundry	—	−€2,600
Utilities (paid by the owner)	—	−€1,500
Common costs (IBI, community, insurance, interest)	−€3,650	−€3,650
Management	−€1,150	−€2,900
Before tax	€9,000	€5,950
50% relief available	Yes	No
Management hours per year	10–15	120–200
Default risk	Concentrated in one tenant	Spread
Commitment	5 years	None

On these assumptions the long-term let wins, and it wins for two reasons that never appear in the gross-income headline: holiday letting gets no tax relief, and its variable costs eat between 35% and 45% of turnover.

But the assumptions are the whole point, and there are three situations where it flips:

• Beachfront in Marbella or Estepona, where July and August rates are four times the equivalent monthly rent. There the holiday let wins even after commissions.
• Self-management and time available. Save the 20%–25% management fee and value your own hours at zero, and holiday letting improves considerably.
• You plan to sell within two or three years. A tenant on a five-year contract does not prevent a sale, but it shrinks the buyer pool: anyone wanting to move in rules the property out.

If your case is the first, check what the tourist licence on the Costa del Sol now requires before deciding, because the rules have tightened and not every community of owners still allows it.

Seven mistakes that cost money

1. Not lodging the deposit. It is a breach, and it leaves you badly placed if you ever claim for damage.
2. Labelling a permanent home as a «seasonal let». The contract does not decide: use does. If the tenant lives there, you have five years.
3. Forgetting the personal-need clause. If it is not written on signing day, you cannot recover the property before the five years.
4. Missing the four-month notice. A month late and you have another year of tenancy.
5. Not claiming building depreciation. It is the largest deductible expense and the one most often left unused.
6. Signing the contract before finishing the works. The 60% requires the refurbishment to come first. The order changes the percentage.
7. Assuming the old 60%. Since 2024 the default is 50%, and planning with the old figure throws the whole calculation out.

Step by step

1. Decide the figure — residential or seasonal — based on the actual use it will have, not on what suits you to write.
2. Do the works first if the property needs them, and keep the invoices with VAT in your name.
3. Set the rent from data on closed deals in your area, not from what the listings ask.
4. Screen the tenant: payslips, employment record, references. It is the decision that weighs most over the next five years.
5. Include the personal-need clause even if you cannot imagine needing it today.
6. Agree the rent review expressly. Without a written clause, the rent does not rise for five years.
7. Take a dated photographic inventory and annex it to the contract, signed by both parties.
8. Lodge the deposit and keep the receipt.
9. Take out rent-default insurance if the rent is a meaningful part of your income.
10. Diary the four-month notice date for every year of the tenancy.

Frequently asked questions

How long does a residential tenancy legally last in Spain?

Five years if the landlord is an individual and seven if it is a company, even where the contract states a shorter term. At each yearly expiry it renews compulsorily until that minimum is reached. Once the five years are up, if neither party gives notice, a tacit extension of up to three further years applies.

How many months’ deposit can a landlord ask for?

One month as the compulsory legal deposit, plus a maximum of two months in additional guarantees on contracts of up to five years. For a €1,100 rent, the combined ceiling is €3,300. Anything beyond that is not enforceable.

Does the 60% rental tax relief still exist in Spain?

Yes, but it is no longer the general case. For contracts signed on or after 1 January 2024, the 60% is reserved for properties refurbished in the two years before signing. The default rate became 50%. Contracts signed before that date keep the regime they were signed under.

Can I get the 90% relief on the Costa del Sol?

Not at present. The 90% requires the property to sit in a stressed residential market zone and the new rent to fall at least 5% against the previous contract. Declaring those zones is a matter for each autonomous region, and Andalusia has not done so. Without that declaration, the bracket does not apply.

What expenses can I deduct from rental income?

Council tax, community fees, insurance, mortgage interest, repairs and maintenance, management fees, and 3% depreciation on the higher of construction cost or the cadastral value of the building. Mortgage capital repayments and improvements are not deducted directly; improvements are depreciated separately.

Can I evict a tenant if I need the property myself?

Only if that possibility is expressly stated in the contract, at least the first year has passed, and you give two months’ notice. It must be for you, a first-degree relative, or your spouse after divorce or annulment. If nobody occupies it within three months, the tenant may return or claim compensation.

Can the tenant leave before the contract ends?

Yes. After six months they may withdraw with thirty days’ notice. If it was agreed in the contract, they owe you one month’s rent for each year outstanding, calculated proportionally for periods of less than a year.

How much tax does a foreign owner pay on rental income in Spain?

If resident in the EU, Iceland or Norway, 19% of net income, with expenses deductible but no 50% relief. If resident outside that group — the UK, the United States, Switzerland — 24% of gross rent with no deductions at all. It is filed quarterly.

Can I increase the rent every year?

Only if the review is expressly agreed in writing. Without that clause, the rent stays unchanged for the whole term. Where it is agreed, the statutory reference index applies and the increase is capped; it is worth checking which index is in force in the year of each review.

Should I switch my apartment from holiday letting to long-term?

It depends on location and on how you value your time. In second line and inland, long-term usually wins on net despite lower turnover, because there are no commissions or cleaning costs and there is tax relief. Beachfront in Marbella or Estepona, holiday letting keeps its edge. The five-year commitment is a separate factor to weigh.

Keep reading

• Holiday lets versus long-term rentals on the Costa del Sol, with the yield comparison by area.
• Tourist licence on the Costa del Sol: what is required and where it is no longer granted.
• How much is my house worth on the Costa del Sol and how market price is actually calculated.
• Appraisal, market valuation and cadastral value: which one you need and when.
• Selling as a non-resident: the 3% retention and capital gains.
• What it costs to sell your property on the Costa del Sol, if you decide to exit instead.

Sources and method

Terms, renewals, notice periods, deposits and additional guarantees come from Spain’s Law 29/1994 on Urban Leases as currently in force. The relief percentages and their effective date come from Law 12/2023 on the right to housing, which amended article 23 of Law 35/2006 on personal income tax. Non-resident rates come from the consolidated text of the non-resident income tax law.

The figures in the worked example and the comparison are a constructed example using ranges typical of the area, not a real transaction or a market average. Rents, commissions and management costs vary substantially between municipalities and between properties, and should be taken as an order of magnitude for structuring your own calculation.

The absence of declared stressed residential market zones in Andalusia refers to the position at the date this article was updated. It is a regional decision that can change, and worth checking before you sign.

This article is general information and does not replace advice from a lawyer or tax adviser for your specific case. Last updated: August 2026.