The Civil and Criminal Court Number 2 of Parla (Madrid), in its groundbreaking Judgment 188/2024, dated September 25th, declared null and void the following clause in a residential lease agreement: “On this day, arent guarantee insurance policy is subscribed to ensure the payment of rent and other obligations derived from this contract, with a monthly premium of TEN EUROS AND FIFTY-FIVE CENTS (€10.55). THE TENANT agrees to cover the cost of the premium for said insurance.”
In this case, the key lies in the fact that the landlord was a leasing company, legally classified as a large-scale landlord, and the tenant was an individual who rented the property to fulfill their housing need.
For this reason, the judgment jointly applies the Urban Leases Act and the Consumer Protection Act. The Court decisively ruled that, despite Section 36.5 of the Urban Leases Act allow the parties to agree on any type of guarantee for the tenant’s fulfillment of their rental obligations, in addition to the cash deposit, “this clause infringes upon rights clearly stated by the law, because it imposes on the tenant the obligation to pay for an insurance premium subscribed by the landlord, which exclusively benefits the landlord’s risk, thereby breaking he fair balance and proportionality between the rights and obligations of the parties in a contractual relationship.”
As a result, the Court declared the clause null and void and ordered the leasing company to reimburse the tenant for all amounts paid toward the non-payment insurance during the contract’s validity, with legal interest accruing from the time the payments were improperly made.
The judgment has been described as groundbreaking, with many speculating that it could pave the way for new judicial standards and perhaps legislative reforms aimed at curbing abuses in the rental market. In any case, the judge’s reasoning is remarkably strong, particularly for highlighting the full applicability of the Consumer Protection Act when the rental relationship is established between a leasing company qualified as a “large-scale landlord” and an individual who enters the lease agreement to satisfy a primary need, such as securing housing.
