Short-Term Rental Agreement: What It Is, Types, and How It Works

The short-term rental agreement is an essential legal tool for landlords and tenants in Spain. It provides a practical solution that allows parties to reach agreements without long-term commitments. However, not everyone fully understands its importance and implications.

For this reason, this article outlines the key aspects you should understand to make the most of its advantages. If you are looking for a flexible option that adapts to a variety of situations, this type of agreement may be ideal, especially if you plan to rent your property to tourists, for example.

In fact, having short-term rental options can be highly beneficial for both landlords and tenants. However, this flexibility also involves certain considerations and challenges, which we will explain here. Understanding these fundamentals can help prevent potential issues in the future.

What is a short-term rental agreement?

If you wish to enter into a short-term rental agreement, it is important to understand what it entails. It is a legal agreement between a landlord and a tenant that defines the conditions under which a property will be rented for a limited period of time.

Unlike standard rental agreements, this type of contract has a more limited and defined duration, typically not exceeding one year and often lasting up to five months. For this reason, it is commonly used to meet the specific needs of tenants who do not wish to commit to a long-term lease.

For this reason, this type of agreement is often the ideal solution for the situations outlined below:

• University students who need an apartment for a semester.
• Professionals who need to temporarily relocate to another city for work.
• Tourists seeking comfortable accommodations for extended vacations.

However, regardless of the specific circumstances, the defining features of this type of agreement are its limited duration and the specific clauses that govern it.

How do short-term rentals work?

Like all legal agreements, a short-term rental contract begins with drafting a document that clearly outlines all the key terms. These include the duration, rental amount, rights and responsibilities of both parties, security deposits, and applicable conditions.

If you are unfamiliar with the key elements to consider when drafting this type of agreement, we explain them below:

• Fixed term. Unlike a traditional lease, this type of agreement has a clearly defined end date.
• Specific clauses. This is not only important for standard leases; short-term agreements should also include provisions regarding the use of the property, renewal options, and penalties in case of non-compliance.
• Deposits and guarantees. A security deposit is generally required to cover potential damages or breaches of the agreement.

In addition, it is essential to review the Urban Lease Law (LAU), with emphasis on Title III. This section outlines the regulations governing rental agreements, including short-term leases. It also defines the rights and obligations of the parties involved in the contract.

What are its benefits?

A short-term rental agreement offers many advantages, but its primary benefit isflexibility. It allows you to rent out your property for a defined period and specific purpose, giving you greater control without committing to a longer-term arrangement than desired.

Another benefit is the potential for increased profitability. In certain locations, such as Barcelona, short-term rentals may not be subject to the annual 2% rent update cap that applies to some long-term leases. As a result, these agreements may fall under different regulatory frameworks, depending on local legislation.

Last but not least, these agreements allow for greater customization. With this type of contract, you have more flexibility to tailor the clauses to your specific needs. You may also include additional services or furnished arrangements to enhance comfort.

Types of short-term rental agreements

Nowadays, there are several types of short-term rental agreements designed to accommodate different durations and purposes. Below, we explain the main options:

• Daily or weekly rentals. These are ideal for individuals who need accommodation for short periods, such as during trips or vacations.
• Monthly rentals. These are an excellent option for individuals working on temporary projects or those who need a flexible leasing arrangement.
• Seasonal rentals. These are a good option for individuals who need accommodation during specific times of the year.

As you can see, there are different types of short-term rental agreements to suit various needs. The key is determining which one best fits your situation.

Differences between a short-term rental agreement and a vacation rental agreement

The differences between these types of agreements are quite straightforward. A short-term rental agreement is designed to meet a tenant’s needs for  a specific period of time; and typically cannot exceed eleven months in duration

On the other hand, a vacation rental agreement typically has a shorter duration and is generally limited to a few weeks. In some cases, these properties may include additional services similar to those offered in the hospitality sector. This type of rental usually has a maximum duration of 31 days and is intended solely for tourism purposes.

Key elements of a short-term rental agreement

The key elements of these types of agreements may vary depending on the applicable legislation. However, the three primary components are generally as follows:

• Contract Duration. You must clearly specify the period during which the rental will be valid, keeping in mind that the maximum term is generally eleven months for a short-term agreement. The duration must be well defined, as it cannot be an ambiguous arrangement.
• Price and Payment Terms. This type of agreement must clearly state the total rental amount and the payment method. Be sure to include payment deadlines and any applicable conditions.
• Use of the Property. It is essential to specify the purpose of the rental, as regulations may vary depending on the circumstances and the duration of use.

Clarifying these key points is essential to avoid misunderstandings in the future. It also ensures that both parties comply with the agreed-upon terms.

Short-Term Rental Agreement Template

If you need to review a short-term rental agreement template, many examples are available online. However, it is advisable to consult with your real estate agent, who can guide you through the process.

We invite you to read our articles: room rental agreement, how to draft a rental agreement, and renting without a contract or receipts.

How long can a short-term rental agreement last?

To be considered a short-term rental agreement, the contract generally must not exceed eleven months. If it does, it may be classified as a standard residential lease and must comply with the corresponding legal requirements. Additionally, depending on the jurisdiction, the minimum rental period may be fifteen or thirty days.

How many times can it be extended?

The agreement may be extended if both parties reach a mutual agreement.However, any modifications to the contract must be made in writing, and the temporary nature of the rental must be clearly justified. It should also be expressly stated that the property is not the tenant’s primary residence.

How and when can the contract be terminated?

Firstly, it is always advisable to check the local regulations applicable in your region to understand the terms of cancellation. However, tenants generally have two options, which we will explain below:

• The first option is to vacate the property when the contract ends.
• Alternatively, if necessary, an early termination may be arranged in accordance with the terms agreed upon in the contract.

Regardless of your decision, you should always have a clearly detailed contractin place. This helps prevent misunderstandings and ensures that the rights and obligations of both parties are properly upheld.

How are short-term rentals reported for tax purposes?

If you are the owner of a property rented on a short-term basis, you are required to declare all of the net income received during the year for tax purposes. Be sure to report this to the appropriate tax authorities. If you need assistance, do not hesitate to consult your real estate agent or a tax professional.

The type of contract you were looking for

A short-term rental agreement is a great tool that benefits both property owners and tenants. However, like any legal arrangement, it requires careful attention to detail and a clear understanding of its terms to ensure it is truly beneficial for all parties involved. Whether for a vacation stay or a temporary project, short-term rentals are becoming increasingly popular.

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