Rental Contract Extension: Step-by-Step Guide 2026

In the current real estate market, understanding the different aspects surrounding rental agreements is essential for anyone in this situation, whether as a tenant or a landlord. One of the most relevant aspects is the extension of the rental contract, a legal tool that allows the parties to maintain the contractual relationship beyond the initially agreed period, that is, the automatic extension of the lease once its initial term has expired. Let's take an in-depth look at what this entails.

What is a lease extension?

A lease extension refers to the extension of the term of a previously established lease agreement. According to the Urban Lease Law (LAU) in Spain, rental agreements for primary residences have a minimum duration of five years (for individual landlords) or seven years (for corporate landlords). Once this period has expired, the agreement can be automatically extended if both parties agree, or this can be stipulated in advance in the agreement itself.

What is it for?

The extension of a rental agreement primarily serves to provide continuity in the relationship between landlord and tenant. For tenants, it allows them to enjoy the property for an additional period of time, providing security and stability in their place of residence. For landlords, the extension guarantees continuity of rental income, avoiding the risk of vacancies that could affect their profitability.

Another fundamental function of the extension is the recognition of the rights of both parties. By formalizing an extension, it is reaffirmed that both parties agree to continue with the contract under the previously established or modified terms.

How does it work?

Extending a rental agreement does not require any special procedures, as it is automatically extended for an additional period. By law, this period is usually one year, with the possibility of further extensions if both parties agree.

Although not strictly mandatory, it is recommended that the extension be formalized in writing to avoid future disputes. This document must be signed by both parties and must include the new duration of the contract.

What is the difference between an extension and a renewal?

It is essential not to confuse an extension with a renewal of the lease agreement. The key differences are detailed below:

• Extension: This involves continuing the contract under the same terms and conditions as the original agreement. No new contract is required; the term of the existing contract is simply extended.
• Renewal: In this case, a new contract is created, which may include changes to the previous conditions, such as rent, duration, or any other clause modification. The renewal may be unilateral or by mutual agreement.

How long does a lease extension last?

In Spain, the duration of a rental contract is freely agreed between the parties, but if it is less than five years, the rental must be extended for annual periods until it reaches a duration of five years, unless the tenant gives one month's notice to the contrary. After these five years, the contract may be extended for annual periods, up to a maximum of three years, unless either party gives one month's notice to the contrary.

How many extensions can a contract have?

Depending on the duration of the initial contract, rental contracts may have a different number of extensions. If the initial contract is for 1-4 years, the contract can be extended year after year until it reaches five years, at the discretion of the tenant. If the initial contract is for five years, extensions can continue for another three years, up to a maximum total of eight years.

In practice, it is advisable to establish clear limits and review the terms of the contract periodically to avoid uncertainty in long-term planning for both the landlord and the tenant.

What happens if an extension is not agreed upon?

If no agreement is reached to extend the contract and it expires, the law establishes that the contract is terminated. At this point, the tenant must vacate the property. However, in practice, situations often arise in which the tenant continues to occupy the property. This occupation without a formal and explicit contract can lead to legal disputes.

If the tenant decides to remain in the property without having formalized the extension and without the owner's consent, the latter has the right to claim eviction. This process could be carried out through legal proceedings, which can result in a lengthy process and additional costs.

Advantages of a lease extension 

Extending a lease agreement offers several advantages for both landlords and tenants:

Stability

Tenants are assured that they will be able to remain in their home for an additional period, avoiding the need to search for a new home within a limited time frame.

Financial security

Owners maintain their steady income stream without having to deal with the uncertainty of finding new tenants.

Lower cost

Avoiding the process of finding new tenants can save time and money.

Continuity of the relationship

It allows the parties to preserve a relationship built up during the initial contract period, avoiding conflicts related to the transition to a new tenant.

Disadvantages of extending a lease 

However, extending a rental agreement can also have drawbacks:

No changes in conditions

The extension does not allow for any clauses to be modified, nor for improvements to be incorporated that could benefit both parties. If the owner wishes to update the monthly rent, they would have to resort to contract renewal.

The tenant may leave at any time.

During the extension period, if the tenant decides to leave for any reason, whether justifiable or not, they may do so without having to justify their decision.

Extensions are for a limited time only.

Extensions are executed annually, while a contract renewal restarts the relationship between the owner and the tenant, i.e., they start from scratch and extend the term, which leads to a guarantee of stability for the landlord.

Rental contract extension template 

It is advisable to formalize the extension in writing. Below is a basic example of a rental contract extension template:

If you would like to see a sample of this contract, check here.

It is important to adapt this model to the needs of the parties and ensure that it accurately reflects their intentions.

How to terminate a contract after an extension?

The law provides for exceptional cases for terminating a contract after an extension:

• The owner may terminate the rental agreement for justified reasons, such as the need to sell the property or to use it for their own purposes or those of a family member.
• The tenant's failure to comply with any obligation established in the contract (such as subletting the property, causing damage to it, or failing to pay the rent on time) is also grounds for terminating the lease agreement.
• The tenant may terminate the contract at any time during the extension period, giving one month's notice, while the landlord must give four months' notice. 

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Conclusion 

Extending a lease agreement is a key legal tool that provides benefits to both landlords and tenants. Understanding how it works, its advantages and disadvantages, and being clear about the procedures for formalizing and eventually terminating it is essential to ensuring a healthy and conflict-free contractual relationship. Whether you decide to extend your contract or not, the key is to communicate openly and formalize any agreement clearly and accurately. This way, you can ensure that both your rights and obligations are properly protected.