Which estate agency fees can be charged to the tenant, and which cannot

What can be agreed in a rental and what should not be mixed up

When you rent a property, not everything involved in the transaction can be passed on to the tenant without first reviewing the contract. The Urban Tenancies Act distinguishes between rent, general and service charges, and estate agency management and contract formalisation costs. In particular, article 20 of the LAU states that **estate agency management and contract formalisation costs may not be passed on to the tenant, either directly or indirectly, under any concept or description**; it also makes clear that this includes those arising from the preparation, formalisation, management, novation or renewal of the contract Ley de Arrendamientos Urbanos.

This does not mean that every cost related to the property is prohibited, but rather that it must be clearly distinguished what is rent, what is a cost that can be borne by the tenant if agreed in writing, and what is a management cost that falls to the owner or, where applicable, to the party obliged by the rule.

How to check the contract before signing it

Before entering into the tenancy, it is advisable to read the financial clause carefully and check whether any items appear that should not be confused with one another. In practice, problems usually arise from general terms such as “fees”, “management”, “processing”, “formalisation” or “administrative services”.

Follow these steps:

1. **Identify the actual monthly rent**.

- Check what amount is set as rent and whether the contract tries to introduce additional payments that, in reality, form part of the rental price.

2. **Review the charges passed on**.

- If the contract aims to pass on general costs of the property or individually identifiable services to you, this must be agreed in writing and with the annual amount as at the date of the contract, as required by article 20 of the LAU.

3. **Identify the estate agency management costs**.

- These should not be charged to the tenant. The law prohibits their being passed on, whether the agency is involved in the search, preparation, signing, renewal or amendment of the contract, or whether the payment is disguised under another name.

4. **Check whether there are optional services**.

- If it is a service that is not essential to finalise the tenancy, it could only be charged to the tenant if they have expressly requested it in writing and were previously informed that it was optional and of its cost.

5. **Ask for everything to be made clear in writing**.

- If in doubt, it is advisable to specify in the contract who pays each amount, on what date, for what purpose and with what supporting receipt.

Practical examples of items that should be kept separate

Not every amount appearing in a rental transaction is treated in the same way. To avoid mistakes, it is advisable to distinguish between:

- **Rent**: the price for the use of the property.

- **General or service charges**: these may be agreed to be borne by the tenant under the terms of article 20, but the agreement must be clear and in writing.

- **Management and formalisation costs**: these may not be passed on to the tenant.

- **Optional services**: only if expressly requested and their cost is known.

A common mistake is to try to include the agency’s fees within a broad clause for “rental costs”. Another is to charge the tenant amounts for renewal or novation when the contract is amended. The law also treats these as estate agency management or formalisation costs, and therefore they should not be passed on to the tenant.

What the owner should do to avoid disputes

If you are renting out as the owner, it is worth using simple and transparent wording. The clearer the cost allocation, the less likely there will be a later dispute.

### Recommended practical actions

1. **Draft a financial clause separating the items**.

- Rent.

- Deposit.

- Reimbursable charges, only where applicable.

- Optional services, if any.

2. **Avoid generic wording**.

- Expressions such as “all costs of the transaction” or “management fees payable by the tenant” may conflict with the LAU.

3. **Keep receipts and communications**.

- Although article 17 of the LAU regulates the receipt of rent payments and the method of payment, it is useful to keep a full record of all amounts paid.

4. **Clarify who contracts each service**.

- If there are certifications, utilities or ancillary services, set out in writing who requests them and who pays for them.

5. **Review the contract before using a standard template**.

- Generic templates may include items that do not fit the specific circumstances of your property.

Common mistakes to avoid

- Thinking that any agency fee can be passed on to the tenant.

- Mixing professional fees with the monthly rent.

- Charging formalisation, renewal or novation costs as if they were neutral “administrative expenses”.

- Accepting imprecise clauses about general charges without an annual amount or breakdown.

- Relying on an old template without adapting it to the current wording of the LAU.

If you would like to review a tenancy before putting the property on the market, you can also use our online valuation guide, which includes a price range and PDF report, with an optional visit if you need one. And if you would prefer to discuss it with us, you can get in touch via our contact page. Our office is at Calle Montesa 29, Madrid, Monday to Friday from 10:00 to 15:00 and from 16:00 to 19:00.

When it is worth requesting a personalised review

The general rule is clear, but every contract may have particular features: furnished property, accessories, utilities, optional services, fixed-term duration or special conditions from the owner. In these cases, a case-by-case review before signing is the sensible option.

Please note that this guide is for guidance only and does not replace specific legal advice. If a contract seeks to charge the tenant management or formalisation costs, the main reference should always be article 20 of the LAU, which prohibits that passing on and requires optional services requested expressly to be clearly separated. Ley de Arrendamientos Urbanos

If you would like to go further, read our related guide: How to choose the right estate agency to sell your flat in Madrid.