Tenant improvement compensation in Spain: LAU Article 23 and what landlords owe at lease end

A tenant who installs a new kitchen, upgrades the bathroom or lays hardwood floors in a Spanish rental expects to recoup some of that investment at lease end. In most European systems, a good-faith possessor who adds value to another’s property has a legal claim. Spanish law narrows that right sharply for residential tenants: LAU Article 23.2 strips all compensation for unauthorised works, giving the landlord an unrebuttable choice between restoration and retention. The general Civil Code improvement rules (Articles 453 and 454) still matter, but only for authorised improvements and only through the LAU’s supplementary mechanism.

What does LAU Article 23 say about tenant works?

Article 23 of the Ley de Arrendamientos Urbanos (Ley 29/1994) governs all works a tenant undertakes in a rented dwelling. It has two operative paragraphs. The first, Article 23.1, prohibits the tenant from carrying out any works that modify the dwelling’s configuration without the landlord’s written consent, and bars outright any works that diminish the building’s stability or the dwelling’s security. The second, Article 23.2, sets the consequences for unauthorised works: at lease end, the landlord may either demand that the tenant restore the property to its prior state or elect to keep the modification, and in both cases the tenant “cannot claim any compensation” (the Spanish text reads “sin que este pueda reclamar indemnizacion alguna”). Where unauthorised works have compromised structural stability, the landlord can demand immediate restoration without waiting for the contract to end. This provision was refined by Ley 4/2013 (BOE-A-2013-5941), which separated the stability-diminishing prohibition into a standalone sentence and clarified the immediate-restoration trigger, but the no-compensation rule has been in place since the LAU’s original 1995 entry into force.

How do the Civil Code improvement rules interact with the LAU?

The Spanish Codigo Civil sets a general framework for improvements made by a possessor on another’s property. Article 453 distinguishes necessary expenses (paid to any possessor, with a right of retention for good-faith possessors) from useful expenses (paid to a good-faith possessor with the same right of retention, where the owner may choose to pay either the cost incurred or the increase in value). Article 454 addresses luxury or recreational improvements (mejoras voluptuarias): these are not reimbursable, though the possessor may remove ornaments if removal causes no damage. Article 455 limits bad-faith possessors to necessary expenses only. Under normal property law, a good-faith possessor who installs a EUR 5,000 kitchen that adds EUR 4,000 to the property’s value could retain the property until paid, or force the owner to choose between reimbursing the cost or paying the value uplift.

The LAU displaces this framework for residential tenancies. Article 4.2 of the LAU states that housing leases are governed by the parties’ agreement within the framework of the LAU’s Title II, and only suppletorily by the Codigo Civil. Because Article 23.2 expressly addresses the tenant’s improvement compensation question and answers it negatively for unauthorised works, the supplementary Civil Code route is closed for that scenario. The LAU’s special rule prevails: no consent, no compensation, regardless of the improvement’s character or the value it added. A tenant who spent EUR 15,000 on unauthorised renovations that raised the property’s market value by EUR 20,000 has no claim under either statute.

What compensation rights exist for authorised improvements?

The LAU is silent on compensation for authorised works, those carried out with the landlord’s written consent under Article 23.1. This silence is not accidental: the statute treats the landlord’s consent as a contractual matter, leaving the compensation question to the agreement between the parties. If the written authorisation specifies a compensation term (the landlord will reimburse the cost at lease end, or will pay a percentage of the value increase, or will apply the improvement cost against rent), that term governs. If the authorisation is silent on compensation, the Codigo Civil’s supplementary framework may apply: Article 453’s useful-improvement rule, under which the landlord would choose between paying the cost incurred or the increase in value. However, Spanish courts have not uniformly applied Article 453 to authorised tenant improvements, because the tenant’s possession is contractual rather than the kind of independent possession the Civil Code provisions were designed for. The practical answer is to negotiate the compensation term at the point of authorising the works, not to rely on post-hoc statutory claims.

How does the deposit interact with improvement claims?

The LAU deposit (fianza) under Article 36 is one month’s rent for housing leases and two months for non-housing use. Its statutory purpose is to secure the tenant’s compliance with contractual obligations, primarily rent payment and property condition at handover. The landlord may withhold the deposit against unpaid rent or damage beyond normal wear (desgaste por el uso ordinario, per Article 21.4), but the deposit is not structured as an improvement compensation fund. A landlord cannot use the deposit to pay for authorised improvements the tenant claims, nor can a tenant use the deposit as leverage to force improvement reimbursement. If the landlord fails to return the deposit within one month of key handover, Article 36.4 imposes the legal interest rate on the balance. Improvement compensation, where it exists, is a separate claim handled outside the deposit mechanism, either through the contractual authorisation terms or, if necessary, through judicial proceedings.

What is the difference between useful, necessary and luxury improvements?

Spanish property law, following the Codigo Civil framework in Articles 453 to 455, classifies improvements into three categories. The classification determines whether and how compensation is available, though for residential tenancies the LAU’s consent requirement is the threshold question that overrides the classification.

Improvement type	Civil Code basis	Description	Compensation (general CC rule)	Compensation under LAU Art 23
Necessary (necesarias)	Art 453, para 1	Required to prevent loss or deterioration of the property	Reimbursed to any possessor; good-faith possessor may retain	LAU Art 21 assigns conservation to the landlord; tenant’s necessary repairs recoverable from landlord under Art 21.3
Useful (utiles)	Art 453, para 2	Increase the property’s value or income potential	Good-faith possessor reimbursed; owner chooses cost or value increase	Unauthorised: no compensation (Art 23.2). Authorised: contractual terms govern, CC Art 453 supplementary
Luxury (voluptuarias)	Art 454	Decorative or recreational, no functional value increase	Not reimbursable; possessor may remove ornaments if no damage	Unauthorised: no compensation. Authorised: no compensation unless contractually agreed

What should a tenant include in a written improvement authorisation?

Because LAU Article 23.1 requires written consent for any configuration-modifying works, and Article 23.2 strips compensation for unauthorised works, the written authorisation is the tenant’s primary protection. A robust authorisation should specify: the exact scope of the works (which rooms, what changes), the projected cost, the contractor arrangements, the timeline, whether the improvements stay or are removed at lease end, and any compensation the landlord will pay for useful improvements that remain. Without a compensation clause, the tenant is left arguing for supplementary Civil Code application, which is uncertain. With one, the claim is contractual and enforceable. The landlord’s authorisation should also confirm that the works do not affect structural elements or common areas, since Article 23.1 prohibits stability-diminishing works absolutely and the community of owners may have separate consent requirements under the LPH.

Worked example: EUR 5,000 kitchen vs EUR 2,000 decoration

Consider a tenant in a Marbella apartment who, over a five-year lease, makes two sets of improvements. The first is a EUR 5,000 kitchen renovation (new units, worktop, oven, plumbing connections) authorised in writing by the landlord. The second is EUR 2,000 of decorative changes (custom wallpaper, decorative lighting, built-in shelving) carried out without written consent.

At lease end, the kitchen renovation is an authorised useful improvement. If the written authorisation included a compensation clause (say, the landlord agrees to reimburse 50 per cent of the cost at lease end if the kitchen remains), the tenant receives EUR 2,500. If the authorisation was silent on compensation, the tenant may argue for Codigo Civil Article 453 application, under which the landlord would choose between paying the cost incurred (EUR 5,000) or the increase in value (perhaps EUR 3,000 if the kitchen added that much to the property’s market value). This claim is uncertain and may require judicial proceedings.

The decorative changes are unauthorised works under LAU Article 23.2. The landlord may demand restoration (the tenant removes the wallpaper, lighting and shelving and repairs the walls) or keep them. In either case, the tenant has no compensation claim. Even if the decorative work added EUR 500 to the property’s value, the LAU’s express bar applies. The deposit (one month’s rent, say EUR 1,800) is returnable to the tenant unless the landlord can demonstrate damage beyond normal wear; the decoration, if left in place at the landlord’s election, does not give rise to a deposit deduction unless the decoration itself constitutes damage (for example, wallpaper that cannot be removed without damaging the plaster).

How can a landlord respond to unauthorised works?

A landlord discovering unauthorised works has three options under the LAU. First, if the works have diminished the building’s stability or the dwelling’s security, Article 23.2 (second paragraph) allows the landlord to demand immediate restoration during the tenancy, without waiting for the contract to end. Second, for non-structural unauthorised works, the landlord may treat the works as a breach justifying contract resolution under Article 27.2.d (damages caused intentionally or works not consented to when consent was required). Third, the landlord may wait until lease end and then exercise the Article 23.2 choice: demand restoration or keep the modification, with no compensation owed. The third option is often the most practical, since the improved property may be more valuable or more lettable, and the landlord captures that value without paying for it.

This guide is general information, not legal or tax advice. Rules change and individual circumstances differ. Verify current requirements with an independent lawyer (abogado) or tax advisor (gestor/asesor fiscal) before acting.