In this article we are going to tell you what the competitiveness guarantee index or IGC is and how it affects rental contracts.

The IGC, or what is the same, the Competitiveness Guarantee Index, is part of that information that every landlord must know and that we as a real estate agency know perfectly to the point that we want you to also know when making a contract for rent.

Of course, part of our job is to advise our clients and give them the best service, which also includes advice and writing of the contract between the parties.

But let’s stop beating around the bush and go to the chopping block.

The competitiveness guarantee index or IGC

What is the IGC?

The IGC or Leasing Competitiveness Guarantee Index is a reference value for renting prices.

For ordinary mortals, this may not mean anything, but it turns out that the IGC is something similar to the IPC – Consumer Price Index – which aims to review the price of things based on whether life has risen in price or not.

In this framework, then, the IGC establishes a price revision rate based on how competitive Spain is in the eurozone.

In this way, applying the IGC, the price of a rental can go up or down depending on its number in %.

How does the IGC affect rent?

As we have just seen, if we apply the IGC, the rental price can go up or down, but there is a legal framework that must be known about that.

The Competitiveness Guarantee Index in the lease will be applied to the rents if the parties, tenant and owner, stipulated it in the contract. In this way, it must appear in the contract that this index will be applicable if it expressly appears in the rental contract.

It should also be noted that if it does not appear expressly in the contract, they will also be updated through this index if in the contract, but if it was agreed that the rents would be updated.

More important is that in any case these contracts must have a date after 2015, leaving the rest out of this application rate.

How is the Competitiveness Guarantee Index calculated in the lease?

On an annual basis, it is time to renew or update the rent to the IGC.

In this way we will apply the IGC two months prior to the time of the review.

Theoretical example

Let’s say we are in July 2022.

We would then use the IGC of May 2022 (two months earlier).

The formula is as follows:

Rental income * (100 + % IGC) / 100

We first solve what is inside the formula and multiply it by the Rent of the rent, and we divide that by 100 to obtain the new value.

Practical example

It turns out that in July 2022 our rental contract will be one year old since its first signature.

Our rent has a monthly price of 1000 euros

We go to the INE to see the IGC of the previous months.

There we see that the competitiveness guarantee index in the lease is 0.01% two months before the date of our review.

Calculations

1000 * (100+0.01%)/100 = 1000.1 euros

Here is an essential point in all this.

“If the IGC value is negative, it cannot be applied”

Results of the Competitiveness Guarantee Index

Be that as it may, if you are a bit savvy, you will have realized that the IGC can never lower the rental price, making this information very useful for owners.

In the same way, the competitiveness guarantee index has a ceiling of 2% of application.

At this point it is important to know that when reviewing the rent of a rental, the IGC or the IPC can be used as reflected in the contract.

Differences between the IGC or the IPC

The difference between the IGC and the IPC is that the latter does not have a maximum application ceiling.

So if what you want is to maintain a stable rent, it is better to use the IGC, but if you prefer it to increase, it is better to use the IPC when formalizing a rental contract.

Everything is always contractual at the time of signing the rent, otherwise neither you nor your tenant will be able to use any annual indicator.

Conclusions

Now that we’ve filled your head with ideas, indexs, contracts and numbers, we’re sure you have a general idea of ​​what it’s all about.

But we are not going to leave you in the lurch, Immobarcelò has among its services the advice at all times and the execution of the pertinent contracts and fully adjusted to the law.

In this way you will not have to think about anything other than finding us and trusting us as thousands of clients have done during our extensive history.