1. The rental contract
1.1. Legal Provisions
Legal provisions on renting and letting business premises in Spain are contained in the Law of Urban Lettings (Ley de Arrendamientos Urbanos) of 1994, which applies to rental contracts made after January 1, 1995. Contracts signed before such date arebe governed by other rules, which have been modified by the current law of urban lettings.
Although the afore-mentioned Spanish law allows agreements entered into between landlord and tenant stating the parties’ rights and obligations, however, it is always advisable that tenant and landlord state the rental conditions in a written contract.
The following provisions are to be contained in a rental contract:
- Details of landlord and tenant.
- Description of the property.
- The contract term.
- Amount of rent and payment terms.
- Any other legal provisions that the parties agree.
Rental contract may be made before a notary and recorded at the Spanish Property Registry (Registro de la Propiedad).
1.2. The contract time period
Both parties agree the term for which the property will be rented. When the contract duration is not provided, this will run for 1 year.
If at the end of the period stated in the contract, none of the parties notice each other their intention to terminate their contract, this will be renewed annually up to the moment that one of the parties decides to terminate it.
2. The rent
The parties shall agree the amount of rent and have it set forth in detail on the written rental contract.
Unless otherwise is agreed, rent is monthly paid 7 days before the end of the month. On no account must the landlord ask for more than 1 month rent to be paid in advance.
The manner of payment is that stated in the contract, where it is not provided, payment shall be made in cash at the premises.
Upon receiving the monthly rent, the landlord must provide the tenant with a receipt for each payment, unless it is proven by other means; e.g. proof of payment through bank transfer. Make sure you get these receipts or any proof of payment as these constitute an implicit contract.
During the first 5 years, rent will be increased or reduced according to the consumer price (inflation) index (índice de precios al Consumo – IPC); after such period, rent will increase according to what both parties agree upon signing the contract.
A security deposit (fianza) is a deposit of money to the landlord to ensure that rent will be paid and other responsibilities of the agreement will be performed. The deposit shall be equal to 2 months’ rent.
This deposit cannot be used to pay the rent to the landlord.
Such deposit will be returned as the tenant moves out, assuming that the property is in good conditions.
The deposit may be updated according to the consumer price index after 5 years of contract time period.
4.Subletting the business premises.Transferring the rental contract.
The tenant may sublet the premises or transfer the rental contract to a third party without landlord’s previous consent, the tenant shall notice it to the owner within one month from the date of subletting or transference.
In these cases the landlord may raise the rent 10% when subletting part of the premises, or increase 20 % of the amount when subletting all the premises or transferring the rental contract.
Keep in mind that upon transfer of rental contract, the tenant transfers all rights as well as obligations to the transferee third party.
Notwithstanding you may be forbidden from subletting your unit if this was previously agreed in your rental contract.
You should consult Spanish Lawyer in order to avoid pitfalls.
5.Repairs in the premises
Usually it involves many problems to clarify who must make the repairs in the premises and pay any related costs, here you have a general guideline about repairs when renting/subletting business premises. Other problems may arise, and thus it is advisable that you hire the services of a Spanish Lawyer.
The landlord must make all necessary repairs to keep the property in a fit condition to use it, however landlord is not responsible for repairing damages caused by the tenant.
Tenant shall make those small repairs on account of the property daily use.
Urgent maintenance repairs may be undertaken by the tenant in order to avoid serious and immediate damages in the property, these must be made previous notice to the landlord, repair costs will be returned to tenant.
The landlord must give the tenant three-months notice of his intent to undertake repairs affecting to health and hygiene in the property. In this case tenant may renounce the rental contract within 1 month from the notice. If the tenant decides to stay he may get a reduced rental rate in relation to the part of the premises that cannot be used because of the repairs. These repairs entitle the landlord to increase the rent after 5 years of validity of the rental contract.
6. Sale of the premises:the tenant’s right of pre-emption
If the landlord is willing to sell the occupied property during the life of the rental contract, tenant has the right of pre-emption (derecho de tanteo), which means that he could buy the property in priority to other purchaser.
Landlord must first offer the premises’ sale to tenant, who will have 30 days to reply. If the landlord does not make this offer, or the property is sold at a lower price than the offered one, the tenant could, within one month following completion, have the sale annulled and purchase the property; in such case the purchase price will be same than the sale annulled.
Pre-emption rights’ renunciation agreement will be valid only for rental contracts that exceed 5 years time period.
No pre-emption right can be applied when the rented house is sold together along with the rest of properties that form part of the same building.
If you buy an occupied property, you acquire the rights and obligations of the vendor, and therefore, not until 5-year validity period of the rental contract has been completed, may the rental be terminated.
7.The tenant’s right to indemnity upon termination of the contract
If the landlord decides not renew the rental contract upon termination of the 5-year period of validity, he must pay the tenant the indemnity that both parties had previously agreed. In order to do so, the landlord must give prior notice of termination of the contract, at least 4 months before the date of expiration of the term.
Normally rental contracts include a clause stating that tenant renounces to such indemnity.
8.Landlord/tenant’s subrogation in favour of third parties
Either party to the rental contract may be substituted for another person, who will acquire all rights and obligations of the former tenant or landlord.
- The landlord may be substituted in the event he sells the rented premises to a third party.
- The tenant may be substituted in the event he gets divorced or dies; in such a case his descendants or spouse could stay in the property up to the date of regular termination of the rental contract.
Landlord is liable to pay income tax at a rate of 25%, assuming that he is a non-resident whose Spanish property is being rented.
Certain maintenance expenses may be deducted from your Spanish income tax.
10. Having he rental contract terminated
a) The landlord may terminate the rental contract when the tenant:
- Fails to pay for the rent or the deposit.
- Rents the premises to a third party without the landlord’s consent.
- Deliberately causes damages to the premises.
- Undertakes repairs without landlords’ consent.
- Performs any dangerous activities.
In any of these cases you need the services of a Spanish Lawyer in order to obtain a court order against the tenant.
b) The tenant may terminate the contract when the landlord:
- Fails to make the necessary repairs to keep the property in a fit condition.
- Disturbs the tenant’s premises’ use.
11. taking legal action before Spanish courts
A number of problems may arise when renting or letting business premises. You may disagree with your rental contract duration, the rent increase, tenant failing to pay the rent, etc.
Disputes regarding to rental are conducted through the ordinary procedure (procedimiento civil ordinario) before a civil court.
If you are a landlord of commercial premises and your tenant has failed to pay for the rent, you may be entitled to evict him/her from your property and claim any unpaid rents. Our lawyers provide a fixed-fee eviction service that you can purchase online right now.
12. Getting Legal Help
We offer solid legal advice regarding any issue related to renting business premises in Spain:
» Property Lease in Spain (Prepare Contract), € 185.
» Property Lease in Spain (Review Contract), € 90.
» Legal consultation to one of our English-speaking Spanish lawyers.