The process of negotiating a commercial lease depends on the contractual freedom of the parties. However, this freedom is limited by mandatory rules established in the Urban Lease Law (LAU) and the Civil Code.
A concrete example of this duality in regulatory sources is evident in the case of the guarantees in commercial leases. Even though guarantees intend to ensure the lessee’s compliance with obligations, the LAU introduces two types of guarantees with contrasting features. On the one hand, there is the deposit, a mandatory and predetermined guarantee by law. On the other hand, there are additional guarantees, which are voluntary and indeterminate.
In commercial matters, as per Article 36 of the LAU, the lessee must provide a deposit at the lease’s execution. The deposit must meet the following requirements:
- To be in cash
- Equivalent to two monthly instalments of the agreed rent
The LAU allows the landlord to adjust the security deposit to align it with the current rent amount.
The LAU also imposes obligations on the lessor to ensure the return of the deposit at the lease end, provided the lessee has not breached the contract:
- Deposit the amount with the corresponding autonomous bodies. While the deposit of the bond is mandatory in most Autonomous Communities, there are some exceptions.
- Return the deposit to the tenant within one month after the lease’s termination.
In case of default, legal interest will automatically apply to the deposit.
Freedom of the parties
Unlike the provisions of the LAU for residential rentals, there are no limitations on the amount or form of additional guarantees for commercial rentals. The parties have total freedom in this matter, making it a crucial point in the negotiation.
It is important to note that even though different practices exist regarding guarantees in contracts, the parties should be free to agree not to introduce supplementary guarantees. The freedom to establish additional guarantees also implies the freedom not to require them.
Common additional guarantees in the Spanish commercial leasing market
The freedom of the parties regarding added guarantees has led to various practices in the Spanish market, the most frequent of which include:
- Cash deposit
Parties commonly agree on an additional cash deposit, usually equivalent to a maximum of six months’ rent.
- Bank guarantee
This method is prevalent in the Spanish commercial rental market.
With this guarantee, a bank undertakes to assume the fulfilment of the lessee’s obligations jointly and severally.
Any third party, including the administrators of a commercial company or the companies of the same group, may jointly and severally ensure the fulfilment of the lessee’s obligations through this method.
In conclusion, addressing specific warranties in commercial lease negotiations is crucial for all parties involved. By doing so, parties can establish customized agreements that precisely match the needs and expectations of each party. Warranties can be a central element in the success of a commercial lease agreement, as they can help ensure the payment of rent and the protection of the real estate.
If you need additional information regarding the guarantees in Spanish Commercial Leases,
This article is not considered legal advice