Commercial leases regulation in Spain

Unlike residential leases, the commercial lease regulation in Spain primarily relies on the parties’ will, a business where the lessee party does not enjoy a presumption of weakness. This presumption is stated by the legislator in the preamble of Law 29/1994, of November 24, 1994, on Urban Leases (from now on LAU), considering that it is not necessary to grant protection measures to the lessee (…) in (…) cases in which economic, recreational, or administrative needs are satisfied.

Although the regulation of commercial leases is primarily the result of the parties’ will, the LAU nevertheless provides for specific provisions. It also applies the general requirements of the Civil Code regarding the fulfilment of obligations.

Below, we review the primary legal obligation and the points that parties must consider when signing a commercial lease.

Legal obligation

Commercial leases: Deposit

In the case of rentals for use other than as a residence, the lessee shall provide a deposit equivalent to two monthly payments.

The LAU provides for updating the security deposit after five years, in the case of an individual lessor, or after seven years, in the case of a legal entity. Unless otherwise agreed, this update and the adjustment of the agreed-upon rent will take place simultaneously.

Major points to be considered by the parties.

Kindly note that the parties could expressly exclude the application of all elements included in this section. Said provisions of the law are not mandatory.

Commercial leases: Guarantees

The LAU allows the lessor to request additional guarantees without setting limits as to type or amount, unlike residential leases.

Commercial leases: Works

Even though what was agreed by the parties, the LAU expressly provides that it is incumbent upon the lessee to carry out the minor repairs necessary for the upkeep of the property during the lease term. However, as far as major works are concerned, they may only be carried out with the landlord’s express authorization or written consent.

In the case of significant improvement and conservation works, the LAU states that the lessor must assume them, and the lessee must bear them, provided they cannot be delayed. In certain circumstances, the LAU provides that the lessor who carries out improvement works may pass on their costs to the lessee by charging an increased rent.

When the works render the leased property unusable, the lessee will have the right to suspend or terminate the lease without the lessor being able to claim any compensation from the lessee.

Commercial leases: sublease and assignment

In the case of commercial leases, the LAU expressly establishes that the lessee has the right to sublease or assign the lease without the lessor’s consent. The lessee must notify the lessor in writing.

In the case of a partial sublease, the lessor will have the right to increase the rent by 10%.

In the case of a total sublease or assignment of the lease, the lessor shall be entitled to increase the rent by 20%.

Commercial leases: rights of the lessee

In the event of the alienation of the property, the lessee, unless otherwise agreed, has the following rights:

• The lessee shall be entitled to subrogation of his rights in the event of the disposal of the leased property
• He shall have a preferential right of acquisition.

In the event of the lessee’s death, unless otherwise agreed, his heirs or legatees shall have the right to subrogate the lease until the termination of the lease by duly notifying the lessor.

Commercial leases: compensation to the lessee

A lessor who decides to terminate the lease of a lessee who has been engaged in a retail activity for five years and has expressed his willingness to continue renting the property for the next five years at a market price must compensate the lessee per the provisions of the LAU.

Commercial leases: termination of the contract

The LAU states as possible motives for the  termination of the commercial lease the following situations:

• Failure to pay the rent or any amounts whose payment has been assumed or corresponds to the lessee
• Failure to pay the amount of the security deposit or its update
• Damage caused maliciously to the property or by works not consented to by the lessor when his consent was necessary
• When annoying, unhealthy, harmful, dangerous, or illicit activities occur in the dwelling
• The subletting or assignment of the contract is in breach of the LAU’s provisions in these situations.

Lauriane Moreira

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