Changes in the law relating to the letting of business premises

The third provision of the Spanish Urban Lettings Act (Ley de Arrendamientos Urbanos, Disposición Tercera), passed in 1994, stated that certain leases for business premises would come to an end 20 years from the Act’s entry into force.

It seemed like the time would never come… But time always catches up with us and the deadline will be reached in December 2014, obliging us to check our leases and anticipate possible consequences.

With this deadline being reached, many leases for business premises will be terminated at the start of 2015. That notwithstanding, not all leases will be affected by the deadline, but rather only some.

You may be the owner of premises let under the conditions set out below, or, alternatively, your business may be established on premises under a contract with those characteristics. Either way, this legislative fact obliges us to check the leases of our business premises to see if they may be affected.

In the following points we try to summarise the main issues to consider to establish whether or not your lease is affected. We should also warn you that civil case law usually goes way beyond what the law in fact states, for which reason, if you have any questions about the lease for your business premises, or require additional information about it, please get in touch with us and we will answer your questions.

What characteristics must the lease for my premises have in order to be affected? The premises that will be affected by the termination must have all of the following characteristics:

• They must be business premises.

• They must have a floor area of less than 2,500 m2.

• The lease must have been signed by a single juristic person before 9 May 1985.

• They must be used for a business activity (included in section 6 of the Business Activity Tax (Impuesto de Actividades Económicas) table) or any other activity, provided an amount of less than 85,000 pesetas (510.86 euros) was paid for that tax in 1994.

Once you have checked your lease, you can establish whether it will be affected by the text of the third provision, but… What are the consequences?

The immediate consequence is that your lease will be terminated by force of law in December of this year.

However, after renting for so long, and especially where that has taken place satisfactorily during those years, it may be the case that both parties wish to continue their contractual relationship.

If that is the case, take this opportunity, in plenty of time, to negotiate the new clauses that will govern your contractual relationship, for which you should seek suitable professional advice, so that the future relationship will be beneficial and lasting for both parties.

And now… What rights do I have as a tenant? The termination of the lease provided for by this law confers certain rights on the tenant, which must be taken into account vis-à-vis the deadline, with basically two aspects:

1. Right of ‘preferential letting’ for the former tenant:

In the year immediately following the termination of the lease, a preference is provided for when the premises are let, under conditions identical to those that a new tenant could offer, which obliges the landlord to notify the former tenant in advance regarding the conditions offered to the potential new tenant, in order to establish that they are not interested in the premises.

2. Compensation:

Where (within one year following the termination) a new business the same as (or similar to) that carried out by the former tenant is established on the premises covered by the lease, they will be entitled to compensation equivalent to 18 monthly instalments of the rent that was paid at the time the lease was terminated.

Also, taking advantage of the subject matter of this post, may we remind you that the passing of Catalan Law 2/2014, of 27 January, on tax, administrative, financial and public sector measures, brought in, under Article 123 of that law, the obligation to pay Property Transfer and Documented Legal Transaction Tax (Impuesto de Transmisiones Patrimoniales y Actos Jurídicos Documentados) on leases at the rate of 0.3% in 2014 and 0.5% from January 2015. The amount is subject to self-assessment and payable at the relevant receiving office within one month of signing the lease.

Failure to comply with that obligation may incur certain penalties, so we recommend that you bear the matter in mind if you are about to sign a lease, in order to avoid such a penalty.

The current situation, therefore, obliges you to check the lease for your premises, to see if it could be terminated in December of this year and to make the decisions that are best for you in sufficient time.

Given everything set out in this post, if you have any questions regarding your leases, our advice is to contact Estudi Jurídic Sánchez & De Canals, so that we can provide you with legal advice on the matter.

Published by Andrea Serrano

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