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Form
• Leases can be signed between parties in a private document
and in a public deed executed before a notary public. As there
is no obligation to register leases at the Property Registry
–for which it is necessary to execute a public deed before a
notary– and due to the cost of executing the public deed –
which triggers Stamp Duty which varies in each autonomous
region ranging between 0.25% and 1.5% of the total rent
accruing during the entire lease– parties tend only to sign
private agreements.
Term
Spanish legislation offers the parties freedom to agree the
duration of a non-residential lease and the terms and conditions
of any extensions to the agreement.
It should be taken into account that, since the entry into force of
the Urban Leases Act (1 January 1995), mandatory extensions
are not established by law. Therefore, once the agreed term of
the lease (or any extensions, if any) comes to an end, neither the
lessor nor the lessee is able to require the other party to continue
with the lease. Some common terms and conditions in relation to
the duration of lease agreements are outlined below:
• Initial duration: Lease agreements commonly establish
an initial term. In practice, certain periods are typically
established depending on the type of building or premises
being let:
1. In the case of commercial units, small spaces or parts of
buildings to be used as offices, the initial term is typically
5 years.
2. In the case of entire buildings or large commercial
premises, the initial term tends to be longer, between 10
and 15 years.
3. In the case of lease agreement in the context of sale &
lease back transactions, even longer terms can be agreed
(up to 20 or even 25 years).
• Extensions: Once the initial term has elapsed, the parties can
agree an extension. It is common for the extension to operate
in one of the two following forms:
1. At the end of the initial term, the lease agreement is
extended for a new term (equal or shorter; it is not
normally longer than the initial term). If so, the agreement
may establish that the extension is at the discretion of the
lessee (which will be entitled to extend the agreement or
not to do so, normally by serving a minimum prior notice
of its decision) and mandatory for the lessor (which
must accept if the lessee requests the extension); or
discretionary for both parties, in which case either party
may reject the extension.
2. Annual extensions (or other periods: 2+2+2…), which are
automatic if at the end of the initial term or any extension
period neither of the parties requests the end of the
agreement by serving minimum prior notice.
• Lessee’s right to terminate the agreement prematurely. It
is common for the lessee to be entitled to terminate the
agreement once a minimum period of the lease has elapsed,
shorter that the initial term agreed for both parties. That
minimum period is therefore considered to be mandatory for
both parties.
• Tacit continuation of the lease. If at the end of the term of
the agreement and extensions, if any, the lessee continues
to occupy the premises or building for fifteen days with the
lessor’s acquiescence, the lease will be extended for the same
period as that set for establishing the rent (articles 1,577 and
1,581 of the Spanish Civil Code, in relation to article 1,566 of
the Spanish Civil Code).
Rent
• The parties are free to establish the rent, although this is
normally done according to prevailing market conditions.
In Spain, rent is typically established in two different forms:
fixed rent (although subject to review); variable rent (this
is more common in the case of commercial establishments
and hotels). In the case of variable rent, the parties agree
a minimum guaranteed rent (accruing in any case) and a
variable rent component depending on the gross turnover
obtained by the premises (which is only paid if the minimum
guaranteed rent is exceeded).
• In the case of non-residential lease agreements, the parties
are also able to decide how they wish for the rent to be
reviewed throughout the duration of the agreement. It is
common to establish annual reviews of the rent according
to the variation of the Consumer Price Index (CPI) in the 12
preceding months.
• Other rent review mechanisms may also be established,
especially in the case of long-term agreements: for example,
according to market prices, extraordinary reviews every so
many years by a certain percentage over the CPI.
Deposit and additional guarantees
• Under the Spanish Urban Leases Act, lessees in non-
residential lease agreements must pay the lessor a deposit
equivalent to two months of rent when the agreement is
signed. The lessor may be required to deposit that amount
at an official organism, in compliance with the regional
legislation applicable at the location of the let premises.
Breach of this obligation could lead to an administrative
penalty. The deposit cannot be reviewed for the first three
years of the duration of the lease.
• According to the Urban Leases Act, the lessee may also be
required to provide an additional guarantee; it is common that
this take the form of a bank guarantee for a certain number of
monthly rent payments.
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Investors Guide to Europe 2015