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BASIC GUIDE OF URBAN LEASES,
OFFICES, COMMERCIAL AND LEISURE CENTRES, FACTORY OUTLETS, ETC.
Law 29/1994, of 24 of November, Urban Lease
(hereunder, ULA) regulates the urban leases on the base of the following
scheme:
| LEASE
TYPE |
GOVERNS |
SUBSIDIARELLY |
AUXILIARY |
| House
> 300 m2 or 5.5 initial rent superior to
salary (SMI). |
As
agreed. |
Title
II of the Law |
Civil
Code
|
| Other
houses. |
Title
II of the Law |
As
agreed. |
Civil
Code
|
| Other
uses. |
As
agreed. |
Title
III of the Law |
Civil
Code
|
Only the urban properties are solely within the
scope of application of the ULA, understood in arts.2 and 3 of the ULA
like the constructions. Thus, when defining what must be understood
by house leasing (art. 2), one says specifically that it is referred to
habitable construction. Similarly the ULA in article 3 when establishing
the concept of leasing for different use, refers to a construction.
Consequently, the lots or parcels of land that
being urban plots, lack any building or construction, like the leasing
of garage seats, will be outside the scope of the ULA application.
These leases will be regulated by the Civil Code (arts. 1,542 to 1,574
and 1,580 to 1,582).
House leasing.
It is considered like house leasing when this
one is used permanently by the lessee. The law does not analyse the
total leasing possibilities that actually exist, but are excluded the following
uses:
-
Houses of doormen and other workers.
-
Use of military houses.
-
Leasing of property with agricultural purposes.
-
Use of university houses.
The house leasing refers only to habitable
construction whose fundamental destiny is to satisfy the permanent housing
necessity of the lessee. Otherwise, being the lease affected to different
uses from housing (although the parts had described it like a house lease)
will not be subject to the ULA. The house leasing will not lose this
condition (although the lessee did not have in the rented property his
permanent residence) provided it is occupied by his/her no-separated spouse
or children.
Term.
The most important of the contract conditions
is the obligatory annual prorogation up to five years, unless the lessee
shows thirty days ahead his will of not renewing it. After the five
first years without having cancelled the contract, one will postpone automatically
three more years. The renovations will be yearly.
Having elapsed the contract, after the obligatory
five years term, no-party has notified the other, at least a month in advance
to the completion date, his/her will of not renewing it, the contract will
be prorogued obligatorily by annual terms up to a maximum of three years
more, unless the lessee declares to the landlord, a month to the completion
date of anyone of the annuities, his/her will of not renewing the contract.
In leases of agreed term over five years, the
lessee will be able to conclude the contract after five years and notifies
the landlord with a minimum of two months.
Rent.
The rent will be freely agreed by the parties
(except in official protected houses, that are appraised) and, except opposite
pact, it will have monthly character, and it will be paid within the first
seven days of the month.
The landlord must give the lessee a receipt detailing
the amounts to be paid by different concepts.
During the first five years of the contract term,
the rent could only be updated at the date in which every year of use of
this contract is marked, applying, to the rent corresponding to the previous
annuity, the percentage variation experienced by the "General Index Consumption
Prices" (a certificate emitted by the National Institute of Statistic,
can be demanded by the lessee) in a period of twelve months immediately
previous to the date of each update, and taking like month of reference,
for the first update, the term that corresponds to the last index that
was published at the contract celebration date; and in the successive
ones, the one that corresponds to the last one applied.
As of the sixth year, the update of rent will
be governed by the agreed by the parties.
Raise of rent by improvements.
In case of accomplishment by the landlord of improvement
works, passed five years of duration of the contract, it will have right,
except for pact in opposite, to increase the annual rent in the quantity
that turns out to apply to the capital inverted in the improvement (deduced
the public subventions) the type of legal interest of the money at the
moment of completion of works, increased in three points, but the increase
cannot exceed 20 % of the effective rent at that moment.
Check-list of works.
-
The landlord must make works necessary to conserve
the house.
-
The lessee has the obligation to allow the accomplishment
of the work.
-
The deterioration by the use will be in charge of
the lessee.
-
The lessee will not be able to make works that modify
the house without express consent of lessor.
-
The invalid lessee will be able to make preparation
works.
Expenses.
The general expenses and individual services could
be freely agreed by the parties. This concept includes the general
expenses for the suitable support of the building, its services, tributes,
costs and responsibilities that are not susceptible of being individualised
(those that are by means of accountant machines will be paid by the lessee),
being applied to each house through the quota of condominium division,
if exists, or its surface, otherwise.
In order to assure the validity of this pact,
it will have to be pointed out in writing, quantifying the annual cost
to the date of the contract.
The repercussion of these expenses, except for
the case of tributes (local real estate tax ("IBI") is charged), during
the five first years of duration of the contract has a limit, since its
charged total quantity cannot exceed the double of the percentage of rent
increase.
Check-list for imputation of expenses.
The owner may charge to the lessee the following
amounts:
-
The expenses of conservation and repair in order
to maintain the house in state to serve for a suitable use, with certain
conditions.
-
The amount of the cost of the services and provisions
that take place as of the new Act enforcement.
-
The landlord is obliged to pay for all those necessary
works to conserve the house in the conditions of habitability (as limit
is the destruction of the house by causes non-imputable to that one), except
when the deterioration is imputable to the lessee in accordance with articles
1563 and 1564 the Civil Code. On the other hand, the lessee will
not be able to carry out works without permission of lessee (unless works
of adaptation for invalids, in which the simple notification in writing
is enough), committing itself to replace the house to its initial .
Preferred acquisition right and retract.
Except for opposite pact in leases with over five
years term, in case of sale of the rented house, the lessee has preferred
right (by 30 natural days) and of retract (by identical term). In
order to file with the Real Estate Registry sales of rented houses it is
necessary to justify the notifications to the lessee for the exercise of
such rights. There is no place to those rights when the rented house
is jointly sold with the remaining houses or the premises property of the
landlord that comprises the same building, nor either when they are jointly
sold to the same buyer, by different proprietors, the totality of the floors
and the premises of a building.
Guarantee.
At the beginning of the contract the presentation
by the lessee of a guarantee in cash for the sum of a monthly rent will
be compulsory. The guarantee is created to cover damages in the floor.
Check-list of guarantee.
-
It was updated as of the fifth year.
-
It will be deposited with the corresponding autonomous
community.
-
The guarantee is compulsory.
-
The guarantee cannot be set-off agains the payment
of outstanding rents.
-
The guarantee will be given back when finalising
the contract.
Cession and sublease.
The Cession of the contract and the Sublease are
only allowed if authorised in writing by the landlord, and in the case
of the sublease, only when this one is partial.
Subrogation.
In case of death, the subrogation right will have
to follow the following order:
-
the spouse that coexists,
-
the person that coexists at least during two years
,
-
lessee's descendants of the lessee subject to custody
or coexistence (two years),
-
lessee's ascendants (two years of coexistence),
-
lessee's brothers (two years of coexistence),
-
lessee's relatives with 65 invalidity (two years
of coexistence).
Contract resolution.
-
Non-fulfilment of the obligations.
-
Non-payment of the rent or other amounts.
-
Non-payment of the guarantee or update.
-
Non-authorised sublease.
-
Non-authorised cession.
-
Non-authorised works.
-
Annoying, unhealthy, dangerous, injurious activities.
-
Non-consideration of permanent house.
-
Non-fulfilment of contract obligations.
-
The lessee may conclude whether the necessary repairs
are not made, disturb in the use of the house, house ruin, lost of the
of the property by cause non-imputable to the landlord.
The furnished house.
In these assumptions, the ULA extends their scope
of application to the furniture, the warehouse rooms, the seats of garage
and any other dependencies, rented spaces or services yielded like accessories
also owned by the landlord. In this case, the dispositions of the
contract and the Law, in the matter of house lease, will be applied to
such dependencies, spaces or services yielded like accessories to the rented
property.
The sumptuary house.
The ULA describes as sumptuary houses, those whose
surface is over 300 square meters or in which the initial rent in annual
calculation exceeds 5.5 times the minimum wage. The Law allows that
in these leases (as in those for use different from housing) the parties
regulate their lease relationship. Thus, they will be governed in
the first place by the agreed, without other limitations that the generals
of article 1,255 of the Civil Code; in defect of voluntary contractual
stipulations, by the norms of Title II of the ULA applicable to the non-sumptuary
houses and additionally, for the cases that neither the parties have anticipated
the regulation nor is mentioned in Title II either, will be of application
the Civil Code.
Leases
for other uses different from the one of house.
The house leasing will be the one that falls on
an inhabitable construction that is going to constitute the habitual house
of the lessee. It is evident that there will exist houses to be considered
within the contracts of "use different from house ", because they do not
satisfy the necessity of permanent residence.
Unlike what happens to the house leasing, that
specifically has to fall on a "habitable construction", the physical base
of the leasing is a construction to which any adjective is not added, reason
why the lease of future thing is allowed. This difference is conclusive
when referring to commercial centres and offices, because the leasing pre-contracts
or conditional will be the determining base for the project-finance.
The leases of different use are:
-
Season Lease
-
Tourist lease
-
Professional premises
-
Offices
-
Garage
-
Warehouse
-
Second residence.
Legal regime
In this type of leases, the ULA chooses to leave
to freedom of pact to the parties respect to all the elements of the contract,
without damage, of course, of the titles of necessary right. In defect
of such pact, it will be necessary to follow to the norms that Title III
of the ULA (legal scope, leasing formalities and processes) dedicates to
the leases for different use from the one of house and the
Civil Code.
The articles exclusion of the non-imperative ULA
must become of specific mention. The most characteristic assumptions
are the resignation to the right of preferred acquisition and the sublease
or cession of the rented property when a professional or enterprise activity
is exerted (art. 32 of the ULA).
Guarantee
The guarantee will be of two months. Additional
guarantees can be agreed.
Sublease and cession.
In the assumptions of sublease or cession, the
landlord will be entitled to increase the rent a 10% by partial sublease,
and 20% in the assumptions of cession of the contract or total sublease.
Special clauses usually are agreed to, that allow the cession between companies
of a same enterprise group.
If existing an enterprise or professional activity,
it is not necessary the landlord authorisation.
Although "cession" is not considered as company
merger, transformation or split, this one must be notified to the landlord,
that is entitled to increase the rent.
Subrogation.
There are subrogation cases for the lessee's death,
but, in practice they are excluded by the contracts.
Indemnification by extinction of the contract.
The extinction by the conventional term of the
lease of premises that during the last five (5) years had a commercial
activity of public sale, will entitle the lessee to an indemnification
to be paid by the landlord, whenever the lessee has declared four months
in advance to the expiration of the term, his will to renew the contract
by a minimum of five years more and by a market rent.
The amount of the indemnification (and except
pact in contrary) will include the expenses of transfer and the loss of
customer produced during six months, if the lessee initiated the activity
in the same municipality. Whether in that term it is initiated another
activity or it did not initiate any, and the landlord or third parties
develop in the property, and in that term, the same activity or similar
to the developed one by the lessee, the indemnification will be a monthly
rent per year of the contract term, with a maximum of 18 monthly rents.
Causes of resolution of the contract of lease
of use different from house.
-
Breach of the clauses of the contract.
-
Lack of payment of the rent or other amounts.
-
If the guarantee or later updates do not become effective.
-
Development of annoying, unhealthy, injurious, dangerous
or illicit activities.
-
If the premises with breach of the law are yielded
or subleased.
Legal
aspects to be considered in the leasing of commercial centres. What
clauses of the lease contract are negotiable?
Promise of lease or conditional contract of future
thing.
From the landlord perspective (promoter of a commercial
centre) it is more advisable to have assured the effectiveness of the lease
contract. From a procedural perspective, the breach of a transaction
promise can face judgement considerations that diminish the indemnification
to be received by the landlord.
In any case, the landlord covers its responsibility
exonerating itself from any damage resulting from delivery or delay, whenever
it obeys to causes that are imputable to him or not. Actually, as
most of the commercial centres begin to commercialise without counting
on all the mandatory city-planning authorisations, it could be considered
that the concession of licenses is not imputable to him. This assumption
has special relevance in the case of the "second license".
Frequently, it is negotiated with the great surfaces
or cinemas, millionaire indemnification (guaranteed) whether the opening
terms are not fulfilled.
Specific problems to be considered:
Cinemas.
Without consideration of the problematic that
is caused when the landlord is committed to build the basic structure of
the cinema, that must be put under important regulations, exist special
relative clauses for parking, the determination of the rent by armchairs,
the schedules and the minimum exhibition of films, the exhibition of videos
by stores, the exclusive popcorn sale, videos, etc.
Presently, some cinemas incorporate one or two
restaurants in their interior. This aspect is very important at the
time of fixing possible incompatibilities within the commercial centre.
The cinemas usually are used like commercial
attraction, nevertheless, sometimes they are used as theatres or forums
for conferences. This type of activities must be limited because
it does not attract customers to the rest of the commercial centre and
diminish the level of variable rent.
Factory Outlets.
In " factory outlet " the lessee is requested
to offer at least a 30% discount on the normal price of its products.
Actually, the most frequent problem is the exclusivity of some trademarks.
The great companies use the "outlet" with the purpose of selling the rest
of season, but there are problems when it is sold abroad and the merchandise
come to Spain. In " factory outlet" it is fundamental to enclose a list
of trademarks with sale exclusivity within the centre.
Leisure.
The Leisure centres do not request the second
license. In these exclusive centres of leisure (although there are
cases in Spain, actually they are mixed with commercial and leisure) the
anchor is the cinema.
Family Entertainment Centres.
The Family Entertainment Centre (hall games) creates
exclusive feature problems with respect to the use of connected computers
to Internet. It must be considered that the cinema will be in future
connected to Internet. Also, many lessees (bars, restaurants, etc.)
have public vending machines, computers with connection to Internet (games),
etc. that must specifically be regulated in order to avoid that the regime
of exclusive feature of the Family Entertainment Centre is altered (hall
games).
Movable boxes.
By movable box, we mean a medium-stable
sale position (e.g.: newspapers box) different from the typical sale wheelbarrows.
The movable boxes can be regulated by means of
a contract by which the right to a temporary installation in lease regime
is yielded. It is very important to fix the terms of communication
with the purpose of mobility, the form to make the disassembling, etc.
Complex questions:
Contribution to the common expenses of the centre.
With the purpose of attracting the preferred lessees
(anchors: supermarket, cinema, etc.) they are exempted of certain
contributions or its participation is limited, this means a decrease
of income non-assumed by the lessor-promoter, and it is distributed
among the rest of the lessees.
Insurance.
The great companies have their own insurance policies,
reason why they reject to subscribe collective policies or to be put under
the models of policy demanded by the landlords, as it is habitual in the
Anglo-Saxon law.
Guarantees.
Regarding the deposit of the guarantee, in our
experience almost all the Autonomous Communities consider that it is a
conditional lease, reason why it is not requested to deposit the guarantee
until the effective delivery of the premises. Nevertheless, some
community, like the one of the Basque Country, esteems that it is due and
strictly applies the criterion of contract signature. So, this Community
exceptionally demands the deposit of the guarantee at the signature of
the contract.
With respect to the guarantees, the small commerce
must provide accessory guarantees. Normally, it is a banking endorsement
guaranteeing 6 monthly rents. The medium commerce gives a personal
guarantee of its matrix and the great chains do not give any additional
guarantee.
Audit and variable rent.
Fixed and variable rent. The rent does not
require a special commentary, unless in most of the commercial centres
it is demanded that whether updated it will be increased and never reduced.
With respect to the variable rent, it is very
difficult to know exactly the sale of the great store-chains that can distribute
costs and carry out returns externally. The most advisable solution
for the landlord would be the verification of the magnetic supports of
the recording boxes, but this procedure is very expensive. Actually,
the audit of an independent company is accepted, which is insufficient
because it does not take place by individualised stores.
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