Spain Plus More

Explanation of Commercial Lease Contracts

The term traspaso is still used by many sellers but, in reality, the traspaso no longer exists and was replaced some years ago by the Contract de Alquiler, (the lease contract).

Lease contracts are for a fixed period of time, normally five years but many for ten years and, on rare occasions, twenty plus.
In almost all cases the lease contract is renewable for a similar period of time at the termination of the first contract always by putting in writing to the landlord the intention to renew, on renewal the rent will be increased by a nominal ten percent unless otherwise written in the original lease.

Unlike some lease contracts in the UK, the holder does not have to pay again for renewing the lease also there are no rent reviews every two years as is usually the case in the UK.

In the Spring of every year the Spanish Government publish the,” Cost of Living Index”, and all property owners are allowed to increase the monthly rent by the amount published, this applies to every type of property not just businesses but rental apartments, offices etc.

A word of warning, on some rare occasions a lease contract will have a specific clause that prevents the selling on of the lease to a third party, using the outdated term Traspaso, (It is not permitted to sub-rent or traspaso this contract without the owners consent), we would never recommend a client of ours to purchase a business with this type of lease contract.

Apart from the obvious freeholds there are, rarely, straight rental contracts, again these are deceiving as, in most cases, you would be required to provide a Bank Guarantee for period of the agreement, normally 12 months, plus pay one months rent in advance and two months cash returnable security payment. As you can see this amounts to a payment of approximately 22500 euros based on an average rent with VAT of 1500 in other words around 16,000 pounds! plus, at the end of your rental period, after maybe building up the business for the owner, you can be put out, also straight rentals always command higher monthly rent payments. We would never recommend this type of contract.

So, to sum-up, the only contract really applicable be it a bar a cafe or whatever is the straight forward lease contract which allows you to sell at any time and at any price regardless of what you originally paid for the business, this presents a great opportunity, if you buy right to begin with, to make a good profit.
 
We trust that this information helps, it is only a very brief explanation, remember that we go into everything in depth when our clients come over on commercial viewing trips.