• Residential lease

A residential lease is a lease of real estate with the purpose of establishing the tenant’s permanent residence.

• Non-residential lease

Specifically, seasonal leases, second residences and leases for industrial, commercial, professional, recreational, assistance or cultural activities, regardless of the person who holds them, are considered non-residential leases. Plot leases, industrial leases and other similar leases are also excluded from the category of residential leases.

• Lease work and lease service

Both types of lease are similar in that one party agrees to perform a specific job or provide a specific service and the other party pays a certain price.

Residential leases and non-residential leases are regulated by the Urban Leases Act (LAU) of 1994, as amended by Royal Decree Act 7/2019 of 1 March 2019 of urgent measures regarding housing and rent.

For residential leases, some sections of the LAU are compulsory but the parties can also reach some agreements based on their will, as indicated in the framework of Section II (which mainly regulates residential leases). However, for those aspects not contained in the Act, the parties may decide the terms and conditions to apply. The non-residential lease is in principle governed by the will of the parties and failing that, by the provisions of the LAU. Additionally, the Civil Code is supplementary in both cases.

A new law has been recently enacted (Law 12/2023 of 24 May, for the right to housing “New Housing Law”) which provides the possibility that certain regions of Spain are declared areas with a strained residential market, in which case rental prices will be limited in certain conditions, among other limitations.

There is no maximum term. However, the law establishes a minimum term for residential leases.

The residential lease term is freely agreed upon between the parties. However, the LAU establishes a compulsory minimum term of five years if the landlord is a natural person and seven years if it is a legal entity. In case the lease has been agreed for a period shorter than five or seven years, as applicable, the lease shall be deemed extended for additional periods of one year until the minimum term established by law is reached.

The following are some exceptions to the minimum term rule:

• The tenant may give 30 days’ notice of his or her wish not to extend the lease
• The landlord may recover possession of the property before the expiry of the three-year minimum term if he or she can duly justify the need to occupy the property as his or her permanent residence (or for the permanent residence of his or her close relatives, or his or her spouse in case of divorce)

After the minimum term, the lease term may be extended as agreed by the parties. However, if none of the parties have notified the other party (at least four months in advance in the case of the landlord and at least two months in advance in the case of the tenant) of their will not to renew it, the lease will be mandatorily extended for annual terms up to a maximum of three more years, unless the tenant expresses to the landlord one month in advance of the termination date of any of the annuities, their desire not to renew the contract.

Additional extensions may apply in case that the conditions of the New Housing law are met (which are related to the declaration of areas of with a strained residential market and the vulnerability of the tenant).

The non-residential lease term is freely agreed between the parties but in case it is not agreed or determined, the provisions of the Civil Code will apply. As a general rule, if the term of the lease is not specifically indicated, it will be the same as the rent payment term. Thus, if the rent payment term is established on an annual basis, the lease term shall be deemed to be annual. The same shall apply for terms of months or days. In such cases, the lease terms will be automatically renewed for such periods upon the conclusion of the previous terms if the parties have not served each other notice of their wish not to renew.

Generally, terms are five to seven years for residential leases and three to 10 years for non-residential leases.

There are none in a residential lease but in the non-residential lease, it depends on the agreement between the parties.

Typical causes of termination in residential leases are as follows:

• Loss of the property
• When the property is declared in ruin by the competent administrative authority
• Expiry of the lease term
• Death of the tenant, if there is no right of subrogation in the lease by the tenant’s family
• Breach of rent payment obligations by the tenant
• Tenant’s execution of unauthorized works in the property
• Unauthorized assignment or subletting by the tenant
• Annoying, dangerous, unhealthy or illegal activities by the tenant
• Breach by the tenant of the building’s internal regulations

The following, on the other hand, are typical causes of termination in non-residential leases:

• Failure to pay rent or similar obligations
• Failure to pay the security deposit
• Failure to provide, to renew or to complement (in case of enforcement) the first demand bank guarantee, when agreed at the contract
• Annoying, dangerous, unhealthy or illegal activities
• Unauthorized assignment or sublet by the tenant
• Any other breach of essential obligations by the tenant

The tenant is also entitled to terminate the lease agreement early when the landlord fails to fulfill any of his/her obligations under the law or the lease agreement to guarantee peaceful possession of the leased property by the tenant.

No, but it is usually paid in euros.

• Residential leases

Rent is paid as agreed between the parties, but in the absence of agreement, it shall be paid on a monthly basis. Payment must be made within the first seven days of the month. In any event, the landlord may request prepayment of more than one monthly rent payment.

• Non-residential leases

Rent is paid as agreed between the parties.

Rent is reviewed through the system agreed upon by the parties. The most typical systems to carry out such review are the following:

• The review to adapt the rent to the current market value, which could be through appraisal by a real estate expert
• The review to adapt the rent to the Consumer Price Index (limitation of 2% with respect to the annual update of the rent in the case of residential leases for part of the years 2022 and 2023 due to extraordinary rates of inflation)
• Establishment of a scale of rent increases through the rent term

The basic obligation of the landlord is to guarantee that the tenant enjoys peaceful possession of the property through the lease term and can use it for the purposes established in the lease agreement. This means that the landlord shall undertake, at his or her own cost, all necessary works to keep the property in the agreed conditions to be enjoyed by the tenant. In some cases, such works may entitle the landlord to increase the rent.

In turn, the tenant’s essential obligations consist of keeping the property in said conditions through appropriate maintenance, undertaking the necessary repairs, using it for the purpose indicated in the lease agreement and paying the rent and other related amounts in due course.

The right to sublet may be agreed between the landlord and the tenant, and so established in the lease agreement. Exercise of such right by the tenant may include certain requirements and guarantees to be provided by the tenant.

In residential leases, if something is not specifically provided for in the lease agreement, the tenant may not sublet without the prior written consent of the landlord.

It is a cause for termination of the lease.

The landlord is the party that takes out insurance on the leased property and recovers the cost from the tenant. However, the tenant is liable for any material damage caused to the property by its occupation under the lease, and at times the lease imposes the obligation for the tenant to take out relevant insurance to the landlord’s benefit.

In residential leases, the purchaser of a leased property will be subrogated to the rights and obligations of the landlord during the first five years of the lease, or seven years if the previous landlord were a legal entity, even when the lease is not registered in the property registry.

In non-residential leases, it will depend on what has been agreed between the parties in the lease. If nothing has been agreed on, the purchaser will be subrogated in the rights and obligations of the landlord (the lease will survive), except that the requirements of Article 34 of the Mortgage Act apply (good faith and appearance in the property registry that the owner is entitled to transfer the property, except that the purchaser was aware that the information provided for in the property registry was inaccurate or incorrect).

In residential leases entered into before 6 June 2013, if the foreclosure takes place during the first five years of the contract, the tenant will have the right to keep the lease contract until the fifth year of its term. In contracts with an agreed term of more than five years, if the foreclosure takes place after the first five years of the lease, the lease contract will be considered extinguished. However, if the contract with an agreed term of more than five years has been registered in the property registry before the mortgage is, the lease contract will be in force until the end of the period agreed in the same.

Residential lease agreements entered into on or after 6 June 2013 and before 7 March 2019, the tenant will only have right to continue with the contract in force until the end of the agreed period if it has been registered in the property registry before the enforcement of the mortgage. Otherwise, the lease agreement will be extinguished. In such case, the tenant would have the right to continue occupying the premises for three additional months and to seek compensation from the landlord.

In non-residential leases, the terms will be as agreed between the parties. If nothing is agreed between the parties in this regard, the contract will survive until the end of the period agreed in the same, unless under the following circumstances:

• The new owner, in accordance with good faith principles, did not know about the lease
• The lease contract is not registered in the property registry

With regards to leases entered into as of 7 March 2019:

• In residential leases, if during the first five years of the lease, or seven years if the landlord is a legal entity, the landlord's right is terminated by the exercise of compulsory alienation derived from a foreclosure or judicial sentence, the tenant shall have the right, in any case, to continue in the lease until the end of five or seven years respectively, without prejudice to the power of non-renewal. In contracts with an agreed term of more than five or seven years, if the foreclosure takes place after that term, the lease contract will be considered extinguished. However, if the contract has been registered in the property registry before the mortgage is, the lease contract will be in force until the end of the period agreed in the same.
• In non-residential leases, in cases of foreclosure there is still some doctrinal discussion. The latest case-law (STS 783/2021, of November 15) establishes that non-registered leases for use other than housing, or those registered after the foreclosed mortgage, are ineffective against the successful bidder, so that the transfer of the property causes in this case the termination of the lease at the request of the former.