Termination of long-term lease agreements and ‘silent renewal’

Raymundo Larraín Nesbitt, April, 21. 2019

Landlord, are you leasing long term in Spain? Read this unless you fancy locking yourself into a 8 or 10-year contract.

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Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Lawyer - Abogado
21st of April 2019

Spain has recently amended its rental laws in March 2019, in most cases to the detriment of landlords, creating serious legal obligations landlords should be acutely aware of. One of the issues that is important to understand is what happens to a long-term lease when it is over.

Most landlords wrongly assume that when the mandatory five years are up (or seven, for legal persons) the lease agreement is automatically terminated - crass mistake. If nothing is done, an automatic extension to long-term leases operates by law (known as ‘silent renewal’ in English legal jargon or prórroga tácita, in Spanish). The idea behind it is to protect and bolster furthermore tenant rights.

Silent renewal periods

For all long-term rental contracts signed on or after the 6th of March 2019:

  • Physical landlords: adds an extra 3 years to the lease. Making a long-term tenancy’s total duration 8 years.
  • Legal landlords (i.e. companies): adds an extra 3 years to the lease. Making a long-term tenancy’s total duration 10 years.

 

Example: a contract signed on the 9th of March 2019 by a private landlord. If by 2024 the landlord takes no action, the contract will be automatically extended for a further 3 years until the 8th of March 2027.

Long term tenancies (contract duration, in years)

I'll throw in a little chart to make everyone's life easier (please excuse my appalling chart abilities).

 

Landlord

No silent renewal

  With silent renewal

Physical person

5

8

Legal entity

7

10

     
     
     

How do you avoid this legal extension?

A lawyer needs to draft a formal notice of termination and serve it to your tenant by recorded delivery within a specified time limit. This must be done giving a 2-month notice if a landlord is a physical person and with a 4-month notice if the landlord is a legal person (i.e. a company).

I’m trying to sell on the property, how would this affect me?

It affects you. Under the new changes to our rental laws, any buyer acquiring a property needs to respect the whole duration of a pre-existing lease agreement until it ends. This means a buyer may have to wait several years before he is able to attain vacant possession. Needless to say, most buyers do not have the patience to put up with this, putting a damper on any house deal.

For this reason alone, it is strongly advised landlords take legal counsel before signing any lease agreement in Spain. There are many different types of rental agreements, and some will lock you into an 8 or 10-year contract if you are not mindful.

That said, there are always legal ways to circumvent such pesky matters. Talk to a lawyer, we can pre-empt such matters, so they do not jeopardize your house sale.

 

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Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on 952 19 22 88 or by completing our contact form to book an appointment.

Article originally published at IdealistaTermination of long-term lease agreements and ‘silent renewal’

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Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

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