7 questions about buying and selling leased properties in Spain

1. The sale of a rented property: Is it a legal operation?

The sale of a rented property is a perfectly valid operation from a legal point of view. However, it may have a series of limitations depending on the regulatory regime to which the lease was subject, determined by the date on which it was signed.

Any landlord, at any time, can sell a rented property. It will be a different matter if the lessee has certain rights, either over the property or in relation to the continuity of the lease.

At present, we can find housing leases subject to four different regimes:

1. LAU of 1964 (those signed before 1 January 1995).

2. LAU of 1994 (those signed between 1 January 1995 and 5 June 2013)

3. LAU of 1994, after the reform carried out by Law 4/2013 (as from 6 June 2013 and - except for a short period - until 1 March 2019)

4. LAU of 1994, after the reforms of Royal Decree-Law 7/2019 (as from 1 March 2019).

The date of the lease is essential as it will determine the obligation of the new buyer to respect the lease or not, and for how long.

2. What steps must be taken by a landlord who wants to sell a property that is currently rented?

The steps to be taken by the owner will depend on the legal regime to which the lease is subject, so the first step is to check the legal regime applicable to the lease. Having the advice of a lawyer specialised in the matter is a key point for the success of the operation and the shortening of the deadlines.

The steps to be taken by the landlord depend on the legal regime of the contract, so having the advice of a specialised lawyer is a key factor for the success of the operation. 

For example, it is more than likely that the tenant has a "right of first refusal". This right is regulated in the LAU and implies the possibility for the tenant to match the offer received by the landlord for the purchase of the property. The waiver by the tenant of this right is only possible in leases after 6 June 2013.

In any case, it should be noted that, legally, the lessor-seller cannot terminate the lease as a result of the sale of the property, as such termination would be the responsibility of the purchaser, if the termination of the lease is possible.

3. From the buyer's point of view, what aspects must be taken into account before signing the purchase contract?

Since, as we have pointed out, the tenant's rights depend on the legal regime governing the lease, the buyer must pay close attention to this aspect, since his position may vary considerably.

The purchaser of a rented property must carefully analyse the lease contract and the applicable regulations, as this will determine the rights that, as a purchaser, he may have over the property.

In particular, the buyer must take into consideration the tenant's rights over the property: pre-emptive acquisition rights, rights of continuance of the contract, as well as the right to terminate the contract.

The buyer of a rented property is always subrogated to the existing contract, even if he can later terminate the contract for various reasons.

Since the buyer is obligatorily subrogated to the lease, the risk of the purchase of a rented property must be properly weighed up, because even if the law allows him to terminate the lease, the tenant may not want to leave the property. Therefore, there is always a high risk of ending up in legal proceedings to evict the tenant, without the possibility of occupying the property for a prolonged period of time.

4. With regard to the tenant, what are the tenant's rights if the landlord informs the tenant that he/she is going to sell the property in which he/she resides?

The tenant's rights are determined by the date on which the lease is signed, which determines the applicable legal regime.

1. In leases prior to 1995, the buyer is legally obliged to be subrogated to the lease, which will remain in force and be extended indefinitely.

2. For leases signed between 1 January 1995 and 5 June 2013, the buyer is obliged to subrogate himself to the lease and respect a minimum duration of 5 years. If these 5 years have already passed and the contract is in the additional extension of 3 years, we understand that this must also be respected, and the contract can only be terminated if the so-called "necessity clause" was included.

3. For leases after 6 June 2013 and until 1 March 2019, things get even more complicated, as the rights may vary between three different scenarios. In any case, the most common scenario in these leases would be that the buyer can terminate the lease, and the tenant can claim damages from the seller.

4. In leases after 1 March 2019, the minimum legal duration must be respected (5 years if the original lessor was a natural person, or 7 years if the lessor was a legal person).

5. Can the transaction be completed and the tenant continue to live in the property?

In reality, whenever the transaction is carried out with a lease in force, the lease remains in force after the sale and purchase, given that what occurs by operation of law is the subrogation of the purchaser to the position of lessor in the lease contract.

The lease is not terminated as a consequence of the sale, but the new acquirer has to respect it to a greater or lesser extent, as we have seen above.

6. The sale of leased properties is a booming phenomenon, is it also profitable?

The profitability of the operation will depend on the purpose for which it is carried out by the buyer:

1. If you buy the property as an investment, having a tenant with a valid contract and a clean payment history may be one of the reasons that encourage you to buy (as we explain in this post).

2. If you are doing the deal to meet your housing needs, the profitability will depend on several factors, notably:

   1. Whether or not the lease can be terminated early (which will depend on the legal regime to which it is subject).

   2. Whether the tenant is likely to agree to leave voluntarily or whether legal proceedings are necessary.

   3. The price reduction obtained with respect to the comparables as a result of acquiring a house "with a bug".

7. What advice should be borne in mind when selling a rented property?

In all property purchase and sale operations, whether you are a buyer or a seller, it is advisable to consult a specialised lawyer to advise you on the legal implications of the operation and to indicate the best legal formula for carrying it out.

The lawyer is the only professional involved in a real estate transaction who will provide legal advice on behalf of the client and exclusively defend his client's interests.