Can an old lease be extended in the event of a transfer?

In our entry on the legal regime for the termination of old rental contracts, we pointed out the possibility of the continuation of certain old rental contracts beyond 1 January 2015, in cases in which the lessee, on 1 January 1995, was a natural person.

We also pointed out the possibility that, in the event of a valid transfer, these contracts could be extended beyond 1 January 2015 (although in reality the date set by the Law was 24 November 2015, insofar as it referred to 20 years after the law was passed).

The legal regime applicable to transfers of premises entered into before 9 May 1985 by an individual is regulated in the Third Transitional Provision of the LAU 1994, although it is a complex regime that is difficult to interpret.

Can an old lease be extended in the event of a transfer?

In this respect, Transitional Provision Three, section B allows the individual tenant who was the tenant on 1 January 1995 and his or her spouse, if he or she has been subrogated to the contract, to transfer the business premises. If such a transfer takes place, the lease will continue "for a minimum of 10 years or for the number of years remaining after the transfer until 20 years from the passing of the law" (i.e. until 24 November 2014).

It therefore provides for the possibility of a transfer, establishing two criteria with regard to the duration of the lease transferred:

• Minimum duration of 10 years; or

• For the number of years remaining from the moment the transfer is made until 20 years from the passing of the law (24 November 1994).

Clearly, the LAU 1994 foresees the possibility that the current lessee (the one who was the lessee at the time of entry into force of the LAU 1994), may carry out a transfer under the terms of Article 32 TRLAU 1964, but when determining the duration, it establishes two criteria:

• Minimum duration of 10 years.

• By the number of years remaining from the moment the transfer is made until 20 years from the passing of the law (24 November 1994).

Therefore, the Law speaks of a "minimum duration of 10 years from the transfer" or "the remaining years until 20 years have elapsed". Thus, it can be understood that the minimum duration to be respected is always 10 years, with "the remaining years until the 20th anniversary of the passing of the law" being an extra for those transfers made between 1995 and 2005.

In the case of a transfer of a lease of old rental premises by the tenant, who was the natural person on 1 January 1995, the new tenant is entitled to an additional 10 years of the lease, regardless of the date of transfer.

What does the case law say?

The case law has also decided in the same direction. For example, the STS of 12 March 2015 states that:

"SIXTH.- Consequences of the appeal being upheld and of the instance being taken over.

(...) Therefore, having requested in the claim, as far as is relevant here, the declaration that the contract in dispute would be terminated on 1 January 2015, this Chamber must decide, as the court of first instance, whether or not to uphold this claim, as one of the respondent-appellants has been arguing, from its response to the claim until its opposition to the present appeal, that even if the d.t. 3ª LAU 1994 were applicable, the contract would not be terminated on 1 January 2015. 3ª LAU 1994, the contract would not be terminated until 17 March 2021 due to a valid transfer carried out on 17 March 2011, an issue on which the judgments of the court of first instance did not reach a decision as they considered the 1st d.t. LAU 1994 to be applicable and not the 3rd d.t. LAU 1994.

The issue must be resolved by dismissing the claim because, having validly transferred the premises from one natural person to others after the entry into force of the LAU 1994 and before twenty years from its approval, the fifth paragraph of section B), paragraph 5, must be applied. 3. of the third d.t. of the LAU 1994, which states 3ª LAU 1994, which establishes "the continuation of the lease for a minimum of ten years from its completion (that of the transfer)", taking as the date of the latter, according to the last paragraph of the same section, "that of the deed referred to in article 32 of the revised text of the Urban Leases Act 1964", which in the present case was 17 March 2011. Consequently, the date of termination of the disputed contract could not be 1 January 2015, as requested in the lawsuit, but 17 March 2021".

What if the transfer is after 2015?

In case of a transfer after 2015, we understand that there is no problem in applying the same legal consequences: being in force the lease and meeting the necessary requirements for it, the lessee may validly enter into a transfer and, if it does so, this will have a "minimum duration of 10 years from the date on which it was made", since the regulations only temporarily limit the time at which a subrogation in the lease can be made when it is a descendant, so that, in the opposite sense, we must interpret that there is no limitation to make the transfer beyond 1 January 2015.

The law does not temporarily limit the time at which the natural person tenant can carry out a transfer of his business.

However, we must point out that this criterion will only apply to those persons to whom the LAU expressly recognises this power of transfer, which are the individual tenant who was a tenant in 1995 or his or her subrogated spouse. The rest of the lessees (subrogated lessees, descendants, etc.) will not have this power of transfer.

As a consequence, it is very important to seek advice from a specialist lawyer before entering into a transfer agreement, as it will be necessary to analyse the circumstances of the lease in depth in order to determine the rights of the new tenant.