Real Estate 2026 Comparisons

Real estate law, as a specialised branch of civil law, is rooted primarily in the Spanish Civil Code of 1889 (Código Civil) and the 1978 Constitution, which underpins the entire Spanish legal system and recognises the right to private property. A range of statutes at national, regional and local level then regulate the many specific aspects of real estate practice ‒ most notably:

• the Urban Leases Act (Ley de Arrendamientos Urbanos, or LAU), governing residential and commercial tenancies;
• the Building Regulations Act (Ley de Ordenación de la Edificación), governing the construction process and the liability of the parties involved; and
• the Mortgage Act (Ley Hipotecaria), together with its implementing Mortgage Regulation (Reglamento Hipotecario), governing the Property Registry and the registration of rights over real property.

Real estate practice is further shaped by adjacent areas of law:

• mercantile law, where property is held or transacted through corporate structures;
• tax law, particularly the Transfer Tax and Stamp Duty Act (Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados, or ITP-AJD) and local property taxation; and
• environmental law, which is playing an increasingly significant role in development and construction projects.

It should also be borne in mind that Spain is a multi-legislative state. Alongside national legislation, each of Spain’s 17 autonomous regions has its own competence over matters such as urban planning and housing, so the applicable regional and local rules must always be checked alongside the national framework.

The Spanish real estate market has remained active, supported by strong residential demand, limited housing supply, and renewed investor interest across several asset classes. Madrid and Barcelona continue to dominate institutional investment, but Valencia, Málaga, the Balearic Islands, Andalucía and the Canary Islands are increasingly attracting capital where demand is supported by tourism, logistics, education, demographics, or lifestyle-led investment.

Residential prices have continued to rise – although growth has moderated. National Institute of Statistics (Instituto Nacional de Estadística, or INE) data shows national house prices increasing by 12.2% year-on-year in Q2 2026, slightly below the 12.9% recorded in Q1. The structural shortage of new housing remains one of the main drivers of affordability pressure and continues to support both prices and development activity in the most constrained locations.

CBRE Group, Inc recorded more than EUR12 billion of Spanish real estate investment in H1 2026, up 59% year-on-year. Investment was spread across living assets, hotels, offices, retail, and industrial and logistics property, with living assets remaining the largest category.

Recent Significant Real Estate Deals in Spain

Major transactions included Brookfield’s acquisition of Blackstone’s Fidere platform, HOOPP’s acquisition of full control of Iante from Ares Management, the sale of Barcelona’s Estel building to Inmocaixa, and the former Telefónica headquarters sale in Madrid, along with significant retail deals involving Islazul and a Castellana Properties retail park portfolio. Together, these transactions show continuing institutional appetite across residential, office, hotel and retail assets, with Madrid and Barcelona still generating much of the headline deal value.

Foreign demand also remains important but uneven. Coastal and lifestyle-led markets continue to record the highest overseas interest, with Alicante and Málaga remaining well above the national average. Demand has continued despite the end of the property-linked Golden Visa route, suggesting that lifestyle and long-term investment motives remain important. Spain’s Digital Nomad Visa has also supported demand from internationally mobile professionals in Madrid, Barcelona, Valencia and other remote-worker destinations.

Impact of Inflation and Interest Rates on Spanish Real Estate Market

Inflation and interest rates have had a mixed effect. Earlier European Central Bank (ECB) easing reduced mortgage costs and supported transaction activity, but renewed inflationary pressure has increased borrowing costs again. The impact has been contained by cash buyers, limited housing supply, and continued demand ‒ although borrowers increasingly favour fixed- or mixed-rate products and banks have tightened lending conditions.

Other Current Trends

Investors, developers and lenders have adapted by using more flexible financing sources and responding to changing asset demand. Private debt, bridge financing and real estate crowdfunding have become more relevant where bank finance is slower or more selective. Proptech, tokenisation and blockchain-based structures are emerging, but remain developing areas requiring careful regulatory analysis.

At the same time, housing pressure has encouraged greater use of flex-living, co-living, modular construction and ‒ where legally feasible ‒ conversion of commercial space to residential use. Distress and workouts have increased from a low base, but remain far below post-2008 levels.

Several housing and real estate reforms are either already in force or under discussion.

A proposed rental reform package would address room rentals, temporary lets, tenant pre-emption rights, VAT on short-term tourist rentals, and restrictions in high-demand areas. Its final form and timing remain uncertain and it is not clear that it will pass as currently drafted.

For a variety of technical and legal reasons, the proposed tax of up to 100% on purchases by non-EU, non-resident buyers appears most unlikely to proceed in its current form. Although submitted to Parliament in May 2025, it has not been debated or voted on, and in general faces significant parliamentary obstacles.

Short-term tourist rentals remain an active area of reform. Some measures are already in force, including local restrictions such as Málaga’s three-year suspension of new tourist apartment licences, as well as the national requirement for approval by at least 60% of a condominium’s owners before an apartment may be used for short-term tourist letting. Regulation remains highly localised, with significant variation between regions and municipalities.

The National Housing Plan 2026–30 is already in force. Its practical effect will depend on implementation agreements and funding allocation between the State and the autonomous communities. Related measures include support for affordable rental schemes, non-payment guarantees, renovation grants, and regional planning reforms intended to increase housing supply.

Other reforms to watch include the proposed Land Act reform, which would limit the annulment of urban plans for minor procedural defects, and possible listed real estate investment company (sociedad anónima cotizada de inversión en el mercado inmobiliario, or SOCIMI) tax incentives for profits reinvested in affordable rental housing. Their timing remains uncertain.

Spanish law recognises a range of property rights, from full ownership to more limited rights held over someone else’s property, as follows.

• Ownership (propiedad/dominio) ‒ this is the fullest right over a property (to use, enjoy and dispose of it, subject only to legal limitations). It is akin to a freehold interest.
• Horizontal property (propiedad horizontal) ‒ this regime governs most apartments and multi-unit buildings and refers to the exclusive private ownership of an individual unit, combined with shared ownership of the building’s common elements (structure, roof, stairwells, façade, etc).
• Usufruct (usufructo) ‒ this is the right to use and enjoy property belonging to another (including any income it generates) for a fixed term or for life, while a separate “freehold owner” retains underlying ownership. It is frequently used in inheritance and succession planning or arises as a consequence of a probate in certain cases.
• Easements/servitudes (servidumbres) ‒ these are rights benefiting one property (the dominant estate) at the expense of a neighbouring one (the servient estate), such as a right of way or rights to light and views. Easements may be established by law, by agreement, or acquired over time by prescription. They can be continuous or discontinuous, and apparent or non-apparent, depending on how they operate.
• Surface rights (derecho de superficie) ‒ these are the right to build or plant on land owned by someone else and the right to own the resulting construction for an agreed period. These rights are commonly used in long-term development arrangements.

There is no single statute governing real estate transfer in Spain. The core framework rests on:

• the Civil Code, which requires a valid title (such as a sale contract) plus a notarial deed to transfer ownership between the parties; and
• the Mortgage Act ‒ under which, Land Registry registration is not needed for the transfer to be valid between buyer and seller, but is essential to protect it against third parties.

Certain property types carry additional rules, such as:

• units in shared buildings require certification of unpaid community charges before sale;
• rented residential and rural property give sitting tenants a right of first refusal; and
• publicly subsidised housing has capped resale prices and holding periods.

Expropriated or foreclosed property follows its own procedure.

Industrial, office, retail and hotel property generally follow the same general framework, with no dedicated commercial property statute ‒ although sector-specific licences and planning permissions often need attention.

A lawful transfer of title in Spain normally requires a valid contract (such as a private purchase contract) together with delivery, most commonly through execution of a notarial public deed. Of course, transfer may also take place on a range of bases, such as a court order, dissolution of co-ownership, or probate.

Registration of transfers in the Property Registry is not required to transfer ownership between buyer and seller, but it is essential to protect that ownership against third parties. The registry operates on the basis of the chain-of-title principle and gives buyers confidence they are dealing with the true owner and provides full visibility of registered charges on the property. Registration is therefore standard practice in real estate transactions.

Title insurance exists in Spain but is far less common than in many other countries. Where used, it tends to be reserved for larger or more complex transactions.

The scope of due diligence depends on the asset, its intended use and how it is held. Buyers normally review title and seller capacity, registered charges, cadastral consistency, planning status, licences, community charges, tax debts, occupancy, physical condition, and litigation risk.

In practice, this usually involves obtaining Property Registry and cadastral information, checking the seller’s title and authority, confirming mortgages, easements or other registered rights, and verifying whether the registry and cadastral descriptions match. Planning and licence review is also central, particularly where the property is to be developed, changed in use, let for tourism or used for regulated activity.

For apartments or multi-unit buildings, buyers normally obtain community certificates and review any statutes or restrictions affecting use. Tax and debt checks usually cover IBI (impuesto sobre bienes inmuebles, which is Spain’s equivalent of council tax), utilities, and any liabilities that may attach to the property. Existing leases, occupants, physical defects, energy performance and pending litigation should also be reviewed before completion.

Spanish law gives parties broad contractual freedom to agree warranties, remedies and liability limits, subject to law, morality, and public order. In commercial real estate transactions, buyer protection therefore depends mainly on due diligence and negotiated drafting rather than extensive default statutory warranties.

Sellers commonly warrant title, capacity, planning and licence compliance, absence of undisclosed charges or litigation, accuracy of lease information, and ‒ in share deals ‒ standard corporate matters. Statutory protections may also apply: buyers may seek rescission or damages for undisclosed hidden charges or defects, and newer buildings benefit from statutory construction guarantees, including up to ten years for structural defects.

Typical remedies include indemnity, price adjustment, or rescission for serious breach. Enforcement may be supported by escrow, retention, bank guarantee, or warranty and indemnity (W&I) insurance. Ordinary warranties commonly survive for 18 to 24 months, with liability caps often around 10–30% of price; fundamental warranties are usually capped at the price or uncapped. W&I insurance is increasingly used in larger Spanish real estate transactions – although it remains less common than in some other European markets.

This will largely depend on the investor, the type of property, and its intended use. Buying Spanish real estate involves several areas of law, including:

• Ley Hipotecaria (the Mortgage Act) – this governs registration of title, charges or third-party rights;
• urban planning law – checking permitted use, zoning and planning issues;
• tax law – transfer tax or VAT on purchase, ongoing property tax, and tax on rental income or capital gains on exit;
• landlord and tenant law – lease rules and tenant rights, including rights of first refusal;
• construction law – building compliance and legal guarantees for newer or redeveloped properties;
• environmental law – permits and liability, especially for industrial or development sites;
• corporate law – relevant where the property is acquired through a company;
• foreign investment rules – restrictions, reporting duties or residency implications for non-resident buyers;
• sector-specific licensing – extra rules for hotels, tourist rentals or industrial use; and
• regional law – some regions, including Catalonia and the Basque Country, have their own property and inheritance rules.

As these areas often overlap, getting co-ordinated legal advice early on is usually the most valuable step before committing to an investment.

The seller is obligated to communicate information concerning soil pollution or environmental contamination and must declare it before the notary at the time of the sale. Likewise, enquiries should be raised regarding this matter during the purchasing process.

Establishing the permitted uses of a specific parcel in Spain requires the systematic analysis of multiple documentary sources, which together define the legal and regulatory envelope within which the site may be used and developed. The General Urban Development Plan (Plan General de Ordenación Urbana, or PGOU) is the central instrument that directly governs what may be built on a given parcel of land and the activities that may be carried on once completed.

Governmental taking of land is permitted in certain prescribed circumstances as provided by the Ley de Expropiación Forzosa of 1954 (LEF). A compulsory acquisition must meet with certain legal, material and public interest grounds before being permissible.

In the urban planning context, such grounds are typically established by operation of law: the approval of a planning instrument that designates land for a public purpose such as infrastructure, green space, social facilities, educational facilities or health facilities. Outside the planning context, the cause must be specifically declared by the competent administration ‒ typically through a legislative act or administrative resolution.

The tax treatment differs significantly between an asset deal and a share deal.

Asset Deal

A direct acquisition of Spanish real estate is generally subject either to VAT or property transfer tax (impuesto de transmisiones patrimoniales, or ITP), depending mainly on the nature of the property and the transaction. VAT subject acquisitions may be subject to stamp duty (actos jurídicos documentados, or AJD). Second and subsequent transfers of buildings are generally VAT-exempt and therefore subject to ITP, at rates determined by the relevant autonomous community. The buyer generally bears ITP and AJD, while VAT is charged by the seller to the buyer.

Share Deal

Transfers of shares are generally exempt from VAT and ITP/AJD. However, under Article 338 of Law 6/2023, the exemption may not apply where the transaction effectively seeks to avoid the taxation that would have arisen on a direct transfer of Spanish real estate. This is particularly relevant where control is acquired, or an existing controlling interest is increased, in companies whose assets consist substantially of Spanish real estate not used in a business or professional activity.

Accordingly, changes in control or partial transfers may also trigger real-estate transfer taxation in the circumstances covered by Article 338 of Law 6/2023. The applicable rates and exemptions should therefore be reviewed on a transaction-by-transaction basis, particularly in real-estate holding structures.

For the great majority of foreign real estate investors (residential purchases, standard commercial acquisitions), there are no restrictions beyond the general framework applicable to any buyer.

The foreign direct investment (FDI) screening regime is the most relevant genuine restriction for a non-EU/non-EFTA (European Free Trade Association) investor, particularly where the target involves critical infrastructure or a controlling stake in a Spanish company holding the real estate; the defence zone rule is a narrower, geographically limited exception.

A single commercial property is usually financed simply through a straightforward mortgage loan from one bank secured against that property.

Larger portfolios and company acquisitions tend to be more complex, typically financed through facilities shared between several lenders (syndicated loans or club deals), with security taken not just over the real estate itself but also over the shares in the companies that own it. Institutional debt funds, fintech and alternative lending platforms, and other non-bank lenders also play an increasingly important role alongside traditional banks in these larger deals, often providing faster and more flexible access to capital but typically at a higher cost.

For a single asset acquisition, security usually comprises a registered first mortgage, assignment of rents and bank account pledges. Larger, leveraged or development-stage transactions may also include share pledges where an SPV is used, non-possessory pledges, corporate guarantees, completion guarantees, and phased or maximum-amount mortgage structures linked to construction progress.

Generally, there is no legal restriction preventing a foreign lender from taking security over Spanish real estate or receiving loan repayments. Three practical caveats apply:

• real estate lenders operating in Spain generally need to be properly registered;
• Spain’s FDI screening regime should be checked where relevant; and
• the tax treatment of interest paid to the foreign lender ‒ including whether an EU exemption or double tax treaty relief applies – is often a key structuring issue in practice.

Granting security mainly attracts stamp duty (now generally borne by the lender), notarial fees, and registry fees. Enforcement adds further notarial, registry, and court fees, plus transfer tax on any resulting change of ownership.

In practice, lenders typically require a board resolution confirming the corporate benefit rationale before accepting real estate security in Spain. As is the case across the EU, important rules and regulations are in place regarding financial assistance, directors’ fiduciary obligations, shareholder approval concerning disposal of essential assets, and protection surrounding transactions involving related parties.

In Spain, lenders may enforce real estate security through the courts or ‒ where agreed in advance ‒ by extrajudicial notarial sale. Priority generally follows the order of mortgage registration at the Property Registry.

Court-based enforcement typically takes 12 to 24 months, depending on the region and whether the borrower contests the process. Most pandemic-era foreclosure protections have ended ‒ although protection for certain vulnerable residential tenants facing eviction for rent arrears has been extended until the end of 2026.

Foreclosures have risen from a low base, but lenders still often prefer forbearance or negotiated workouts. There is also an active market for sales of non-performing, property-backed loans to specialist investors.

Secured debt can become subordinated to new debt in Spain in two ways:

• voluntarily, where an existing mortgage lender agrees to rank behind new debt through a registered postponement; or
• automatically by law in an insolvency where certain creditors closely connected to the debtor (such as shareholders or group companies) have their claims subordinated regardless of any security held, unless a specific legal exception applies.

Both are relevant to real estate financing, particularly for shareholder loan and intercompany debt structures.

A lender is not automatically liable under Spanish environmental law simply for holding or enforcing security over real estate, given that liability is generally tied to being the “operator” of the polluting activity. Following foreclosure, however, if the lender assumes ownership of the contaminated land it could potentially be exposed to liability in certain circumstances.

A borrower’s insolvency does not automatically cancel a lender’s security, but certain risk factors must be considered. Security granted within the two years before insolvency, particularly to secure a previously unsecured debt, may be challenged and unwound by the courts. Security granted as part of an ordinary financing arrangement when the loan was made is better protected. Insolvency may also affect how and when the lender can enforce.

Mortgage loans attract stamp duty (AJD) on the notarial mortgage deed, now generally payable by the lender, plus notarial and Land Registry fees based on the secured amount. Where the mortgage secures the loan at creation, the transaction is taxed once. Mezzanine loans follow the same treatment where secured by mortgage. No national reform specifically targeting mortgage or mezzanine real estate loans is currently expected.

Spain has a three-tier planning system. The State sets the basic legal framework, the Autonomous Communities regulate planning and land use within their territories, and local councils implement policy through the General Urban Development Plan, which classifies land, sets development parameters and provides for public infrastructure.

Development rights in Spain are usually obtained through a municipal planning licence from the local council. Depending on the project, further approvals or public consultation may be required.

Local councils enforce planning rules and may impose sanctions ranging from fines to demolition orders. Serious infringements may also constitute criminal offences against territorial and urban planning, subject to prosecution by state authorities.

The most common vehicles are the private limited company (sociedad de responsabilidad limitada, or SL) and the public limited company (sociedad anónima, or SA) ‒ both of which offer limited liability and flexible management structures. Also available are listed real estate investment companies (sociedades anónimas cotizadas de inversión inmobiliaria, or SOCIMIs), which are commonly used for institutional real estate investment.

The SL and SA are incorporated by means of a public deed executed before a notary and registered at the Companies Registry, with a minimum share capital of EUR3,000 and EUR60,000 respectively. The SL may have a sole shareholder and restricts the transfer of shareholdings, whereas the SA permits the free transfer of shares and is the customary vehicle for attracting external investors. Both are subject to the standard corporate income tax rate of 25%.

The SOCIMI must take the form of a listed public limited company admitted to trading on a regulated market, with a minimum share capital of EUR5 million and at least 50 shareholders. At least 80% of their assets must be invested in income-producing real estate. They benefit from a corporate income tax rate of 0%, subject to an obligation to distribute at least 80% of profits derived from rental income.

In Spain, the equivalent of the Anglo-Saxon REIT is the SOCIMI, regulated by Law 11/2009. SOCIMIs are available both on regulated markets and on multilateral trading facilities (such as BME Growth), meaning that both public and semi-public formats exist. They are accessible to foreign investors without significant restrictions.

The principal advantages of a SOCIMI are a corporate income tax rate of 0% and the ability to access capital market financing. In order to qualify, the following requirements must be met:

• the SOCIMI must take the form of a listed public limited company with a minimum share capital of EUR5 million and at least 50 shareholders;
• at least 80% of assets must be invested in income-producing real estate;
• an obligation to distribute at least 80% of profits derived from rental income; and
• at least 70% of income must derive from rental revenues.

The minimum capital requirements for each vehicle used to invest in real estate are as follows:

• SL ‒ EUR3,000;
• SA ‒ EUR60,000 (of which, at least 25% must be paid up at the time of incorporation); and
• SOCIMI ‒ EUR5 million.

The SL requires at least one director and a general meeting of shareholders. The SA requires a management body (sole director, board of directors, or other permitted forms) and a general meeting of shareholders, with more stringent formal requirements regarding the convening of meetings and the adoption of resolutions than the SL.

The SOCIMI is additionally subject to the corporate governance requirements of the National Securities Market Commission (Comisión Nacional del Mercado de Valores, or CNMV), including the obligation to maintain a board of directors comprising independent directors, as well as audit and nomination committees.

The Corporate Transparency Act requires entities incorporated or registered in the USA to disclose their beneficial owners to the US financial authority (FinCEN). For US investors participating in Spanish real estate vehicles, this obligation may extend indirectly to Spanish structures, requiring disclosure of their participation therein for the purposes of compliance with US legislation.

Annual maintenance and compliance costs are usually lower for SLs and SAs, covering book-keeping, annual accounts, tax compliance and any required audit – commonly ranging from EUR3,000 to EUR15,000 depending on scale and complexity. SOCIMI costs are materially higher because of listed-company, audit, regulatory, investor-relations and governance obligations, and can exceed EUR100,000 annually.

Spanish legislation operates around a fundamental distinction that defines the degree of regulatory protection applicable, as follows.

• Residential lease ‒ this refers to leases of habitable buildings whose primary purpose is to satisfy the permanent housing needs of the tenant.
• Non-residential leases ‒ this type of arrangement encompasses all non-residential leases: commercial premises, offices, industrial units, seasonal lettings, and professional spaces.
• Vacation rentals ‒ this is a highly controversial topic internationally and Spain is not an exception in this regard. Increasing regulations are in place at a local, regional and national level.
• Surface right ‒ this right confers on the superficiary the faculty to carry out constructions or buildings on the surface, airspace, and subsoil of another person’s land, retaining temporary ownership of the constructions or buildings so erected.

Spanish law does not treat “commercial lease” as a separate statutory category. It normally falls within leases for use other than housing (arrendamiento para uso distinto de vivienda) under the Urban Leases Act.

In practice, the main variants are commercial premises leases, leases of industry/business (arrendamientos de industria) and temporary leases. Commercial premises leases cover retail, office, restaurant and similar business premises.

Leases of industry/business may include both the premises and the business or operating elements installed in them. Temporary leases are entered into for a defined season and do not satisfy the tenant’s permanent housing need, such as second-home, work, study or holiday accommodation outside the regulated tourist letting regime.

Residential leases are substantially regulated. Spanish law imposes a mandatory statutory framework that the parties cannot contract out of to the tenant’s detriment. If the agreed term is shorter than five years (seven where the landlord is a legal entity), the contract is automatically extended year-by-year until it reaches that minimum – although exceptions exist. The tenant may generally terminate following an initial six month period. Rent itself may also be constrained in certain circumstances.

Leases for use other than housing are normally freely negotiable as the governing principle.

In contrast to residential leases, lease agreements concerning business premises are governed primarily by the will of the parties as mentioned. There is no statutory minimum term, no mandatory rent-review index, and no cap on the level of rent that may be agreed. Duration, rent, break rights, repairing obligations and assignment or subletting rights are all matters left to negotiation between landlord and tenant.

The rent does not remain fixed for the entire lease term unless the parties expressly agree to the contrary. Spanish law imposes no mandatory index for leases of use other than housing, but it also does not guarantee that the rent stays frozen; in practice, it varies according to what the contract provides.

Most commercial leases include an annual rent review clause, commonly linked to Consumer Prices Index (CPI) or another agreed index.

There is no information on how new rent is determined in Spain.

Commercial leases are generally subject to VAT at 21% where the premises are not used exclusively as housing, including offices, retail units, industrial premises and other business premises. Residential leases are VAT-exempt where the dwelling is used as permanent housing.

The tenant’s opening cost package is largely a matter of identification of the type of lease contract in question and, in some cases, is a matter of negotiation. Overall, there are some mandatory costs that the tenant must bear in any case – although delimited by the type of contract in question.

First, there is the mandatory legal security deposit, which amounts to one month’s rent for residential leases and two months’ rent for non-residential leases.

Second, the parties may validly agree on additional guarantees beyond the statutory security deposit (bank guarantee, additional cash deposit, or personal guarantee). The value of such additional security may not exceed two months’ rent and this limit does not apply to non-residential leases, where the parties have full freedom to negotiate.

The cost of maintaining and repairing shared use areas is governed first by the terms agreed by the parties. The Urban Leases Act expressly allows the parties to pass on to the tenant the general expenses for the property’s upkeep, services, taxes, charges, and liabilities that cannot be individually allocated.

The landlord may only pass the corresponding cost on to the tenant to the extent the lease expressly allows it. Due diligence should therefore verify both the association’s current by-laws and resolutions and the exact wording of each lease’s cost pass through clause, as discrepancies between the two are a common source of post-acquisition disputes.

Individually metered utilities and telecommunications are paid by the tenant who consumes them. Commercial leases usually specify how services are contracted and how any common or non-metered costs are allocated.

The landlord is the taxpayer for council tax (IBI), but the lease may pass the cost to the tenant. This is common in commercial leases. In residential leases, taxes and other non-individualised charges may be passed on only by written agreement stating the annual amount at the contract date.

The landlord usually insures the building and fixed installations and may recover the premium through the service charge. The tenant typically insures contents, stock, equipment, tenant improvements, liability, and business interruption.

Recovery from pandemic closures has generally depended on the provisions of individual policies. Accordingly, a tenant cannot assume that rent, clean-up costs or lost turnover can be recovered merely because the premises have been closed.

A commercial landlord may restrict use by contract, including business type, product range, opening hours, signage, appearance, noise, odours, and similar matters.

Residential leases must generally remain for the tenant’s permanent housing needs; otherwise, the landlord may have grounds to terminate. Building or homeowners’ association rules may impose further restrictions.

In residential leases, tenants may not carry out works altering the dwelling or its fixtures without the landlord’s express written consent, and may never carry out works compromising the property’s stability or safety. Limited exceptions apply, including certain accessibility works.

The main distinction remains between residential leases and leases for use other than housing. Residential leases are subject to mandatory tenant protections on duration, extensions, rent rules, deposits, costs and termination. Commercial leases are generally governed by freedom of contract.

Tenant insolvency does not, by itself, terminate a lease. The lease remains in force unless terminated for a legally recognised breach or by the insolvency court under strict procedures.

Where material obligations remain outstanding on both sides, the lease is treated as an executory contract. Pre-insolvency rent and other sums are generally insolvency claims, whereas post-insolvency rent and tenant obligations must continue to be performed by the tenant or insolvency administration.

As a general rule, a tenant has no right to remain after a commercial lease expires or is terminated. The lease ends on expiry of the agreed term, without the mandatory extensions applicable to residential leases.

However, the Urban Leases Act gives non-residential tenants certain rights that investors should consider, including preferential renewal rights and compensation for customer base where the statutory conditions are met.

To avoid tacit renewal, the landlord should give notice of non-renewal within the contractually agreed period and require the tenant to vacate on expiry.

In residential leases, assignment and partial subletting require the landlord’s prior written consent, and the sublease rent may not exceed the rent payable under the main lease.

For non-residential leases where a business or professional activity is carried out, assignment and subletting are generally permitted without the landlord’s consent, subject to formal notice within one month. The landlord may increase the rent by 10% for a partial sublease and by 20% for an assignment or total sublease.

However, commercial leases commonly modify this statutory regime by requiring the landlord’s prior consent. Corporate mergers, restructurings, or spin-offs involving the tenant are not treated as assignments – although the landlord may still apply the corresponding rent increase.

In addition to the general right to terminate for material breach under Article 1124 of the Spanish Civil Code, the Urban Leases Act allows the landlord to terminate for non-payment of rent or deposit, unauthorised assignment or subletting, damage or unauthorised works, unlawful or disruptive activities, and ‒ in residential leases ‒ where the property is no longer used as the tenant’s permanent residence.

The tenant may terminate where the landlord fails to carry out required repairs or materially interferes with the tenant’s use. The lease may also terminate for objective reasons, such as loss of the property or an official declaration of ruin.

Commercial leases commonly include additional termination events, such as loss of required licences or other material business-related breaches, subject to the lease and applicable law.

Spanish law does not generally require written form or registration for a lease to be valid; the parties may choose an oral or written agreement. Clearly, oral leases are significantly harder to prove and enforce.

Registration in the Property Registry ‒ although not mandatory – creates significant advantages:

• it makes the lease enforceable against third-party purchasers protected under Article 34 of the Mortgage Act;
• it enables termination as of right for non-payment via notarial or judicial order, with direct cancellation in the Property Registry; and
• it grants the tenant priority if the landlord’s title is later terminated.

A landlord may terminate the lease and seek eviction before expiry where the tenant commits a breach entitling termination ‒ most commonly non-payment of rent or another material breach under law or the lease. Eviction usually requires judicial proceedings and, depending on the court and whether the tenant contests the claim, may take several months.

Pandemic-era eviction suspensions remain in force until 31 December 2026 for certain vulnerable households in residential proceedings, but do not generally apply to ordinary commercial leases.

A third party cannot generally terminate a private lease, but public-authority action may do so ‒ most notably, through compulsory expropriation or a final administrative declaration of ruin.

In expropriation, the lease is extinguished and the tenant is generally compensated by the expropriating authority for loss of leasehold rights. A declaration of ruin may also terminate the lease, but does not automatically carry the same statutory compensation regime.

In commercial leases, there is no general statutory cap on damages recoverable by the landlord following a tenant’s breach. In addition to termination and recovery of unpaid rent, the landlord may claim proven losses resulting from the breach, including damage to the premises, reinstatement costs, interest, and ‒ where justified ‒ loss of profits. The lease may also provide for contractual penalties or agreed compensation for early termination.

Spanish law also requires a cash deposit equal to one month’s rent for residential leases and two months’ rent for non-residential leases. Depending on the autonomous community in which the property is located, it may be necessary to deposit the security deposit with a public institution that holds it in escrow.

Additionally, an extra financial guarantee may be freely agreed upon ‒ except in the case of residential leases, where it is limited to a maximum of two months’ rent.

Construction projects in Spain are commonly priced through fixed-price, unit-price, cost-plus, guaranteed maximum price and design-and-build contracts. Fixed-price contracts place cost-overrun risk mainly on the contractor; unit-price contracts are often used where final quantities are uncertain; cost-plus and guaranteed maximum price structures are common where scope may evolve; and design-and-build contracts place both design and construction responsibility with a single contractor.

Responsibility for design and construction is usually allocated through the contractual model chosen by the owner. In a traditional model, the owner appoints the architect and technical design team, while the contractor executes the works in accordance with the approved project, building permit, and contract.

Spanish law also assigns statutory duties to the main participants in the building process, including the promoter, developer, designer, contractor, project director, execution director, and other technical agents. Their obligations derive from the contract, the Building Act, and other applicable regulations.

Construction risk is primarily managed through contractual allocation of responsibilities, using mechanisms such as indemnities, warranties, defects liability periods, insurance, retention, liability caps, exclusions of indirect or consequential damages, force majeure provisions, termination rights and dispute resolution clauses.

These mechanisms are generally enforceable in Spain, subject to the limits of mandatory law, public order, and general contract law.

Certain statutory liabilities cannot be excluded. Under the Building Act, construction agents may be liable for ten years for structural defects, three years for defects affecting habitability, and one year for defects in finishes attributable to the contractor. Liability is generally individual but may be joint and several where responsibility cannot be clearly allocated.

The contractor is usually required to notify delays within a specified period and to provide supporting documentation. Spanish law generally allows parties to agree that the owner will be entitled to monetary compensation if agreed milestones or completion dates are not met. In practice, this is commonly done through delay penalties or liquidated damages. These clauses should be drafted carefully so that the trigger, amount, cap and relationship with actual damages are clear. Spanish courts may moderate penalties in certain cases, particularly where the obligation has been partially or irregularly performed, so the clause should be proportionate and commercially justifiable.

Owners commonly require additional contractor performance security on larger or higher-risk projects, including bank guarantees or performance bonds, parent company guarantees, retention, escrow arrangements and third-party sureties. Their scope, amount and duration are negotiated in the construction contract. Spanish law does not impose a single mandatory form for private projects ‒ although general contract and guarantee rules apply. Statutory defect protections also apply under the Building Act, including the option to replace the one-year finishes guarantee with a 5% retention of the material execution cost.

Unlike some other jurisdictions, Spanish law does not generally grant an automatic lien over real property merely because the contractors’ fees remain unpaid. They must normally pursue a payment claim through the courts. Interlocutory remedies may be sought (such as an embargo preventivo) and may be inscribed in the Property Registry.

A judicial encumbrance may generally be removed by satisfying or settling the claim, successfully challenging the measure, or ‒ in appropriate cases – providing sufficient substitute security. Cancellation of a registered judicial attachment normally requires the corresponding court order.

Most frequently a habitation certificate (licence of first occupancy) will be required for new build properties. A promoter may give a temporary undertaking (declaración responsable) whereby it remains responsible for obtaining the certificate of first occupation pending town hall inspections, etc. The process typically requires evidence that the works have been completed in accordance with the approved project and applicable regulations, including the final works certificate.

Additional licences or authorisations may also be required for certain commercial, industrial or regulated activities. Accordingly, the precise requirements should always be checked at regional and municipal level before occupation or commencement of the intended use.

In Spain, the transfer of corporate real estate may be subject either to VAT or ITP (property transfer tax), depending on the nature of the transaction and the status of the seller.

Usually, first transfers of dwellings by developers are subject to VAT at the reduced rate of 10%. A super-reduced VAT rate of 4% is possible in certain instances ‒ most typically in relation to officially protected housing. The general VAT rate of 21% may apply to a range of transmissions depending on the nature of the contracting parties and user of the property in question. Stamp duty may also be payable when a transmission is subject to VAT.

Second and subsequent transfers are generally VAT-exempt and subject instead to ITP at variable rates from 6% to 11%, depending on the autonomous community.

These taxes are normally paid by the buyer, except where there is an agreement to the contrary.

The mitigation of tax costs on large real estate portfolio acquisitions may be achieved by acquiring shares in property-holding vehicles rather than the underlying assets directly. Depending on careful planning and execution, share deals may avoid VAT and ITP on the transfer of real estate.

The SOCIMI (Spain’s REIT equivalent) offers the most favourable tax treatment available ‒ a 0% corporate income tax rate on income derived from the rental and disposal of real estate assets, provided that the entity satisfies mandatory dividend distribution requirements.

In addition, real estate collective investment vehicles regulated under Law 35/2003 also benefit from significant VAT and ITP reductions on their acquisitions.

The economic activities tax (impuesto sobre actividades económicas, or IAE) is the closest Spanish equivalent to business rates. It is levied on the exercise of any commercial, professional or artistic activity, regardless of whether the business owns or leases the premises.

The IBI is an annual property tax levied on the owner of the real estate rather than the occupant. However, in commercial lease arrangements, it is common practice for landlords to pass this cost on to tenants contractually.

Foreign investors are generally subject to Spanish non-resident income tax (impuesto sobre la renta de no residentes, or IRNR) on rental income and capital gains from Spanish real estate. Rental income is taxed at 19% for EU/EEA (European Economic Area) residents, with directly related expenses deductible, and at 24% on gross income for other non-residents (including UK residents under the current regime). Where the tenant is a withholding agent, it must withhold the corresponding tax; otherwise, the non-resident landlord pays directly.

Capital gains are generally taxed at 19%, with the buyer withholding 3% of the price as a payment on account where the seller is non-resident. No general exemption applies merely because the investor is foreign ‒ although EU/EEA-resident individuals may benefit from the habitual-residence reinvestment exemption where statutory requirements are met. Double tax treaties may also provide relief from double taxation. Finally, sales of urban real estate may also be subject to urban land value tax (plusvalía municipal).

Spanish tax law offers several benefits tied to owning and operating real estate. For corporate income tax purposes, real estate used in a business is depreciable under the official depreciation table, with industrial buildings depreciating at up to 3% per year and commercial, administrative and residential buildings at up to 2% per year, while certain installations depreciate faster.

Individuals also benefit from temporary personal income tax deductions for energy-efficiency renovations ‒ ranging from 20% to 40% of costs incurred, depending on the level of energy improvement achieved. Separately, landlords can benefit from a reduction in taxable rental income, which can – in limited circumstances ‒ reach up to 90% when letting a dwelling in a designated stressed rental market at a reduced rent, with lower tiers available for other qualifying tenancies.