Real Estate 2020

Last Updated April 14, 2020


Law and Practice


ONTIER is located in Madrid, Oviedo, Sevilla and Santander, with more than 120 lawyers in Spain. Furthermore, the firm's multidisciplinary team of professionals stands out for its ability to provide highly customised legal advice and strategy. ONTIER’s real estate and urban planning departments are located in Madrid, providing legal advice to clients all around the Spanish territory. In this regard, ONTIER’s real estate department has consolidated experience advising investment funds, institutional investors, financial institutions, family offices, developers and construction companies, distribution chains, amongst others. In particular, the firm's professionals have been involved in the most representative transactions involving the acquisition of real estate assets and debt in recent years, related to shopping centres, office buildings, warehouses and logistics parks and residential buildings/promotions, and real estate asset-holding companies.

The main sources of real estate law are the:

  • Civil Code (Royal Decree of 24 July 1889);
  • Urban Lease Act (Law 29/94 of 24 November 1994);
  • Horizontal Property (Law 49/1960 of 21 July 1960);
  • Mortgage Act (Decree of 8 February 1946), and Mortgage Regulation (Decree of 14 February 1947, and Royal Decree 1093/1997 of 4 July 1997);
  • Land Act (Royal Decree Law 7/2015, of 30 October 2015); and
  • Building Act (Law 38/1999 of 5 November 1999).

In 2019, the volume of transactions in the real estate market has been around EUR12 billion, a little behind of 2018 figures. From largest to smallest, such figures are composed by offices (tertiary), hotels, dwelling and commercial.

Consequently, real estate investors and companies aimed at acquiring

  • leased real estate properties, in order to collect rents with solid tenants or possibilities to improve the rents of the lease agreements;
  • hotels;
  • turn-key agreements (hotels and dwelling);
  • logistic premises, for e-commerce purposes; and
  • residential units for students.

The five most relevant transactions made in 2019 have been the following:

  • the sale of Santander Headquarters (EUR3,157 billion);
  • the sale of La Finca Business Park (EUR422 billion);
  • the sale of Toledo Hospital (EUR300 billion);
  • the sale of Puerto Venecia Shopping Centre (EUR268 billion); and
  • the sale of Castellana 200 (EUR250 billion).

ONTIER advised some of the most relevant real estate transactions, eg, the purchase and sale of the Office Building located at Marcelo Spinola (Madrid), both in 2019, and the sale of Auditori Tower (Barcelona).

Finally, in 2020, the Real Estate Spanish Market is still in a good situation for investing, taking into account that there is a lot of foreign capital to invest in Build to Rent for dwelling purposes, Turn-Key transactions for logistic and hotel properties and, coming-up, co-working and co-living schemes.

Proptech is having a deep impact in the Spanish Real Estate Market, specifically development and construction in dwelling, logistic premises, offices and commercial and management of hotels or leases.

Specifically, the use of:

  • Big Data, in order to obtain detailed information of a property regarding its ownership, value appreciation, surroundings, class and wealth of people who live in the area, type of businesses in the area;
  • blockchain, for implementing payments of rents in leases (avoiding intermediary costs), for valuation of properties (acquisitions, mortgages);
  • VR (Virtual Reality) and AR (Augmented Reality) used in development and design (projects), construction and execution of works and acquisition of properties; chatbots (used by real estate agents and developers) and the use of drones for security purposes and inspections of properties; and
  • property development software (task assignment, chart visualisation, reporting and resource management, apps and platforms).

In construction, companies have been implementing AR in the design phase, green and eco-construction (parks, vertical gardens) the use of drones for movement of soils and implementation of pillars, self-repairing concrete, BIM platforms, clear aluminum, 3D printers, etc. The use of these technologies is definitely reducing the construction costs for the companies, taking into account the cost increase of the materials.

Apart from the Royal Decree enacted on 1 March 2019 (Urgent Measures Regarding Leased Dwellings) discussed in the previous Real Estate Guide, the most relevant reform made in 2019 has taken place through Law 5/2019, March 15th, which regulates the Real Estate Credit Agreements.

This Law, which has been in force since 16 June 2019:

  • affects/modifies, among other Acts, the Mortgage Law and the Civil Proceeding Law; 
  • is applicable to loan agreements, with a mortgage on a property, granted by individuals or legal entities, in favour of borrowers (individuals);
  • reinforces the transparency obligations (information, publication) for the lender to the client in a pre-contractual phase;
  • obliges the lender to check the solvency of the borrower;
  • includes some obligations and changes regarding the events of default (lack of payment of 3% of the capital or 12 monthly rents, in a first phase of the loan; and 7% of the capital and 15 monthly rents in a second phase) and maturity of the loans, repayment of the loan (fixing the maximum of a repayment fee), interest rates, opening fee, costs and expenses (notary and registry costs and taxes to be assumed by the lender); and
  • states the application of a sanctioning regime.

Regarding the taxes (Stamp Duty) to be paid by the Lender in amendment of mortgage loans, the Spanish Supreme Court, on 13 March 2019, confirmed the criteria in order to apply the Stamp Duty when the amendment affects not only the interest rate and the term, but also other financing obligations.

Although there is no Law or Act approved, the new Government (prior to its formation) agreed to regulate maximum rents prices for the leases (only for dwelling, when the tenant is an individual and in special areas where the prices are considered high). In any case, this measure will require the approval of the corresponding Autonomous Government in each case.

The freehold, which implies the full ownership of the property, is the most common property scheme. It implies that the owner holds the title and the disposal of the property, without prejudice of the fact that it is leased to third parties.

In this regard, the freehold requires (i) an ownership public deed, granted before a Public Notary; and (ii) its registration with the Land Registry.

In addition to the freehold scheme mentioned, there are other schemes commonly used:

  • Condominium (commonly used in shopping centres, logistic or commercial parks) submitted to the Condominium Law and its By-Laws, and/or co-ownership (buildings or flats) by two or more individuals or legal entities;
  • Surface Right, by which a company has the right to erect a construction on a plot, keeping the ownership of the building for a period of time, against the payment of a surface canon (tax); and
  • Bare ownership and usufruct, which means that the owner has no right to use the property, and the user is acting as an user either free of charge or paying a rent, during a period of time.

The following laws apply to transfer of title:

  • transfers of title made within the private law frame. In this regard, in general, Civil Code and Mortgage Law (apart from the tax acts) are the applicable normative. Additionally, and depending on the property to be transferred, special normative or rules may be applicable, ie, planning and zoning normative (licensing, certificate of occupancy for dwelling, heritage restrictions if the property has been declared as a protected building or is included in a protected area) special sectorial normative (roads, aerial, coasts, etc);
  • transfers of title, of public properties ready to be transmitted, made by Public Administrations. The applicable law is 33/2003, November 3rd.

According to the Civil Code, the legal transfer of the title is completed when title and possession of a property are assigned to a third party. In sale and purchase schemes, this occurs when the seller accepts the offer made by the buyer (property to be sold, the price and its payment) and this can be validated by means of either verbal or written agreements.

It is market practice that the parties include all their pacts within a written agreement, either in private or before a Public Notary. In the first scenario, private agreements include all the terms and conditions agreed by the parties, one of them being its price and payment. In these private agreements, it is common accepted that the buyer pays a deposit of 10% of the price, with the rest (90%) to be paid when the Sale and Purchase Deed is executed before a public Notary.

The execution of a Sale and Purchase Public Deed before a public Notary implies the transfer of title and possession of a property in the same act, and makes proof of the date and the parties who have signed the deed. Once the public deed has been granted, the last step is to register the deed with the corresponding Land Registry, so the terms (only those related to the property) can have effects towards third parties, by which the title-holder acquires legal protection (eg, other titles, charges and encumbrances, etc).

Basically, there are two kinds of purchase schemes; direct acquisition of the asset (Asset Deal) or acquisition of the company (SPV) that owns the asset (Share Deal).

In both schemes, once a NDA (non-disclosure agreement) has been signed and a NBO (Non-Binding Offer) has been accepted by the seller, a due diligence report is commonly prepared within the exclusivity period for the purchase, and previously to submit the BO (Binding Offer).

In addition to the due diligence report, investors usually request a red-flag report, whereby key contingencies are detected and quantified, with an evaluation of the risk and closing solutions.

Real Estate, planning, and tax scheme consultancy are becoming key in the acquisition of real estate assets, in order to (i) draft the most economic structure; and (ii) revise in depth the possibilities of creating new parking spaces, executing amendment works or changing the use of the property.

The due diligence should cover:

  • ownership (in Share Deals, titles of the shares);
  • tax schemes (Asset or Share Deal);
  • corporate issues (Body of Administration, powers of attorney);
  • charges and encumbrances;
  • leases and occupancy;
  • works and co-ownership rules (title and by-laws);
  • planning, licences and permits;
  • insurances of the property;
  • supplies agreements;
  • litigation and administrative proceedings (licences); and
  • payment of property taxes.

Once the due diligence phase is finished, investors shall decide whether to file a BO, negotiating the SPA/SPD (Sale Purchase Agreement/Deed) with the seller.

Standard Representations & Warranties (RR&WW) in commercial asset deals may cover the following:

  • ownership: free and 100% ownership (which means that the ownership title has been registered with the corresponding Land Registry);
  • charges: free of charges and encumbrances (except for those listed in an Appendix);
  • occupation: free of occupants and leases (except for those listed in an Appendix);
  • third-party agreements: no agreements in favour of third parties (except for those listed in an Appendix);
  • licences: all licences and permits have been granted and are currently in force (property licences) and are listed in an Appendix;
  • taxes and expenses: no taxes, expenses or amounts related to the property are pending to be paid (except for those listed in an Appendix);
  • litigation: no litigation or administrative processes are currently under way (except for those listed in an Appendix);
  • constructive: the property is in good shape, and there is no work pending being executed;
  • environmental: free of any environmental issue (eg, asbestos);

Apart from the aforementioned RR&WW, the Civil Code (but can be waived by the parties on the SPA/SPD) states an indemnification (i) of ejectment of title in favour of the buyer; and (ii) for hidden defects, by which the buyer may request hidden defects of the property to the seller for a six-month term.

In the SPA/SPD, it is currently admitted to limit the requests, made by the buyer to the seller for a breach of the RR&WW, (i) temporarily; (ii) quantitatively (franchise, individual and basket) and for a maximum-amount liability, which is a percentage of the price (except ownership and charges); and (iii) to the contingencies arising out of the documentation received by the buyer by means of the due diligence process.

Finally, RR&WW in SPA/SPD are currently covered by insurance companies, in order to (i) open possible requests to such companies by the buyer; and (ii) prevent the parties (buyer and seller) from disputing with each other, allowing further real estate transactions.

From a buyer’s perspective, the most important areas of law for investors are:

  • title and charges (real estate);
  • licensing and planning uses (with the possibility of a change of the main use);
  • tax scheme (not only in order to decide between asset or share deal, but also the tax regime of the transaction); and
  • possibilities of financing the asset (the agreements to be signed are bankable).

The correct construction of the tax scheme is key in the acquisition of assets that are being developed (with a running activity) as hotels and shopping centres, from the perspective of VAT.

Environmental due diligences and the inclusion (Environmental Liability) as part of the set of the R&W in the SPA/SPD are currently standard in the transactions.

Furthermore, if the object of the acquisition is a plot, it is common to submit the enforceability of the SPA to the precedent condition (CP) of obtaining a positive environmental report, which may confirm that the soil is not polluted (physically and administratively). Therefore, there is a Public Registry, in each autonomous province, where contaminated soils are listed (this situation does not mean that the soil is still polluted, but administrative measures would be required in order to declassified the soil as polluted).

Legally, in a first stage, those who have caused the polluted/contaminated situation are liable to be sanctioned. In this regard, apart from eventual administrative and economic fines, the sanctioned company/individual must take the required actions to clean the soil (remediate/reverse the polluted situation).

Secondarily, and only if it is not possible to determinate or request the liability in the mentioned first stage, the owner or the occupier (who is carrying out an activity in the asset) will also be obliged to execute the aforementioned required actions.

Permitted uses are perfectly determined by municipal Plans (PGOU) in each province or city in Spain. Only through an official proceeding of changing the municipal plan can a non-permitted use be included (logistically as permitted).

Once a permitted use is confirmed by checking the municipal plan, the activity to be developed (offices, logistical, commercial) must be validated by means of the corresponding licence or responsible statement (in this case, confirmed by the Conformity Act).

The review of permitted and ancillary uses are key in a due diligence report, taking into account that investors usually want to perform works, change of tenants, other activities, etc.

On the grounds of public utility, public administrations (the State, autonomous communities or provinces) can expropriate properties, in which case an official statement of occupancy (declaring the public utility), within an administrative proceeding, is required.

For that purpose, the proceeding concludes with the payment of a compensation to the previous owner (once the appraisals made by both parties – the administration and the previous owner – have been revised, fixing a final price for the property expropriated).

Finally, when a property is protected (according to the Spanish Heritage Law) the administration (State, autonomous community or province, depending on the level of protection) has a pre-emption right/right of first refusal on the property. If the pre-emption right cannot be enforced by the administration because the owner has not notified to the administration the terms and conditions of the sale, that administration will have the right to buy the property (under the same conditions) within the next six months of the date of the sale. In this regard, the seller and the buyer are obliged to respect this right.

Two scenarios must be considered in order to determine the relevant tax implications: asset deals and share deals.

Asset Deal

Real estate transactions, carried out through an asset deal, can be subject to VAT or to Transfer Tax (Impuesto sobre Transmisiones Patrimoniales Onerosas), depending on whether the seller is considered to be an entrepreneur or a professional, or not, for tax purposes. Both VAT and transfer tax are borne by the purchaser.

Where a deal subject to VAT is applicable, stamp duty (Actos Jurídicos Documentados) has also to be considered. This tax, which is also paid by the purchaser, levies the public deed to be granted within the transaction (if certain circumstances are met).

Moreover, in the case of urban land, the transaction will also be subject to tax on the increase of urban land value (Plusvalía municipal), to be paid by the seller.

These tax implications will be detailed in the following paragraphs.


Generally, the sale of buildings carried out by entrepreneurs or professionals (VAT taxpayers) are subject to VAT, at a 21% rate (10% in the case of transfer of dwellings). In practice, VAT is declared and paid by the seller and charged to the purchaser.

Nevertheless, in the case of second and subsequent sales of buildings, as well as first transfers carried out after a two-year period of use (or lease agreement), the transactions will be VAT-exempt. This would imply that transfer tax would apply at a 6%-11% rate (depending on the Spanish region in which the asset is located). This VAT exemption can be waived by the seller if the purchaser is also a VAT taxpayer, which has the right to deduct, at least partially, the VAT borne. In such a case, a reverse charge would apply and the purchaser would have to self-charge VAT, which would be considered (at least partially) deductible.

The key point regarding the waiver of the VAT exemption becomes crucial, since, although the VAT rate is generally higher than the rate of transfer tax, only VAT is recoverable through deduction (at least partially); transfer tax implies a definitive cost for the purchaser. Consequently, in practice the VAT waiver (if applicable) is preferable.

If the transfer of real estate is part of a transfer of an independent economic unit, that transfer will not be subject to VAT and, consequently, will be subject to transfer tax. In such a case, no waiver could be applied, and the acquirer would bear a 6% - 11% rate on the market value of the asset.

Transfer tax

As previously shown, transfer tax and VAT are incompatible levies. Hence, transfer tax will be applicable only if a transaction is not subject to VAT.

In the case of transactions subject to but exempt from VAT, if the seller decides, where possible, to waive that exemption, no transfer tax would apply and the purchaser would bear a recoverable cost (if certain requirements are met).

Stamp duty

Stamp duty is applicable on notary deeds and acts which, among other requirements, are susceptible of being registered in certain public registers.

Transfer tax and stamp duty are not compatible, so only transactions subject to VAT (also in the case of a VAT waiver) will be subject to stamp duty. The applicable tax rate will depend on the region on which the asset is located. It should be noted that increased tax rates have been approved, which could amount to 2% of the value included in the public document, or higher.

Tax on the increase of urban land value

A real estate purchase, carried out through an asset deal and located in urban land, will be subject to the Increase of Urban Land Value Tax.

The taxable base will be equal to a certain percentage, depending on the period of tenancy of the asset (one year minimum and 20 maximum), applied on the land’s cadastral value. Nevertheless, this tax, which is levied by each city council,  has been declared unconstitutional in those situations in which the asset has suffered a loss of value from an economic point of view (given that this tax is assessed on cadastral value basis, not on a real market-value basis).

Share Deal

In the case of investing in Spanish real estate through a share deal, the tax costs are considerably reduced, since these kinds of deals are exempt from VAT and transfer tax if certain requirements are met.

Specifically, Section 314 of the Spanish Securities Market Act includes an anti-abuse rule in order to prevent fraudulent indirect transfers of real estate assets. In this regard, a share deal will be taxed applying the aforementioned asset deals rules if, at the least, 50% of the target company’s asset value is derived from Spanish real estate not linked to business activities and, as a consequence of the transfer, the acquirer obtains the control of that company (over a 50% stake).

In addition to the legal requirements of capacity and representation, according to Law 10/2010, April 28th, named Money Laundering Measures, obliges the servicing companies (law firms, bank and financing entities, insurance companies, auditors, real estate developers, etc) to comply with some money laundering due diligence measures, depending on the risk of the client/company.

The most relevant obligations are focused on the identification:

  • of the real holder of the shares (ie, all the companies are required to identify, by means of the corresponding Public Deed granted before a Public Notary, its latest shareholder –the last shareholder of the chain of companies);
  • of the Body of Administration (ie, directors of the company) with a specific description of the managing director of the company; and
  • of the track of the funds to be used for, eg, the acquisition of an asset.

The financing of real estate assets acquisition (asset deal) and/or company shares (share deal) in Spain is usually formalised through the figure of the loan agreement, which can be bilateral (a single financier) or syndicated (several financiers). However, the financing of real estate projects may only cover real estate asset acquisition or include those construction or renovation/refurbishment works to be carried out in order to develop the real estate project.

Additionally, there are cases in which the development of a real estate project is financed through the model of real estate financial leasing, which can also cover the acquisition of real estate asset and/or those construction or renovation/refurbishment works to be carried out in order to develop the real estate project.

The most common securities to be given by the borrower in favour of the lender are the following:

  • mortgage;
  • pledge over shares;
  • pledge over credit rights arising from agreements signed by the borrower; and
  • pledge over bank account balances.

Normally, the aforementioned securities are formalised in relation to the real estate project to be financed, so that the securities to be given are usually the following:

  • mortgage of the asset to be financed;
  • pledge over the borrower's shares;
  • pledge over credit rights arising from agreements signed by the borrower in relation with the real estate project (eg, lease agreements, sale and purchase deeds, insurance policies, construction agreements, interest rate hedging agreements, etc); and
  • pledge over the bank account balances related to the real estate project.

There are no specific legal restrictions on granting securities in favour of foreign financiers. Notwithstanding this, the financier must take into special account the jurisdiction and applicable law regulation regarding the aforementioned securities, as well as their enforcement in the case of default.

The formalisation of the securities referred to in 3.2 Typical Security Created by Commercial Investors may entail the payment of the following costs:

  • fees corresponding to the legal adviser;
  • fees corresponding to the Notary by whom the securities were granted;
  • fees corresponding to the Public Registry where the securities to be granted were registered; and
  • stamp duty which shall be accrued if the security:
    1. is granted in a public deed;

b) has a valuable content; and

c)  can be registered in a Public Registry.

In this way, taking into account that the pledges can be granted in a notarial policy, the only security to be granted in a public deed shall be the mortgage, which will accrue Stamp Duty with a tax base equal to the mortgage liability over the real estate asset and a tax rate which could vary depending on the Autonomous Community where the mortgage public deed is granted (from 0.5% to 3%).

There are no special legal requirements for an entity to formalise valid securities. Notwithstanding the above, the following two circumstances must be taken into account:

  • right of first refusal in favour of the Public Administration: in the event that the real estate asset was subjected to a legal right of first refusal in favour of the Public Administration, it must be taken into account that this right may cover not only the sale of the real estate asset but also the granting of a mortgage over it. In this way, the Public Administration must be notified of the intention to sale the real estate asset and to grant a mortgage over it;
  • financial assistance: Spanish law prohibits the financing of the acquisition of company shares (share deals) when the mentioned financing is secured by the assets owned by the company whose company shares are being purchased.

Failure by the borrower to fulfil his or her payment obligations and/or the acceleration of the agreement signed with the lender makes it possible to foreclose the guarantees that have been given. Unless otherwise agreed, the securities may be foreclosed in full or in part, and the lender may choose which security or securities forecloses first.

Regarding the foreclosure of a mortgage, it must be taken into consideration that the enforcement procedure is regulated by the law, which includes several formalities that must be taken into account in the enforcement procedure, as well as when granting the mortgage due to the fact that, in case of not complying with the mentioned formalities, it may result the impossibility of foreclosing the mortgage (eg, inclusion of an appraisal report issued in accordance with ECO regulations).

Finally, for the foreclose of the mortgage, the rank of the mortgage must be taken into consideration, since, in the case of (i) foreclosing a mortgage of a lower rank than other liens, the creditor who forecloses the mortgage will only receive the amount derived from the enforcement procedure once the secured obligations of a better rank are satisfied; or (ii) foreclosing a mortgage of a higher rank than other liens will entail the cancellation of the lower rank charges/liens.

Spanish legislation regulates the order of precedence of credits, distinguishing those that enjoy special privileges with respect to certain assets and those that do not.

As a general rule and except for those credits which enjoy privilege by virtue of the Law, subordination of debt is possible if the parties agree so.

Additionally, it is possible, by means of an agreement between the parties, to regulate the ranking of preference of those securities referred to in 3.2. Typical Security Created by Commercial Investors.

The lender will not be liable for any borrower’s breach of environmental regulations. Notwithstanding the above, in those financings in which the lender acquires the real estate asset where the environmental infringement is committed (eg, financial leasing), the owner may be liable regarding environmental law.

The insolvency of the borrower shall necessarily lead to its declaration of insolvency whose procedure is regulated by Law 22/2003, dated July 9th, on Insolvency. Without prejudice to the fact that each particular case must be analysed individually, the main effects of the declaration of insolvency are the following:

  • integration of all the creditors to the debtor in the aggregate liabilities of the insolvency proceedings;
  • possible suspension of the execution of rem securities;
  • opening of the possibility of reintegration actions, which may affect any operation/transaction (including financing and granting securities) considered to be detrimental to the aggregate assets performed by the debtor within the two years prior to the date of declaration, even though there may not have been a fraudulent intention; and
  • classification of credits secured by a mortgage as credits with special privilege.

Taking into account that the anticipated expiry of the LIBOR index by the end of 2021, advance preparation is necessary to ensure markets function properly. In this regard, the existing financial instruments that reference LIBOR and that mature later than the end of 2021 will have to be amended prior to that date in order to provide a new index (eg, SOFR [USA], SONIA [UK], SARON [SWISS], TONAR [TOKIO]).

The strategic planning and zoning are regulated by the following legislation:

  • national legislation: by means of the national legislation, the most general and basic aspects of strategic planning and zoning are regulated;
  • regional legislation: additionally, the Autonomous Communities have the power to regulate in the matter of strategic planning and zoning, approving urban planning legislation and supra-municipal planning instruments, which will be applicable only in their territory;
  • municipal legislation: finally, the municipality will exercise powers, as its own, under the terms of the national and regional legislation, in matters of planning, management, execution and urban discipline. The aforementioned powers will be exercised by means of municipal planning instruments (eg, general master plans, partial plans, etc).

For the execution of construction works of new buildings it is necessary to obtain a work licence issued by the City Council where the real estate asset is located. A work licence will also be required for executing major renovation and refurbishment works.

The works carried out will be subject to inspection by the City Council once they have been completed, for the purpose of issuing the corresponding first-occupation licence.

As indicated in 4.1 Legislative and Government Controls Applicable to Strategic Planning and Zoning, the regulatory authorities who hold the power to rule in the matter of strategic planning and zoning are the following: the state/nation, the Autonomous Communities and the City Councils.

In order to obtain the works licence referred in 4.1 Legislative and Government Controls Applicable to Strategic Planning and Zoning, it will be necessary to submit an application to the City Council where the works are to be carried out, together with the mandatory documentation, which must include all the technical documentation regarding the construction/refurbishment works to be carried out.

The application and other documentation provided must comply with the applicable planning regulations, especially with the parameters set out in the urban planning regulations.

The decisions of both regional and local authorities, which are the public administrations with the main competences in the field of urbanism, can be appealed first administratively and then before the administrative-litigious courts.

There is a legal period for appeal: one month to file an administrative appeal and two months to seek judicial review.

In contentious-administrative proceedings, it is possible to request from the court precautionary measures, such as suspension of the enforceability of the decision under appeal.

However, rulings in favour of granting the precautionary measures are not very numerous and their effectiveness is, in most cases, conditioned on the provision of a guarantee, such as a bank guarantee.

Town and country planning are also subjected to judicial control.

The Spanish Urban Planning Law grants a public action to all citizens, which entitles them to appeal to the aforementioned administrative-litigious courts.

The urban agreements are an expression of the so-called concerted urbanism. They are contracts between the local and regional planning authorities and companies and private individuals, whose purpose is to modify general or development planning or to set out certain conditions for its execution.

There are two main categories of urban agreements: planning agreements, which enable, for example, a re-zoning or reclassifying of land use, and management agreements, such as those that make it possible for the execution of planning to be speeded up or simplified.

There is a third, less frequent type: urban expropriation agreements, which are concluded during the course of a compulsory purchase administrative proceeding.

The current Urban Planning Law of some Autonomous Communities, such as Madrid, does not permit urban planning agreements.

The urban agreements are subject to the principles of legality, transparency and publicity.

The use and construction of land are subject to administrative intervention. This intervention may be of varying intensity, based on the nature of the activity to be carried out, and may be prior, simultaneous or even subsequent to the execution of the activity.

First of all, it can be articulated through urban planning licences, which are the usual instrument of control and intervention used by local administrations in this sector. They involve a prior examination and control of the activity to be carried out and a subsequent administrative act of authorisation (building licence, first occupation licence, activity licence, change-of-use licence). Although there is no standardised system in this respect, they are generally reserved for those acts of building and land use of higher intensity.

The responsible declarations and communications are typically linked to minor works, harmless activities, first use and occupation of buildings and facilities and for certain low-intensity land uses. In these situations, the sole submission of the responsible statement or communication is valid for the development of the activity, deferring public control to a time later than the start of the activity or use.

In general, the Autonomous Communities, through their urban planning laws, determine which actions require local licences (including, where appropriate, the additional intervention of the Autonomous Community, for example, in the case of actions to be carried out affecting non-developable land), which others are subject to notification or responsible declaration, and which are even exempt from any of these charges. The State, however, keeps certain competences that enable it to establish provisions in this sense, whether through the land regulations (in this respect, the Royal Legislative Decree 7/2015), or from the sectorial perspective (for example, Law 12/2012).

At present there are several corporate formulas through which an investor can own real estate assets. Taking the restrictions described in 4.7 Enforcement of Restrictions on Development and Designated Use into account, the most commonly used structures in recent years are listed below:

  • special-purpose vehicle (SPV): it is common for an investor to set up a business group in which the parent company, whether Spanish or foreign (eg, Luxembourgish or German), establishes subsidiary companies for each of the real estate projects to be developed.

These subsidiary companies (SPVs) are usually incorporated in the legal form of a public limited company (Sociedad Anónima) or a limited-liability company (Sociedad de Responsabilidad Limitada). In this way, the SPVs acquire all the rights and obligations arising from the allocated real estate project (such as the ownership of the real estate asset itself or the status of borrower regarding the financing that may be required).

Thus, liability for the real estate project to be developed is limited to the SPV incorporated for that purpose, and is not related to the other projects that the investor may be developing:

  • real estate investment funds (Fondo de Inversión Inmobiliaria, FII): FIIs are open-ended non-financial collective investment institutions, regulated as assets without legal personality, which allocate their assets to invest in any type of urban property for lease. The administration of an FII must be carried out by a management company;
  • a Spanish Real Estate Investment Company (Sociedad de Inversión Inmobiliaria, SII): SIIs are closed-ended non-financial collective investment institutions which allocate their assets to invest in any type of urban property for lease. The SIIs must adopt the legal form of a public limited company (Sociedad Anónima), and its management may be carried out through a management company or by itself (its board of directors);
  • a Spanish REIT (Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario, SOCIMI): the SOCIMIs are public limited companies (Sociedad Anónima) listed, whose main purpose is the

       (a) acquisition and development of urban real estate assets for lease;

(b) holding of shares of other SOCIMIs or other entities whose main purpose is the acquisition of urban real estate assets for lease; and

(c) holding of shares in Real Estate Collective Investment Institutions (FII and SII). The investment through the model of the SOCIMI entails a special tax regime regulated in the referred Law 11/2009, dated October 26th, on a Spanish REIT.

The main features of the constitution of each type of entity are:


Corporate enterprises are formed under an agreement concluded by and between two or more parties or, in the case of single-member companies, under a unilateral instrument. The Company formation must be formalised in a public deed, which must be registered in the Commercial Registry.

The public deed of incorporation of any corporate enterprise is to include at least the following:

  • the identity of the partner(s) or shareholder(s);
  • the determination to incorporate a corporate enterprise, specifying the legal corporate form;
  • the contributions made or, in the case of a public limited company (Sociedad Anónima), committed to by each partner or shareholder, as well as the numbers of the stakes or shares attributed thereto as consideration;
  • the company by-laws; and
  • the identity of the person or people initially entrusted with company management and representation.


Once the required authorisation to be issued by the Spanish National Securities Market Commission (CNMV) has been obtained, the FII will be set up by means of one or more initial contributions, which must be formalised by means of an agreement between the management company and a holder (depositario) that may be executed in a public deed. The FII must also be registered with the CNMV.


Once the required authorisation to be issued by the CNMV has been obtained, the SII will be set up by means of a public deed of incorporation of a public limited company (Sociedad Anónima) and its registration in the Commercial Registry. The SII must also be registered with the CNMV.

In order to formalise the incorporation of the SII, the regulation provided in the Royal Legislative Decree 1/2010, dated July 2nd, approving the consolidated text of the Capital Companies Law regarding the incorporation of public limited company (Sociedad Anónima) must be taken into consideration, as well as the specific applicable regulation (ie, Law 35/2003, dated November 4th, on Collective Investment Institutions and Royal Decree 1082/2012, dated July 13th, approving the development regulation of Law 35/2003).


The SOCIMIS shall be incorporated as a public limited company (Sociedad Anónima) and listed on the stock market in accordance with the provisions provided in the Capital Companies Law, as well as with the specific applicable regulation (ie, Law 11/2009, dated October 26th, on the Spanish REIT and Law 24/1988, dated July 28th, on the Stock Market).

The minimum capital requirements for these entities are as follows:

  • SPV:

(a)       for a limited liability company (Sociedad de Responsabilidad Limitada) is EUR3,000;

(b)       for a public limited company (Sociedad Anónima) is EUR60,000;

  • FII: EUR9 million of minimum initial assets fully paid;
  • SII: EUR9 million;
  • SOCIMI: EUR5 million.

Regarding the entities referred to in section 5.1 Types of Entities Available to Investors to Hold Real Estate Assets, the main governance requirements are as follows:

  • information duties: the regulation regarding the SOCIMI, FII and SII provides additional information duties for capital companies, which must be complied with. Furthermore, penalties may be imposed if the aforementioned entities fail to comply with their information duties;
  • criminal compliance: the implementation of a programme which includes surveillance and control measures suitable for preventing crimes or significantly reducing the risk of their commission within a company is advisable, for the purpose of promoting respect for the law and, additionally, avoiding or mitigating the criminal risk of the company in relation to criminal acts that may have been committed by its employees for its benefit;
  • anti-money laundering: the regulation on anti-money laundering classifies as obliged subjects, among others,

       (a) real estate developers;

       (b) professionals who carry out commission or real estate brokerage activities;

       (c) legal advisers;

       (d) notaries;

       (e) property and commercial registries; and

       (f) credit institutions, which are obliged to identify any natural or legal person with whom they intend to establish business relations or intervene in any operations, as well as their real owner. The obliged subjects must identify the real owner and take appropriate measures to verify its identity prior to the establishment of business relations or the execution of any operation.

Therefore, any investor should take into consideration that (i) as a real estate developer, he or she may be an obliged subject regarding Law 10/2010 of April 28th on the prevention of money laundering and the Anti-Money Laundering Spanish Law, and (ii) as a real estate investor, several professionals with whom he or she will be in contact (legal advisers, notaries, sellers, financial institutions, etc) will have the position of an obliged subject and, therefore, will require the identification of the investor, including its real owner.

  • Data Protection: it is relevant for the investors to comply with the data protection regulation, especially with the Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation).

The maintenance of the entities referred to in 5.1 Types of Entities Available to Investors to Hold Real Estate Assets will involve the need to carry out certain tasks and/or hire the following services:

  • accounting: every capital company is obliged to keep and maintain its accounts, and must draw up, approve and submit to the Commercial Registry the annual accounts of each financial year;
  • auditing of accounts: the general rule provided in the regulations is that all capital companies must have their annual accounts audited, excepting those which do not exceed the thresholds established in the Capital Companies Law (ie, assets, net annual sales and average number of employees). In the case of the FII and the SII (for which it is mandatory in all cases), this audit duty extends to the management company hired;
  • fees: with respect to FIIs and SIIs, it should be noted that the law allows management companies and holders to receive management and deposit fees. It should be borne in mind that, in the case of SIIs, it is not mandatory to hire a management company, and therefore the fees indicated may not have to be paid.

The most common contracts are the following:

  • lease agreement: regulated by the Urban Lease Act (ULA) when the object is a construction (dwellings, premises and buildings, etc) or by the Civil Code when the object is not a building;
  • surface right: regulated, basically, by the Royal Legislative Decree 7/2015, of October 30th, it allows the surface right-holder to build on other people's land, to raise new plants above the ground or to build under the ground of other people's land, in exchange, normally (it may be free), for a fee or periodic canon (tax). Therefore, the surface right allows separation of the ownership of the land from the ownership of that which is built on it. At the end of the agreed period, the ownership of the building will revert to the landowner;
  • beneficial interest: regulated by the Civil Code, it allows the usufructuary to possess, use and enjoy a property. It grants the usufructuary more rights over the property than those corresponding to the tenant. It must have a duration period.

Less frequent, but also regulated by the Civil Code, would be the right of use and habitation and the emphyteutic right.

Non-dwelling leases (as opposed to those for residential purposes) are those of which the main purpose for the urban real estate asset is not to satisfy the permanent housing need of the tenant. Therefore, this category includes leases of buildings for the development of commercial, craft, professional, recreational, welfare, cultural or educational activities.

Such leases are regulated by agreement of the parties, by the provisions of the ULA and by the provisions of the Civil Code.

However, leases in which real estate and facilities are jointly leased to develop a business activity are considered as an industrial lease agreement, regulated by the Civil Code.

The rent in lease agreements, whether they are subject to the ULA (ie, dwelling leases and non-dwelling leases) or to the Civil Code, will be freely agreed between the parties, with no limit to the amount to be applicable.

The payment of rent is usually monthly. However, it is also common, especially in non-dwelling leases, to find quarterly, half-yearly or annual rents.

Regarding the duration of a lease, in accordance with the provisions of the ULA, two situations are provided for:

  • in dwelling leases, the duration of the lease agreement will be freely agreed between the parties, but respecting the limits provided for in the ULA. In this sense, in accordance with Article 9 of the ULA, the lessee may remain in the dwelling for up to a maximum of five years, if the lessor is a natural person, and up to a maximum of seven years, if the lessor is a legal person;
  • in non-dwelling leases, the duration of the lease agreement will be agreed between the parties, with no minimum nor maximum period implemented by the law.

As mentioned in 6.3 Regulations of Rents or Lease Terms, the rent is usually paid monthly in advance.

Regarding maintenance, in accordance with the provisions of the ULA (Article 21) and the Civil Code (Article 1554), the lessor is obliged to carry out all repairs to the property that are necessary in order to keep it in a state that serves its intended use, while the lessee will be responsible for small repairs that are as a consequence of the ordinary use of the property.

It is usual for the parties to agree on a system for updating the rent annually, referencing it to a variable index (the Consumer Price Index is the most common). In this sense, it is important to highlight that if the parties have not expressly agreed on a system for updating the rent, it may not be modified by the parties during the term of the lease (Article 18 of the ULA).

Likewise, following the reform carried out by RDL 7/2019, of March 1st, the legislator imposes a limit on the updating of rent in the case of dwelling leases, which may not exceed the result of applying the percentage variation experienced by the Consumer Price Index on the date of each update, taking as the reference month for the update the one corresponding to the last index published on the date of the agreement's update.

Finally, it is common, especially in non-dwellings, to find mixed systems of fixed rent and variable rent and staggered rent systems.

As indicated in 6.5 Rent Variation, the parties usually agree on a system for updating the rent, the determination and procedure of which they are obliged to comply with.

The rent in dwelling lease agreements are subject to and exempt from the payment of VAT. Conversely, the rent in non-dwelling lease agreements are subject to and not exempt from VAT.

A legal deposit of one month’s rent in dwelling lease agreements, or two months in non-dwelling lease agreements, must be delivered by the tenant.

It is also usual to have additional guarantees (eg, bank deposit, bank guarantee, comfort letters, etc), which must, in all cases, comply with the limits provided by Article 36 of the ULA, introduced by RDL 7/2019 of March 1st.

There may also be expenses related to taking out insurance, especially in non-dwelling lease agreements.

Finally, there may be expenses associated with the refurbishment of the premises, in case it was necessary to adapt it to the intended use or to obtain the corresponding activity licences. In this sense, there are frequent agreements between lessor and lessee allowing the execution of such works and even agreeing on discounts on rent or periods of grace while such works are being carried out.

As previously indicated, the landlord often pays for any (serious) expenses or damage that prevents the property from being used for its intended purpose, while the tenant only pays for minor damage or repairs that are the result or product of ordinary use.

When the execution of conservation work may not be reasonably deferred until the conclusion of the lease, the lessee is obliged to bear it. Notwithstanding the above, if the work lasts more than 20 days, the rent shall be reduced in proportion to the part of the property of which the lessee has been deprived.

The tenant negotiates, contracts and pays for all those services that can be individualised, or subrogated in the existing contracts signed by the owner.

In those cases where it is not possible to individualise the expenses, due to the lack of individual meters, the tenant will only pay the percentage of the total that corresponds to his or her usage.

In lease agreements, especially in non-dwelling lease agreements, it is common that the lessor takes out property damage insurance and the tenant takes out damage insurance concerning their content and the civil liability related to their activity.

According to Article 1555 of the Civil Code, the lessee is obliged to use the leased property as a diligent parent, assigning it to the agreed use. Similarly, Article 27 of the ULA states that the lessor may terminate the lease if the tenant maliciously damages the rental property or if annoying, unhealthy, harmful, dangerous or uncivil activities take place in the dwelling.

From the provisions of the aforementioned articles, and many others that could be cited in this area, it is clear that the lessor may terminate the contract when the property is used for a different purpose than that agreed or when activities are being carried out in the property that are prohibited by the by-laws or are not permitted by law.

Likewise, in the case of non-dwelling lease agreements, it is common for the parties to agree to terminate the contract in the event that the landlord or tenant does not obtain the required licences.

In accordance with the provisions of Articles 23 and 30 of the ULA (which refers in this point to the stipulations of Article 23 for residential leases), the lessee may not carry out works that may alter the configuration of the property without the prior written consent of the lessor, who may be able to terminate the agreement or to require the lessee, at the end of the agreement, to return the property to its original state or to preserve the works carried out (in which case the lessee is not entitled to any compensation).

Notwithstanding these provisions, especially in lease agreements for use other than residential, it is common for the parties to agree which works may be carried out by the lessee and under what conditions; that is, whether prior and express consent by the lessee is required, etc.

In accordance with the provisions of Articles 23 and 30 of the LAU (which refers to the provisions of Article 23 for dwelling leases), the lessee may not carry out work that modifies the configuration of the property without the prior written consent of the lessor, who may terminate the contract or require the lessee (once the lease agreement has expired) to restore the property to its original state or preserve the work carried out (in which case the lessee is not entitled to compensation).

Notwithstanding the above, especially in non-dwelling leases, it is customary for the parties to agree which works the tenant may carry out and under what conditions.

The special regulation in terms of leases is found in the Law of Urban Leases on 1994, which introduces a protecting regulation in favour of the lessor in relation to residential leasing (especially since the last modification of the law, carried out by the RDL 7/2019, on March 1st) and is more liberal or balanced for the parties with regard to leasing for use other than residential.

The declared insolvency of the tenant does not necessarily result in the termination of the lease agreement.

In the event of failure of payment, the lessor may initiate an eviction action against the debtor, which may be stopped by the bankruptcy administrator prior to the insolvency declaration.

In order to terminate the lease agreement, the insolvent tenant itself or the insolvency administration may request the termination of that lease agreement. In the event of convenience, in terms of financial recovery, the judge will order the termination of the lease agreement.

Furthermore, the parties to the contract may agree as a cause of termination the insolvency of the tenant.

In accordance with the provisions of Article 36 of the ULA (which is mandatory), the tenant must provide a deposit equivalent to one month's rent in residential lease agreements and two months' rent in lease agreements for use other than residential, which will be returned within one month of the termination of the lease agreement, provided that the property is returned in a proper condition.

In addition to the deposit, the parties may agree on additional guarantees, such as bank deposits, bank guarantees, comfort letters, etc. With regard to the additional guarantees and in the case of housing leases, it is important to respect the new limits introduced in this sense by the RDL 7/2019, on March 1st.

Article 1566 of the Civil Code stipulates a tacit renewal of the lease, once the lease has expired because the agreed period has elapsed, if the tenant continues to enjoy the property for a period of fifteen days, by paying the rent, and with the consent of the lessor. The lease agreement is considered extended by one year if the rent was fixed annually or by one month if the rent was fixed monthly.

In terms of residential leases, according to the provisions of the ULA:

  • the contract may not be assigned by the lessee without the written consent of the lessor. In the event of assignment, the assignee shall be subrogated to the position of the assignor against the lessor;
  • the leased property may only be sub-leased partially and with the prior written consent of the landlord. The right of the sub-lessee shall, in any event, be waived when the right of the lessee who has sub-leased the property is waived. The price of the sub-lease may not exceed the price of the lease under any circumstances.

Regarding leases for use other than residential, the ULA will apply in the absence of agreement between the parties. This law states that, when a business or professional activity is carried out on the leased property, the lessee may sublease the property or assign the lease contract without the consent of the lessor, but in this case the lessor has the right to increase the rent.

In accordance with the provisions of Article 1,124 of the Civil Code, the failure of any party to comply with the obligations of the lease agreement entitles the other party to claim the specific fulfilment of the obligation or to terminate the contract.

Likewise, in conformity with the ULA, the lessor may terminate the contract in the following events:

  • if the tenant fails to pay the rent, the legal deposit or any other amount required;
  • in the case of assignment, or sub-lease if this is forbidden, or if the consent of the landlord was required;
  • malicious damage within the property, or undertaking works not consented to by the landlord when that consent was necessary;
  • if the tenant carries out disturbing, insalubrious, damaging, dangerous or illegal activities in the property; and
  • if there is a change of use of the property that was not authorised by the landlord.

Similarly, the tenant may terminate the contract on the following grounds:

  • if the landlord fails to carry out necessary repairs in the property for the agreed use; and
  • disturbance, in fact or in law, that the landlord causes in the use of the property (eg, fit-out works carried out by the landlord which disturb the tenant's activities).

The lease agreement is registrable in the land registry, owing to its nature as a right in rem.

Generally, the lease agreements that are not registered in the land registry are not prejudicial to the third-party purchaser of the property who meets the requirements of Article 34 LH.

Notwithstanding the aforementioned, in accordance with Article 14 of the ULA and subsequent to its modification introduced by the RDL 7Ç/2019, on March 1st, in residential leases, the purchaser of a leased property will be subrogated to the rights and obligations assumed by the lessor during the first five years of the contract, or seven years if the previous lessor was a legal entity, even if the requirements of Article 34 of the Mortgage Law are met.

If the agreed duration is longer than five years, or seven years if the previous lessor is a legal entity, the purchaser will be subrogated for the entire agreed duration, unless the requirements of Article 34 of the Mortgage Law are met. In this case, the purchaser shall only have to pay the rent for the time remaining to the end of the five-year period, or seven years in the case of a legal entity, and the seller shall compensate the lessee with an amount equal to one month of the rent for each year of the contract exceeding the aforementioned five-year period, or seven years if the previous lessor was a legal entity.

When the parties have agreed the configuration of the sale of the property as a resolution cause, the purchaser will only have to pay the rent for the time remaining before the end of the five-year period, or seven years if the previous owner was a legal entity.

With regard to leases for uses other than residential, the purchaser of the leased property will also be subrogated in the contract unless the purchaser complies with the requirements of Article 34 of the Law.

Once the lease agreement has been terminated for any reason, the lessee will be required to leave the property.

The duration of the eviction procedure depends on the judicial district of the place where the property is located, but, in general, it can last from six to 12 months.

In addition to the possibility of termination of the agreement by the third purchaser, provided he or she meets the requirements of Article 34 of the Mortgage Law, and the provisions of Article 14 of the ULA (question 20), in the framework of insolvency proceeding, the judge may admit the termination of the lease if it is convenient to ensure the viability of the insolvent party.

Fixed-price or lump-sum are the most common structures used to price construction projects in the contracts, including a total fixed price for all the work. There are also other variable structures as the unit pricing is not commonly used in practice.

There is no contractual limitation, although the Civil Code in its Article 1,593 stipulates that the architect or contractor of a building construction for a lump sum may not request an increase in the price, even if there is an increment in the cost of wages or materials. However, there is an exception to the previous provision in the event of any change made to the plan which involves an increase in the scope of the building works, provided that the owner has given his or her approval.

The Law 38/99, of November 5th, on Building Regulations regulates the civil responsibility of the agents involved in the construction. According to this legislation, the building agents — developer, designer, constructor, project manager and construction manager — are those natural or legal individuals involved in the development of the design and construction of a project, and consequently, responsible for a variety of obligations deriving from their involvement in the work.

In relation to the general responsibility of the construction agents:

  • over a period of ten years this will involve flaws and defects affecting structural elements that could compromise the resistance and stability of the building;
  • during a period of three years, they will be responsible for the material damages occasioned to the building by flaws or defects of the construction elements, resulting in the failure to comply with the habitability requirements.

The constructor will be also responsible for the material damages of flaws and defects of execution which affect building completion elements, during the first year.

In this sense, the liability of the building agents is defined as personal and individual. Exceptionally, when the cause of the material damage cannot be identified, and in the event that, in the presence of a concurrence of faults, the degree of participation of each of the agents could not be determined, the responsibility shall be required jointly and severally. Moreover, the solidarity in the case of the developers for the material damages caused to the property due to construction flaws or defects will be extended to the remaining parties involved in the construction before the buyers.

The management of construction risk begins with the drafting of a list of potential contingencies that may arise during the development of the construction project, in order to avoid, mitigate, transfer or assume them. The main risks to be contemplated are the following:

  • contractual: sanctions for non-compliance with the obligations stipulated in the agreements;
  • competition: offering competitive prices and conditions in order to achieve a position in the market, consequently avoiding the loss of opportunities against competitors;
  • labour: possible injuries or damages suffered by the workers or personnel involved in the execution of their construction activities;
  • financial: including the failure to meet sales targets, the rising of interest rates, economy problems, over-trading, etc;
  • natural: meteorological phenomena such as earthquakes, hurricanes, floods, etc, that could affect the construction works or installations;
  • project: imposition of excessive or inadequate company policies, failure to comply with them, inadequate project management, inaccurate forecasting of resources and expenses to be incurred.

Once identified, the risks can be managed through different mechanisms, such as limitations or exclusions of responsibilities, retentions, indemnities, insurances or collateral warranties.

The schedule-related risk arises in the event of delay of contractually agreed milestones or completion dates. Under the Civil Code, the contractor will be liable for construction delays if they are caused deliberately or negligently, but the assumptions of force majeure will not be attributable to him or her.

In this regard, the agreements contain a provision for penalties in the event of failure to comply with the milestones or completion dates agreed by the contractor, consisting of the payment by the contractor of an amount fixed by the parties, for each day of delay.

The system of security to guarantee a contractor’s performance considers an insurance against material damage or financial guarantee, in order to ensure, for a one-year period, the compensation of flaws or defects of the construction elements or, alternatively, will make a deduction of 5% of the cost of the work. Therefore, in the absence of property damage insurance or a guarantee, the developer will withhold 5% of the cost of the construction work. Once the work has been completed and delivered, the developer will be able to use the  withheld amount to cover the cost of repairs, if any exist, and in their absence, he or she must return the total amount within a maximum period of a year from the delivery of the building.

The guarantees of the parent company or the company providing bank guarantees, or a letter of credit in favour of the employer, are also standard practices to provide additional security.

Under Spanish law, the credits resulting from the non-payment do not have rem affection. Based on the consideration of the payment as a principal obligation by virtue of Article 1,124 of the Civil Code, in the event of default, the contractor would be entitled to terminate the works agreement or to claim its compulsory performance, both with the payment of damages.

This will be executed by means of a claim procedure amount demanding the compulsory enforcement of the assets owned by the debtor, excluding the preferences contemplated in Article 1,923 of the Civil Code. In order to ensure the enforcement of the judgment, the contractor should request the registration in the Land Registry as a preventive measure, either (i) the seizure of the assets owned by the debtor, or (ii) the preventive annotation of the demand.

The termination of the construction works will be determined by the issuance of a final works certificate. Subsequently, the autonomous urban legislation requires the developer to obtain a first-occupation licence from the city council, in order to verify that the work carried out complies with the project for which the licence was granted, and that it can be destined for a residential use.

Conversely, if the intention is to open a business, the obtaining of an activity licence will be required, by virtue of which the city council accredits that the building complies with all the requirements stipulated for the performance of a certain commercial activity. Furthermore, it will verify compliance with security measures, for clients as well as workers, and the environmental regulations.

Finally, it would be necessary to apply for the opening licence, which will enable the opening of the establishment to the public.

For general tax implications arising from the sale of assets, see 2.10 Taxes Applicable to a Transaction.

Additionally, the VAT exemption for second and subsequent sales of assets would not be applicable if the sale results from of a call option under a leasing agreement, exercised (anticipated or common exercise) once ten years have elapsed from the signing of the contract.

Also, if the continuous use/lease for a minimum two-year period requirement is only partially met, the tax exemption regarding second and subsequent sales of the building would be proportionally applicable.

The indirect tax impact derived from the real estate acquisition is significantly reduced in the case of share deals, whenever the anti-abuse clause stated in Section 314 of the Spanish Securities Market Law does not become applicable.

The ownership on business real estate is subject to Real Estate Tax. This levy is charged and managed by the City Councils and assessed on a cadastral value basis.

In the case of share deals, a foreign investor will be subject to a 19% tax rate of the dividends paid by Spanish subsidiaries (non-resident withholding tax).

If the investment is carried out through an asset deal, the rental incomes perceived in Spain by foreign investors not acting in Spain through a permanent establishment will be subject to a general non-residents' tax of 24%. This rate is reduced to 19% in the case of EU/EEA tax residents.

In the case of the sale of real estate assets by foreign investor not acting through a permanent establishment, the arising capital gains will be subject to a 19% tax rate. In such a case, the purchaser will be obliged to withhold 3% of the purchase price. This withholding will be part of the amount to be paid by the investor (payment on account).

Nevertheless, the conventions for the avoidance of double taxation signed by the Kingdom of Spain must be considered on a case-by-case basis.

Spain has instated its own Real Estate Investment Trust (REIT) regime, known as “Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario (SOCIMI)”. Such entities, under certain corporate and investment requirements (EUR5 million minimum share capital), are taxed at a 0% rate.

Dividends paid to non-resident investors would bear a maximum of 19% withholding tax in Spain (which could be reduced according to international regulations/conventions for the avoidance of double taxation).

However, capital gains derived from the sale of stakes lower than 5% will not be subject to withholding tax in Spain.

Notwithstanding, the applicability of this tax regimen must be analysed on a case-by-case basis.

Apart from the SOCIMI special tax regime, entities whose main economic activity is the lease of dwellings located in Spanish territory would apply, under certain requirements, a special tax regime that includes an 85% reduction on the incomes perceived from such activity.


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ONTIER is located in Madrid, Oviedo, Sevilla and Santander, with more than 120 lawyers in Spain. Furthermore, the firm's multidisciplinary team of professionals stands out for its ability to provide highly customised legal advice and strategy. ONTIER’s real estate and urban planning departments are located in Madrid, providing legal advice to clients all around the Spanish territory. In this regard, ONTIER’s real estate department has consolidated experience advising investment funds, institutional investors, financial institutions, family offices, developers and construction companies, distribution chains, amongst others. In particular, the firm's professionals have been involved in the most representative transactions involving the acquisition of real estate assets and debt in recent years, related to shopping centres, office buildings, warehouses and logistics parks and residential buildings/promotions, and real estate asset-holding companies.

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