Although it may seem strange, law firms are often consulted regarding such matters, especially since the acquisition of properties with tenants at low prices by investment funds has become increasingly common, which have come to dominate “vulture funds”.
It’s curious that when signing a lease agreement, we tend to thoroughly examine and question the clauses related to the duration of the agreement, the price, withdrawal from the agreement, or the deposit. Yet it is much less common for us to question a clause that is now omnipresent in such agreements: relinquishment of the preemptive right to purchase.
This clause is usually written in the following terms: the lessee expressly relinquishes their preemptive right to purchase in the manner and under the terms established in art. 25 of the Law on Urban Leases.
The reason that this clause has been incorporated into the majority of rental agreements lies in the enactment of Law 4/2013, of 4 June, on measures to promote and increase the flexibility of the rental housing market. Article 1, section 16 of this law modified article 25, section 8 of Law 29/1994, of 24 November, on Urban Leases (LAU) with the following wording:
“Notwithstanding the provisions of the previous sections, the parties may agree to the lessee’s relinquishment of their preemptive right to purchase.”
Before the reform, section 8 contained very different content:
“The agreement by which the lessee relinquishes their rights of first refusal shall be valid in contracts with an agreed-upon duration of more than five years.”
Therefore, it was not very common to find a clause relinquishing preemptive rights to purchase in lease agreements prior to June 6, 2013 (the date Law 4/2013 went into effect).
Returning to the premise that serves as the title of our article, in the case that the owner has decided to sell the home we have rented/leased, our options to exercise the preemptive right to purchase will largely depend on whether our agreement was drafted before or after Law 4/2013 went into effect.
But what is the preemptive right to purchase? Well, no more, no less than the lessee’s option to acquire the home, excluding or displacing any other possible purchaser.
This right is divided into two phases, or rather the lessee (tenant) is given two opportunities to purchase the home for themselves:
- Preemption: The lessee has a period of 30 calendar days to exercise their preemptive right of first refusal. This period begins the day after notification in a reliable manner (i.e., leaving a record that the lessee has received the communication) of the decision to sell the rented property, the price, and the other key conditions of its sale. After 180 calendar days (i.e., including holidays), it will be understood that the lessee does not wish to exercise their right of first refusal.
- Redemption: This is the right to displace the owner who has already purchased the property. Specifically, this second phase of the preemptive right to purchase comes into play when the sale has already been completed with the lessor having neglected the aforementioned notification obligation, having omitted any of the requirements demanded during the sale, or the effective sale price having turned out to be lower or their remaining key conditions having turned out to be less burdensome. The lessee has 30 calendar days to exercise this right. We’ll see how later, but first let’s see when these 30 days must be counted from. Article 25.3 of the LAU tells us that they must be counted from the day after the notification, once again in a reliable manner, that the purchaser must make to the lessee regarding the key conditions under which the purchase was made. This notification requires the delivery of a copy of the deed or document in which it was formalized. However, the case law of the Spanish Supreme Court interprets that said notification is not necessary in the event that the lessee has knowledge of the fact of its sale and its key conditions via another channel. It is important to keep in mind that the lessee must currently occupy the home, and must be the lessee of the entire property being sold. If the lessor is selling a portion of a property larger than that the lessee has leased, exercising this right is not possible.
The lessee (or “redeemer”, if they wish to exercise their right) must reimburse the purchaser (person redeemed from) for the purchase price, in addition to contract expenses, any other legitimate payment made for the sale, and the necessary expenses made on the thing sold. That said, how is this redemption carried out?
Nothing prevents the redemption from being handled out of court. However, mutual agreement by the redeemer and the person redeemed from will be necessary. Thus a request made by the redeeming lessee to the person redeemed from notifying them of their decision to exercise their right is not sufficient. This unilateral action would result in the notary issuing a simple record. What would be required is a deed involving both parties which leaves a record of the right being exercised.
However, common practice is to exercise the redemption by filing a timely legal claim with the courts. Thus, it should be kept in mind that in the event of disagreement between the parties, the legal claim must be filed before the legally established deadline.
We cannot fail to point out the need to rely on a trusted attorney, such as the professionals working at ICN LEGAL, in such cases, since legislators did not indicate the appropriate procedural channel for exercising urban lease redemption claims. Let’s not let ourselves be eaten by the “vultures”.
Managing Partner at ICN LEGAL