The right of preemption in the Urban Leases Law

26 November, 2024
–
Real Estate
–
Neus Vallara


The Urban Leases Law establishes a right of preemption in favor of tenants, provided they have not waived this right in the contract. The existence of this right does not prevent the sale of the property, although it is important to understand in which cases this right exists and in which it does not.

!📢You can listen to the episode on the right of preemption for tenants in our podcast “Inmobiliariamente” at this link.

What is the right of preemption?

The right of preemption is a right that gives priority to the person holding it to acquire the property over third parties. The Urban Leases Law, specifically in Article 25.1, states that “in case of sale of the rented dwelling, the tenant shall have a right of preemption over it, under the conditions set forth in the following sections”.

This right of preemption is divided into the right of first refusal and the right of redemption, depending on when the tenant exercises the right:

Right of first refusal: This is exercised before the planned sale by the landlord. Thus, before the transfer, the landlord must notify the tenant of their decision to sell the rented property, specifying the price and other essential conditions of the sale. The tenant will then have thirty calendar days, starting from the day after the decision is notified in a reliable manner, to exercise their right of first refusal.

Notification of the right of first refusal expires 180 calendar days after it is given. If the landlord does not complete the sale within this period, they must notify the tenant again.

Right of redemption: This is exercised after the sale has already been completed. The tenant may exercise this right if:

- They were not given the notification required for the right of first refusal. - The prior notification was defective due to missing mandatory information. - The sale occurred at a lower price or under less onerous conditions than those stated in the notification.

The right of redemption expires thirty calendar days from the day after the tenant receives reliable notification of the sale.

When does the right of preemption not apply?

The Urban Leases Law also specifies cases where the right of preemption does not apply:

Bulk sales of properties: When the dwelling is sold together with other dwellings or premises owned by the landlord as part of the same building, or when all the properties in the building are sold collectively by various owners to a single buyer. These cases, outlined in Article 25.7, aim to facilitate bulk sales without hindrance, whether by the landlord selling all their properties in the same building or by multiple owners selling the entire building to a single buyer.

Waiver by the tenant: Article 25.8 allows the tenant to waive their right of preemption. This waiver applies to future sales and is usually included in the rental contract. Such waivers are valid for contracts formalized after June 5, 2013, when this amendment to the Urban Leases Law came into force. For contracts signed before June 5, 2013, the waiver is only valid if the agreed duration of the lease exceeds five years, as required by the previous version of Article 25.8. Importantly, this five-year period refers to the agreed term in the contract, not any mandatory extensions that may have extended the lease beyond five years. At the time of the waiver, there must be an explicit agreement confirming that the contract term exceeds five years.

In addition to the Urban Leases Law, other scenarios where the right of preemption does not apply have been defined through case law:

Garage spaces: Unless the rental of a garage space is ancillary to the rental of a dwelling, such spaces are not subject to the Urban Leases Law, as clarified by a March 3, 2004 resolution of the Directorate-General for Registries and Notaries. Consequently, tenants of garage spaces do not have a right of preemption. However, if a garage space is rented together with a dwelling as an ancillary part, the tenant must exercise their right of preemption for both the dwelling and the garage space.

Payment in Kind: Even when payment in kind involves the transfer of property to a third party designated by a creditor, tenants do not have a right of preemption. This was clarified in a June 10, 2020 resolution by the Directorate-General for Legal Security and Public Trust. It explained that, in cases of payment in kind, even if formalized as a sale, the tenant cannot claim the right of preemption because the transfer is part of a broader debt resolution mechanism involving the cancellation of mortgages and other obligations.

Unified properties: If the tenant rents only a portion of a building that is not a separate registered property, the right of preemption does not apply, as it would disrupt the unity of the property. This was clarified by the Supreme Court in a Civil Chamber ruling on October 22, 2004. Although this ruling addressed a case under the 1964 Urban Leases Law, its reasoning also applies to the current law.

At MES Advocats, we offer comprehensive advice on real estate law. If you need more information or wish to request a quote, please contact us at this link.

###


ArrendamentsArrendamientosDerecho de adquisición preferentePreferential acquisition rightsFirst refusal rightsRight of first refusal

---