Compensation for termination of the lease Art. 34 of the LAU.
«BOE» no. 282, of 11/25/1994. Law 29/1994. of November 24, of Urban Leases
Entry into force:
01/01/1995
Article 34. Compensation to the tenant.
The termination due to the expiration of the conventional term of the lease of a farm in which during the last five years a commercial activity of sale to the public has been carried out, will give the lessee the right to compensation by the lessor, provided that the lessee has stated four months before the expiration of the term, their willingness to renew the contract for a minimum of five more years and for a market rent. Market rent shall be considered to be that agreed upon by the parties; in the absence of an agreement, the one determined by the arbitrator designated by the parties.
The amount of compensation will be determined as follows:
1. If the lessee begins in the same municipality, within six months following the expiration of the lease, the exercise of the same activity to which he had been engaged, the compensation will include the expenses of the transfer and the damages derived from the loss of clientele that occurred with respect to the one it had in the previous premises, calculated with respect to that during the first six months of the new activity.
2. If the lessee initiates a different activity within six months following the termination of the lease or does not initiate any activity, and the lessor or a third party develops the same activity on the farm within the same period or one similar to that developed by the lessee, the compensation will be one monthly payment per year of the duration of the contract, with a maximum of eighteen monthly payments.
The activities typically suitable for benefiting, although only in part, from the clientele captured by the activity carried out by the lessee, will be considered related.
In case of lack of agreement between the parties on the amount of compensation, it will be set by the arbitrator appointed by them."
Compensation for termination of the lease of business premises requires a minimum contract duration of five years, this is provided for in article 34 of the Urban Leasing Law.
This precept establishes that if there is no agreement to the contrary in the contract, the lessee will be entitled to compensation for the termination of the lease of the business premises, as long as the following requirements are met:
1º.- That the receipt of this compensation by the tenant has not been expressly waived in the contract.
2º.- That the minimum duration of the lease for use other than housing (business premises) has been for at least FIVE YEARS without interruption.
3º.- That the termination of the lease contract has occurred due to the expiration of the agreed term. There will be no compensation for termination of the lease if the lessee has voluntarily withdrawn from the contract even if he has been in it for more than five years.
4º.- That a commercial activity of sale to the public has been carried out in the premises, both wholesale and retail. Leasing contracts for use other than housing whose purpose has been the rental of warehouses, offices, etc., are excluded, as they do not carry out "commercial sales to the public" activity.
5º.- In order to have the right to collect compensation for termination of the lease, the aforementioned art. 34 LAU requires the lessee to notify the lessor at least four months before expiration, of their willingness to renew the contract for a minimum of five more years, paying a market rent. The market rent will be the one agreed upon by the parties, and failing that, the one determined by an arbitrator.
Amount of compensation for termination of the lease
If after meeting all the above requirements, the landlord communicates his desire not to extend the lease, the tenant will be entitled to compensation whose amount will be determined as follows, according to two assumptions:
1º.- The tenant settles in another place in the same municipality and within the following six months dedicates himself to the same commercial activity that he had been carrying out in the place from which he left. In this case, the compensation to which you will be entitled will include the expenses of the transfer and the damages derived from the loss of clientele that occurred with respect to the one that you had in the previous premises, calculated with respect to that during the first six months of the new exercise.
2º.- The tenant in the six months following the termination of the lease does not start any commercial activity of sale to the public, or open another business within that period dedicated to a different commercial activity. In these two cases and provided that in the old premises, the landlord or a third party, within that period of six months, begin to exercise the same activity (or a related one) to which the previous tenant had been developing, the latter will be entitled to compensation. by termination of the lease of a monthly payment per year of the contract, with a maximum of eighteen monthly payments.
In short, what the law tries to compensate via compensation in favor of the tenant, is the use that the landlord or a third party may have on the clientele that the former tenant had earned during the time he was carrying out his commercial activity in that place.
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