GIPE Newsletter (Nº24.148) February, 26th 2025

INVESTMENT IN PROPERTY:

TRANSFER OF RENTED PROPERTIES WITH AN OLD LEASE

You may have heard that purchasing a property with a lease with a mandatory extension can represent an interesting investment option. Below, we explain what factors you should consider in these cases.

Lower price. In general, a rented property usually has a lower market value than an unoccupied property. In addition, if the contract is with an old lease, the price is further reduced, since the tenant enjoys certain rights:

Mandatory extension. The tenant has the right to remain in the property until his /her death, at which time the contract will expire, unless there are relatives with the right of subrogation, such as the spouse, dependent descendants or  ascendants who have lived with him/her for at least two years before the death.

Preemptive right of purchase. If the property is put up for sale or transferred to settle a debt, the tenant has priority to acquire it through the rights of first refusal and redemption.

Although properties subject to old rent contracts usually offer more affordable prices, their availability for immediate use is limited. Therefore, this investment is recommended for the long term and only if there is no urgent need to occupy the property.

INSURANCE:

WHAT ARE THE LIMITING CLAUSES OF AN INSURANCE POLICY?

When taking out an insurance policy, the insured asset is first defined – in this case, the property – and, through a series of clauses called “limiting clauses”, the coverages included and excluded in the policy are established (such as theft, fire, etc.). These clauses do not entail a restriction of rights, but simply determine the limits of the insured risk and specify which situations are covered.

Important! There are also clauses called “limiting clauses”, which can reduce or modify the insured’s right to receive compensation. These clauses indicate in which exceptional circumstances the insurance will not be liable for the damage. It is essential to know that the law requires that these clauses be clearly highlighted (for example, in bold) to differentiate them from the rest of the contract.

Clarity and transparency. In addition, the courts require that these provisions be understandable and drafted clearly, without ambiguities or mixtures of concepts that may cause confusion. Otherwise, the insured has the right to challenge the clause before a judge and request that it not be applied.

Mandatory signature. Finally, these clauses must have the express acceptance of the insured by signing the general insurance contract. It is not enough to sign the general insurance contract; a double signature is required: one on the policy and another specifically on the limiting clause. If this requirement is not met, the exclusion cannot be applied.

SALE OF PROPERTY:

THE SALE PRICE: A CONFIDENTIAL PIECE OF INFORMATION

Registration consultation. Before purchasing a property, it is common to request a certification from the Property Registry to verify its legal status, including possible encumbrances. You may also be interested in knowing the price of the last sale, especially if you consider that the current price is too high and the seller argues that he/she cannot reduce it without incurring losses.

Please note! However, this information can only be included in the certificate in specific circumstances:

• If the parties involved are companies, individual entrepreneurs or merchants acting within their professional activity.
• If the applicant needs this information to exercise a right recognized by law, such as the right of first refusal or withdrawal.
• If the request comes from a bank in order to comply with the regulations of the Bank of Spain.

The registrar evaluates each situation individually to determine whether it is appropriate to include the purchase price in the registry information.

GIPE: Together we will be stronger.