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Freehold, Lease or Rent?

Freehold (Propiedad) 

Mortgages on ‘freehold’ premises are based on the value of the bricks and mortar.  Freehold premises are hard to come by as Spanish property titles have usually been passed down through the family and can often be owned by several members of the family.  If a Freehold becomes available it usually sells quickly, so be prepared to move fast if it is of interest.

When you purchase a freehold the legal costs will be approximately 10% of the purchase price declared. Mortgages are available up to 60% of the value of Freehold properties (subject to eligibility, normally for non-residents, residents can normally obtain 70 – 80% mortgages).

Leasehold (Traspaso)

These are the most common type of purchase. A one off payment is made to the present leaseholder buying you all the contents and goodwill of the business. The landlord is usually responsible for the bricks and mortar of the building. Leases are between 5 and 10 years generally. Legally the landlord has to be informed about the sale of the business. The new incoming leaseholder can usually get the same length of leasehold (as opposed to the remainder of the original). The landlord is permitted by Spanish law to increase the rent at the time of sale. This is not always the case, but allow approximately between 10% and 15% rent increase in your calculations.  Once the rent has been agreed and contracts exchanged, it can only be increased by the ‘cost of living index’ (currently 2% – 3%).

Rental (Alquiler)

These are also few and far between in the catering sector, more commonly for offices and empty shells. The rent for the year is usually paid in advance. A deposit is normally required.  This is refunded at the end of the contract if the inventory has not changed.