Leasing premises for a franchise: what to check in Spain

Premises may suit a brand’s image yet still become a contractual burden. When you join a franchise network, you normally take on two separate commitments: an agreement with the franchisor and a lease with the landlord. Reviewing them together before signing helps ensure that your business does not depend on rights nobody has guaranteed you.

1. Check who is letting the premises and what you can do there

Request an official summary extract (nota simple) from Spain’s Land Registry and verify that the person signing has authority to let the property. If a representative is involved, check their powers. If the franchisor offers you a sublease, also ask for the head lease: you need to know whether subletting is permitted, how long the lease runs and what would happen if it ended.

Leases of commercial premises are classified as leases for purposes other than residential use under Spain’s Law 29/1994 on Urban Leases. They are governed primarily by the agreed terms; where these do not address an issue, Title III of that law applies, with the Civil Code providing supplementary rules. Do not assume that the protections associated with residential tenancies apply.

Before committing, commission a technical assessment of the premises against the requirements of your specific business activity. Check compatibility with local planning rules and the applicable requirements for accessibility, safety, ventilation, noise and fume extraction. Also review any restrictions imposed by the building’s owners’ association that could affect installations, the façade or the activity itself.

The franchisor’s commercial approval is no substitute for technical checks or the necessary administrative authorisations. Obtain these separately and keep the findings in writing.

2. Calculate occupancy costs beyond the rent

The advertised rent does not necessarily represent everything you will pay to occupy the premises. Prepare a breakdown showing each cost, who is responsible for it and how it may change:

• Initial rent and the rent review mechanism.
• Building service charges, taxes and other costs passed on to you.
• Utility account set-up, connections and any necessary upgrades.
• Repairs, maintenance and inspections of building systems.
• Required insurance and costs of formalising the lease or using an intermediary.
• Security deposit and additional guarantees.

Spain’s Urban Leases Law requires a cash security deposit equivalent to two months’ rent for non-residential leases. This is not a fee, nor does it automatically replace payment of the final months’ rent. Additional guarantees may also be agreed; the specific cap applying to certain guarantees for residential tenancies does not simply carry over to commercial premises.

Clarify the tax treatment of invoices with your adviser, including withholding tax where applicable. If a rent-free period is offered during fit-out works, specify exactly which payments are suspended: it may temporarily remove the rent while leaving other charges payable.

3. Align the lease with the franchise agreement

Compare both documents in a single table: start date, term, extensions, notice periods and consequences of termination. Similar terms are not enough if the expiry dates or renewal conditions differ.

For example, if the lease continues after the franchise agreement ends, you could still owe rent without being able to trade under the brand. If the lease ends first, you could remain bound by obligations to the franchisor without having premises to operate from. Negotiate explicit solutions, such as a break option with defined notice and compensation terms, or an extension agreed with the landlord. Do not assume you have an automatic right to walk away from the lease.

In Spain, Article 62 of Law 7/1996 on Retail Trade and Royal Decree 201/2010 regulate aspects of franchising. The latter requires truthful, non-misleading pre-contractual information to be provided in writing at least twenty working days before you sign a franchise agreement or preliminary agreement, or make a payment to the franchisor.

That period does not turn a lease with a third party into a cancellable reservation. If essential checks are still outstanding, negotiate conditions that must be met before the lease takes effect, with objective requirements, a deadline and clear financial consequences.

4. Agree the works and the condition in which the premises must be returned

Identify the works needed to adapt the property and obtain the relevant approvals before carrying them out. The lease should allocate responsibility for design, permits, execution, damage and cost overruns arising from the premises’ pre-existing condition.

It should also clarify what happens when you hand the premises back: removal of signage, dismantling of equipment, retention of improvements and any requirement to reinstate the original condition. These obligations can involve substantial expenditure even if the fit-out has been fully paid for.

Review the assignment and subletting clauses. The statutory rules for commercial premises allow certain options, but the lease terms may modify them. If the brand requires the right to replace you with another operator, that requirement must be compatible with the rights granted by the landlord; the franchise agreement does not, by itself, bind the landlord.

Practical takeaway: do not sign a lease simply because the brand approves the location. Establish technical feasibility, calculate the full cost and align the lease term, works and handback requirements with your obligations as a franchisee, in writing.