How does rent-to-own work in Spain?

Renting with a purchase option (rent-to-own) is an atypical contract, not contemplated by the Law and which is not expressly regulated in the Civil Code, although it is accepted and recognized in the Mortgage Regulations and in the Urban Leasing Law (LAU). For this reason, it is very important that all the conditions are very well specified in the contract.

It is mandatory that, at least, two essential conditions of the sale are stipulated in it: the object of the contract and the price. This means that the decision to purchase a home is passed on to the tenant after the marked years of lease and the agreed selling price of the home at the time of signing the contract, minus the amount of rent and the initial subscription.

As it is a double contract, it is convenient that it clearly reflects all the conditions related to the lease and the purchase.

Rental contract

• Term during which the tenant can be leased in the house.
• Period during which the tenant can exercise their right to purchase.
• Amount of monthly rental income.
• Who bears the expenses of the community or of a possible reform.

Purchase contract

• The willingness that the landlord will sell the home to the tenant if he is interested in buying it.
• Sale price of the house.
• Amount of the initial subscription contributed by the lessee (if any) for the right to purchase, normally set based on a percentage of the agreed sale price.
• Rental conditions with option to buy.

When making the contract, it is not essential to set an initial subscription for the right to purchase option, but it is recommended for the owner. It should be clear that the subscription and the fees invested in the rent will be lost if the tenant does not exercise the option to purchase.

The tenant has the right to remain leased in the house for the years that the rental contract lasts. The tenant can extend, if the owner consents, the rental contract. The owner has the obligation to maintain the contract and not assign, rent or sell the apartment to third parties during the duration of the contract. The tenant has exclusivity in the purchase of the house within the term established in the contract to exercise his right to option. The sale price cannot be modified by the owner or by the tenant. The rental price, however, can vary depending on the CPI if the owner so requires.

The contract can be registered in the property registry so that it is enforceable to third parties.

As they are subject to the Onerous Asset Transfer Tax, these contracts can give rise to different tax situations:

If only the term and the price of the house are specified, during the lease, the tenant may deduct the rent and the owner must declare what he received.

If the tenant pays the landlord the initial subscription for the option right, the landlord must declare that gain.

More information you can obtain consulting with Despacho Lamas specialists in real estate affairs.