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Commercial Property

Spain

Overview
Including: Purchase of Real Estate; Ground Lease; Mortgages over Real Estate; Other Security Rights over Real Estate Property; Lease of Business Premises.

A recent amendment to the Insolvency Act lifts certain barriers to the sale of real estate during bankruptcy proceedings. As well as relaxing the requirements that prevented receivers from selling real estate without court approval, the new law allows for the sale of property that is subject to special privileges (eg, mortgages) at a lower price than that agreed when the relevant security was created, provided that it matches the market value.

The Spanish mortgage protection system is considered to be sound in terms of affording legal certainty to users. However, it is often criticised for failing to reflect the reality and needs of today's shifting financial landscape. The General Directorate of Registries and Notaries has issued new guidance in relation to the legal foundations of mortgages which should create greater flexibility for the financing of developments.

Future occupiers of buildings which are still under development should consider changing their role and partnering in the development by sharing ownership with the landowner, rather than taking a lease. By becoming a ground tenant, rather than merely a tenant, the occupier will share in the construction costs, but in principle can freely depreciate this investment in its corporate income tax return.

A turnkey project would usually involve a pre-letting agreement with the end user, which would take the future building on an operational lease for a minimum compulsory period that allows the landowner to obtain the return of its investment. Forthcoming changes to lease accountancy will require the end user to account for the entire rent due in such contracts as 'assets' and 'liabilities'.

Unsure as to whether to safeguard banks' funds or allow citizens to offer their homes in payment for the cancellation of mortgage debts, and unable to come down on either side, the government has enacted a royal decree-law entitled "Measures to Support Mortgage Debtors". While offering property in payment will not always clear debts, it will cost banks 10% more to acquire such properties through foreclosure.

The issue of whether credit institutions should assume liability for the mortgages they give to finance the purchase of a home has recently come to the fore. Of particular concern is whether they should agree not to receive more than the value at which they appraised the dwelling or take the dwelling for that value. Consideration focuses on Article 140 of the Mortgage Law - arguably the most under-used article in Spanish law.

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Employment & Labour

Spain

An increasing number of Spanish and multinational organizations are comprised of separate companies which act as a single employer to their respective employees. While the courts have considered the consequences of such activities on worker assignments and company group liability, there are still many issues on which judicial interpretations are not sufficiently clear.

Including: Legal Framework; Workers Statute; Employment Contract; Trial Period; Working Hours; Remuneration; Suspension; Termination; Non-competition; Social Security; Employee Representation; Health and Safety; Working Licences and Permits.

The Supreme Court has ruled that employee stock options will generally be considered as salary, and may be included as such when calculating compensation for dismissal. However, a labour court recently held that stock options will not be considered as salary for such purposes if they are governed by foreign law, which is generally the case.

Projects & Procurement

Spain

The Public Sector Contracts Act, which implemented the EU Public Sector Procurement Directive, has introduced a new category of public contract in Spain - the public-private collaboration contract. This innovation has sparked debate among authors and commentators. Such contracts can be entered into only once the alternative models have been explored and rejected.