Business Law

Spanish law provides for three main alternatives for collaborating with local partners without the need to incorporate a new commercial company: Temporary Joint Ventures (UTE), Economic Interest Groupings (AIE) and joint venture agreements.

• Temporary Joint Ventures (UTE): These lack legal personality in relation to their members and are formed specifically for the joint execution of specific projects or services, being very common in infrastructure and engineering.
• Economic Interest Groupings (EIGs): Their purpose is to facilitate, improve or increase the economic activity of their members, who are jointly and severally liable for debts, although on a subsidiary basis to the EIG itself. They are frequently used to centralise services within a business group.
• Joint ventures: These consist of agreements whereby investors contribute capital or assets to a business they do not manage, assuming both the right and the obligation to share in the respective profits or losses. These contributions are not legally considered share capital.

To market goods and services in Spain without establishing a subsidiary or branch, the law permits operating directly through commercial agreements with third parties based in the country. This operational strategy minimises exposure to corporate risk and reduces the initial administrative burden in the jurisdiction.

• Distribution, Agency or Franchise Agreements: These enable commercial penetration of the Spanish market by leveraging the infrastructure, network and resources of an independent local partner.
• Partnership Agreements: These consist of corporate collaboration agreements with a Spanish company to jointly develop and execute a specific project on a mutually beneficial basis.

The Land Registry provides absolute legal certainty to the investor, protecting them against any encumbrance not explicitly registered at the time of the transaction.

Principle of Public Faith: A purchaser acting in good faith and for valuable consideration is protected; the purchase cannot be challenged by claims not disclosed in the Land Registry.

Exceptions (Hidden Risks): Due diligence is vital because the buyer assumes certain encumbrances even if they are not recorded in the Registry, such as existing commercial leases, soil contamination, outstanding property tax (IBI) debts and outstanding owners’ association fees.

Obtaining a municipal planning certificate is imperative because the Land Registry does not certify the planning status nor guarantee that the physical characteristics of the property comply with current planning regulations.

This document, issued exclusively by the local council, is the sole legal source confirming the degree of regulatory compliance. Unlike the Land Registry, the certificate provides critical and irreplaceable technical information:

• Authorised Uses: Legally confirms whether the land or property is suitable for commercial, residential or industrial activities.
• Building Conditions: Determines the exact permitted construction parameters (maximum volume, heights, setbacks).
• Degree of Urban Development: Clarifies the actual status of the land and reveals whether there are any outstanding urban planning obligations or duties owed to the local authority.

If the agreement does not contain an express agreement to the contrary, the Urban Leases Act (LAU) grants the commercial tenant broad legal powers to assign or sublet the premises without requiring the landlord’s prior consent. Furthermore, the legislation confers upon the tenant a financial right to compensation for the clientele generated at the end of the lease.

• Assignment and Subletting: Although the tenant is free to proceed, this action grants the landlord the right to increase the rent by 10% in the event of a partial subletting, and by 20% in cases of total subletting or assignment of the commercial agreement.
• Compensation for clientele: The tenant is entitled to compensation if they have carried out a business activity open to the public over the last five years. To claim this right, they must have notified the landlord, four months prior to the end of the agreement, of their intention to extend it for a further five years at market rent, and the landlord must have rejected such an extension.

The official declaration of a “strained market area” imposes severe legal restrictions on property investors and landlords, taking the form of extraordinary compulsory extensions and strict mechanisms limiting rent setting.

• Extraordinary extensions: Once the statutory period or the mandatory tacit extension has expired, the tenant acquires the right to demand an extraordinary extension of the agreement, renewable annually for up to a maximum of three years. This extension is mandatory for the landlord, barring very limited exceptions.
• Rent caps for large property owners: If the investor holds the legal status of a large property owner (owner of more than 10 residential properties or 1,500 m²) or the property has not been let in the last five years, the new rent will be strictly limited by the official reference price index.
• Rent caps for small landlords: If the landlord is not a large-scale landlord, the new rent may not exceed the updated amount of the previous agreement, with maximum increases of 10% permitted only under very specific legal circumstances.

The fundamental strategic distinction lies in their binding geographical scope and the administrative authority responsible for processing the application.

For an intangible asset to acquire the status of a patentable invention in the Spanish market, the law requires the concurrent and mandatory fulfilment of three technical requirements: global novelty, inventive step and industrial applicability. This means that the product or process must not exist in the prior art, must not be obvious to a person skilled in the art, and must be capable of industrial manufacture or use.

The key differences between the protection afforded by a patent and that of a utility model lie in the required threshold of innovation and the duration of the legal monopoly:

• Threshold of Inventive Step: Whilst a patent requires a highly disruptive technical standard, a utility model protects less significant innovations; it is sufficient for the invention to provide a practical improvement in the configuration of an object that is not ‘obvious’ to a person skilled in the art.
• Term of Protection: A patent grants exclusive rights to commercial exploitation for a period of 20 years from the date of application. In contrast, a utility model provides more limited protection, with a non-extendable term of 10 years.