Covert assignment of hotel leases through the sale of quotas. Corporate autonomy, evasion of the law and piercing the corporate veil

In the hotel business it is common for the tenant of the property or of the going concern to be a capital company, and for the operation to be structured through business premises leases subject to Law 29/1994 on urban tenancies (the LAU) or through leases of a going concern (“arrendamiento de industria”) governed by the “Código Civil”, the Spanish Civil Code. In this context, the sale of quotas (“participaciones”) or shares in the tenant company raises the question of whether it may amount to an assignment without consent or a covert transfer of the lease (“traspaso”), especially where there are clauses prohibiting assignment or transfer. The case law of the “Tribunal Supremo”, Spain's Supreme Court, has repeatedly held that, as a general rule, the transfer of quotas does not entail assignment of the contract, because the legal personality of the tenant company remains unchanged. However, that rule gives way where the corporate transaction is merely instrumental and seeks to circumvent a contractual prohibition, in which case evasion of the law may be found under article 6.4 of the Civil Code and the corporate veil may be pierced. The article analyses this tension between corporate autonomy and evasion of the law, distinguishes the regime of the business premises lease subject to the LAU from that of the lease of a hotel going concern governed by the Civil Code, and sets out the indicators that the case law regards as relevant in characterising a sale of quotas as a covert assignment, with particular attention to contractual practice in the hotel sector.

12/09/2025

Landlord and tenant Property and contract law Litigation

01.Lease of hotel business premises and lease of a hotel going concern: two distinct legal regimes

In the hotel sector, two types of lease can be set up, with very different legal consequences. Where the main object of the contract is the property itself, the hotel building as a container, and the hotel is operated by the tenant, we are dealing with a lease for use other than as a dwelling within the meaning of article 3 of Law 29/1994 on urban tenancies —the “Ley de Arrendamientos Urbanos”, the LAU—. In that case Title III of the LAU applies and, on a supplementary basis, the “Código Civil”, the Spanish Civil Code, under article 4.3 of the LAU itself. The lease of hotel business premises is governed by the specific rules of the LAU on duration, rent, assignment and subletting, with particular importance attaching to article 32, which allows the contract to be assigned and the premises to be sublet unless otherwise agreed, and to article 34, which regulates the transfer of business premises leases (“traspaso”).

Where the object of the contract is not only the property but an organised production unit in operation, made up of the building, the facilities, the furniture, the licences, the clientele and other tangible and intangible assets, we are dealing with a lease of a hotel going concern (“arrendamiento de industria”). In that case the LAU does not apply, and the Civil Code and the terms agreed by the parties govern, by virtue of articles 1255 and 1258 of the Civil Code, which enshrine freedom of contract and the binding force of contracts, and of articles 1124, 1550 and 1551, which regulate termination for breach and the obligations of landlord and tenant. The civil case law has stressed that the lease of a going concern is characterised by the transfer of the enjoyment of a business in operation, and that its legal regime is built on freedom of agreement, without the specific limitations of the LAU.

This distinction is decisive when analysing assignment of the contract and the effect of a sale of quotas (“participaciones”) in the tenant company. In a business premises lease subject to the LAU, assignment is governed by article 32, which allows the tenant to assign the contract without the landlord's consent unless otherwise agreed, and the transfer of the lease is regulated in article 34, with a specific regime of compensation and subrogation. In the lease of a hotel going concern, assignment of the contract is governed by the Civil Code and by the terms agreed, so that, unless the contract provides otherwise, assignment requires the landlord's consent, and the prohibition on assignment may be essential, linked to the identity of the operator of the business.

02.Sale of quotas in the tenant company and the general rule of corporate autonomy

The central question is whether the sale of quotas or shares in the tenant company can be regarded as an assignment of the lease or a covert transfer. The case law of the “Tribunal Supremo”, Spain's Supreme Court, has repeatedly held that, as a general rule, the transfer of quotas does not entail assignment of the contract, because the legal personality of the tenant company remains unchanged. The company is still the party to the contract, and the change of shareholders or of control does not bring a third party into the tenancy relationship.

The Supreme Court has stressed that the company has its own legal personality, distinct from that of its shareholders, under article 1 of the “Ley de Sociedades de Capital” —Spain's Companies Act, the LSC—, and that the transfer of quotas affects the internal structure of the company but not its identity as a party to the contract. Consequently, the sale of quotas cannot automatically be equated with an assignment of the contract or with a transfer, and does not in itself breach clauses prohibiting assignment or transfer.

This general rule applies both to business premises leases subject to the LAU and to leases of a hotel going concern governed by the Civil Code. In both cases, as long as the tenant company remains the party to the contract and the operator of the hotel, the transfer of quotas does not alter the tenancy relationship. The case law of the “Audiencias Provinciales”, the provincial appeal courts, has followed this line, dismissing claims for termination on the ground of assignment without consent where the only proven fact was the sale of quotas in the tenant company, with no evidence of an actual replacement of the operator or of the instrumental nature of the transaction.

03.Evasion of the law, piercing the corporate veil and covert assignment

The general rule of corporate autonomy gives way where the corporate transaction is merely instrumental and seeks to circumvent a contractual prohibition on assignment or transfer. Article 6.4 of the Civil Code provides that acts carried out under cover of a rule that pursue a result prohibited by, or contrary to, the legal order are deemed to have been carried out in evasion of the law and do not prevent the application of the rule they seek to circumvent. In this context, the case law allows the corporate veil to be pierced where the company is used as an instrument to conceal an assignment of the contract or a prohibited transfer.

Piercing the corporate veil is a judge-made technique that allows the court to look beyond the formal appearance of the legal person in order to address the economic reality of the transaction. In the hotel sector, piercing the veil requires proof that the transfer of quotas was not an investment or corporate reorganisation transaction but a mechanism for replacing the original tenant in the operation of the hotel, circumventing the prohibition on assignment or transfer. The burden of proof lies with the party alleging the evasion, and the case law insists that evasion of the law is not presumed but requires heightened proof.

The indicators that the case law regards as relevant in finding a covert assignment include the actual replacement of the hotel operator, shown by changes of brand, staff, management systems and commercial policies; the conversion of the tenant company into an entity with no activity of its own, which merely keeps the contract alive while the actual operation is moved to another company; the existence of linked transactions, such as management, franchise or business lease agreements, which transfer the risk and the profit of the operation to a third party; and the lack of any economic justification for the corporate transaction beyond the transfer of the leasehold right. Where these indicators accumulate, the court may conclude that the sale of quotas has been used in evasion of the law to conceal an assignment of the contract, and apply the rule prohibiting assignment or transfer, declaring the contract terminated or the transaction ineffective.

In a business premises lease subject to the LAU, a finding of evasion of the law may lead to the application of the consequences laid down in article 35 for assignment without consent or a transfer not made in accordance with the law, including termination of the contract and the tenant's loss of rights. In the lease of a hotel going concern governed by the Civil Code, a finding of evasion of the law may justify termination for fundamental breach under article 1124, since a clause prohibiting assignment or a change of operator, regarded as essential by the landlord, has been breached.

04.Change-of-control clauses and contractual risk prevention

The landlord's protection against sales of quotas that may alter the operation of the hotel should not rest solely on a challenge for evasion of the law, but on contractual provision. Including change-of-control clauses is the most effective tool for mitigating the risk of a sale of quotas. These clauses may provide that the transfer of a given percentage of the quotas or shares in the tenant company, or the acquisition of control by a third party, is a ground for termination of the contract or requires the landlord's prior consent.

In a business premises lease subject to the LAU, the change-of-control clause fits into the assignment regime of article 32 and the transfer regime of article 34, strengthening the landlord's position against corporate changes that, without formally altering who holds the contract, may substantially change the operation. In the lease of a hotel going concern governed by the Civil Code, the change-of-control clause rests on the freedom of contract of article 1255 and may be framed as an express condition subsequent, linked to the identity of the operator and to the landlord's trust in the capability of the tenant company.

The absence of change-of-control clauses increases the interpretation risk for the landlord, who is forced to rely on evasion of the law and on piercing the corporate veil in order to challenge corporate transactions. The case law turns on the facts of each case and requires strong proof of instrumentality, so that contractual provision becomes a central element of legal strategy in the hotel sector.

05.Conclusion: corporate autonomy as the rule, evasion of the law as the exception and contractual prevention as the strategy

In hotel leases, whether business premises leases subject to the LAU or leases of a hotel going concern governed by the Civil Code, the sale of quotas or shares in the tenant company does not, as a general rule, amount to an assignment of the contract or a covert transfer. The legal personality of the tenant company remains unchanged and the tenancy relationship continues, in accordance with the case law of the Supreme Court and the principle of corporate autonomy. However, that rule gives way where the corporate transaction is merely instrumental and seeks to circumvent a contractual prohibition on assignment or transfer, in which case evasion of the law may be found under article 6.4 of the Civil Code and the corporate veil may be pierced in order to address the economic reality of the transaction.

The case law requires heightened proof of instrumentality and of the actual replacement of the hotel operator, and regards as relevant indicators such as the conversion of the tenant company into an entity with no activity of its own, the transfer of the risk and the profit of the operation to a third party through linked contracts, and the lack of any economic justification for the transaction beyond the transfer of the leasehold right. Against this background, contractual prevention through change-of-control clauses and clauses prohibiting or conditioning assignment becomes the most effective strategy for protecting the landlord and reducing the uncertainty of judicial interpretation.

Keeping the focus on the nature of the lease, distinguishing between business premises subject to the LAU and a hotel going concern governed by the Civil Code, and properly drafting the assignment, transfer and change-of-control clauses are essential elements in managing the legal risk of covert assignment through the sale of quotas in the hotel business.

Alburquerque AbogadosJosé Manuel AlburquerqueBarcelona 12/09/2025

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