Three court levels for a revised rent to take effect from the agreed date: the judgment does not create the contract, it declares it
The court of first instance declared void the contract on which our claim was founded and ordered our client to pay the costs. The “Audiencia Provincial”, the provincial appeal court, set that decision aside, declared the contract valid and fixed the rent sought, but limited its effects to the date of its own judgment, three years after the agreed date. The “Tribunal Supremo”, Spain's Supreme Court, in a judgment of December 2025, quashed the appeal decision and upheld the claim in full, with a clarification of general scope for rent-review clauses: a judgment declaring that an agreement exists does not constitute it, it merely recognises it, and the agreement therefore takes effect from the date fixed by the parties.
Our client is a bank which has for thirty years occupied commercial premises used as a branch office in a small town in the north-west of the Iberian Peninsula. The lease was entered into in 1995, for a term of twenty years, between the owners of the premises, a married couple, and another bank which ours succeeded in 2000, with the landlords' express acceptance. As the bank's lawyers, we handled the case from Barcelona through all three court levels.
The tenancy was a long one and was adapted over time through successive novations. In 2009 the parties amended the contract to bring the rent into line with the market and included a review mechanism which was later to be repeated. In 2013 they agreed to maintain the rent until the initial term expired. And in December 2014, with that term about to come to an end, they signed a fresh novation which reduced the rent to 1,750 euros a month, with effect from 1 November 2014, extended the contract until 1 November 2029 and again agreed the same market-value review system, with two milestones: 1 November 2019 and 1 November 2024.
The review mechanism deserves closer attention, because the solution to the dispute was already to be found in its very wording. If, two months before each review date, the parties failed to reach agreement on the new rent, each was to appoint, at its own expense, an expert who would report on the market value per square metre in the area. If the two valuations differed by less than ten per cent, the rent would be the arithmetic mean of the two. If the difference exceeded that threshold, the parties would appoint a deciding expert. And, in a decisive clause, if one of the parties refused to take part or unjustifiably obstructed the appointment of the expert, it would be deemed to have waived that step and to have accepted the report submitted by the other, the rent so determined being payable from the review date.
2.The 2019 review and the landlord's change of tack
In September 2019, more than a month before the agreed date, our client notified the owners by “burofax”, Spain's recorded-delivery notice service, of its intention to review the rent with effect from 1 November 2019 and sent them the valuation commissioned from a well-known consultancy, which put the market value at 850 euros a month.
What followed was a succession of delays and shifts of position. The owners announced that they had commissioned their own expert report, a report which was never produced. They refused the joint appointment of a deciding expert. They went so far as to put forward orally a rent proposal of 1,300 euros a month, with no expert support. And, when it became clear that the review was going to be pressed home, they abandoned the ground of disagreement over market value and maintained something entirely different: that the novation of December 2014 had never been consented to.
The argument was one of radical nullity, not of mere disagreement over interpretation. The landlord maintained that the husband had not signed the document, that the wife's signature was not genuine and that, by extending the tenancy by more than six years, the novation amounted to an act of disposal requiring the unanimous consent of all the co-owners. The landlord put this argument forward in the defence as a plea, with the res judicata effect which article 408.3 of the “Ley de Enjuiciamiento Civil” —the LEC— attaches to rulings on the absolute nullity of the transaction on which the relief sought is founded.
In February 2020 we set the rent at 850 euros a month under the review clause and, in April, we filed a claim seeking a declaration that this was the rent due from 1 November 2019 and an order requiring the landlord to return the sums paid in excess. In the meantime, our client went on paying the previous rent as indexed, 1,817.21 euros a month, expressly reserving the right to claim back the excess. This was not a gesture of courtesy but a calculated precaution, designed to prevent the owners from bringing a possession claim for non-payment over a disputed rent.
3.The first-instance judgment
The first-instance judgment went against us, and did so in the worst possible way. A handwriting expert's report concluded that the signature appearing on the 2014 annex was not that of the co-owner. The court reasoned that the negotiations had been channelled through a daughter of the couple and took it as established that those dealings had taken place, but held that it had not been proved that the daughter held authority to act as her parents' representative, that the burden of proving this lay with the party asserting the contract and that a change of such significance is unlikely to be agreed orally.
In February 2022 it dismissed the claim, declared the 2014 novation void ab initio for want of consent and ordered our client to pay the costs. That judgment meant losing not only the rent review: the extension until 2029 also disappeared, that is to say, the title which kept the occupation of the premises alive.
4.Consent restored on appeal
The appeal was built on two ideas which, in our view, the first-instance judgment had improperly separated. The first, that the physical authorship of a signature and the existence of consent are distinct matters. The emails submitted with the claim documented an intense and prolonged process of negotiation with the owners' daughter, in the course of which she herself stated that she had discussed the offer with her father and that he did not accept the bank's initial proposal. A person who conveys the position of the party they represent and negotiates on that basis is not acting on their own account.
The second, and more decisive, that even if the initial authority to act as representative were denied, what occurred afterwards was an unequivocal ratification. From January 2015 the owners received 1,750 euros a month instead of the previous 2,220 euros, for five years, without any objection. And, once the original term of the contract expired in March 2015, no one called on our client to vacate the premises. Had the novation not existed, none of this conduct would be capable of explanation.
The Audiencia Provincial allowed the appeal on this point. It held that the daughter had acted as her parents' true representative and that, at worst, this would be a transaction entered into by a representative without authority which was validated by the subsequent ratification of all the co-owners. As to the disputed signature, it observed, with a certain irony, that the handwriting report itself concluded that whoever wrote it knew the co-owner's usual way of signing, which allowed its origin to be inferred. Having held the novation to exist and to be valid, the Audiencia likewise held the review agreement valid and fixed the rent at 850 euros a month, the only figure supported by expert evidence in the proceedings.
5.What the Audiencia gave and what it took away
In a final paragraph of legal reasoning running to barely a few lines, the Audiencia refused to apply the revised rent from 1 November 2019. It reasoned that, a court dispute having arisen between the parties and the new figure having been determined in the proceedings, that figure became payable from the handing down of its own decision, by analogous application of the settled case law to the effect that an indexed rent is not payable retroactively, ex tunc, but only ex nunc. It set the effective date at 1 January 2023.
The practical outcome was striking: we had won the case on the merits, but we had lost three years and two months of rent paid in excess, at the rate of 970.32 euros a month. The party which had denied an agreement that did in fact exist came out ahead by precisely the length of the proceedings it had itself helped to bring about.
6.What the case law says about non-retroactivity
The case law relied on by the Audiencia does exist and is well settled, but its scope is different from the one attributed to it. Rent-indexation clauses operate through a declaration of intent which takes effect on receipt: one party notifies the other that it is exercising the power to index, and that notice marks the point from which the new rent accrues. What the case law of the First Chamber has been stating for decades, in judgments of 1995 and 1998 among others, is that indexation cannot be projected back over annual periods preceding that notice. The new rent cannot be claimed backwards in respect of periods in which the other party was not even aware of the intention to review. The power takes effect once the declaration is made and received, not from the time at which it could have been exercised.
That is the sense of non-retroactivity, and its function is protective: it prevents the landlord from silently accumulating several years of increases and claiming them all at once. Where the review, as here, entails a reduction in the rent, the rule operates symmetrically and means that less can be paid only from the period following the notice.
None of this has anything to do with the moment at which judgment is given. The case law fixes the dies a quo at the declaration of intent taking effect on receipt, not at the court decision which, where appropriate, settles whether or not that declaration was supported by a valid contract.
7.Our argument
We lodged an extraordinary appeal for breach of procedure and a cassation appeal, built around four lines of argument.
First, we argued that the appeal judgment was declaratory, not constitutive. The review agreement had existed since December 2014 and the power had been exercised in September 2019. The Audiencia's decision did not create the agreement; it merely recognised its existence and rejected the alleged want of consent. A purely declaratory ruling cannot push forward the date on which what it declares takes effect, because it would then cease to be declaratory and become constitutive.
Secondly, we submitted that the ex nunc point is measured from the declaration taking effect on receipt, not from the judgment. The notice was sent by burofax in September 2019, ahead of the agreed date, expressly announcing effects from 1 November 2019, and it was received. That is the moment identified by the case law on non-retroactivity. Applying it correctly led precisely to the opposite solution from the one adopted by the Audiencia.
Thirdly, we emphasised that the contract had expressly provided for this scenario and that the judgment ignored it. Clause three of the 2014 annex laid down not only the method of calculation but also the effective date, and regulated the consequences of a party's refusal to take part in the appointment of the expert or to facilitate it, in which case that party is deemed to waive the step and to accept the other side's report. The Audiencia disregarded that agreement entirely, along with the correspondence exchanged between the parties, which were precisely the factual foundations on which the decision had to be built. That was where the ground of breach of procedure lay, since article 469.1.4.º of the LEC, read together with article 24 of the Constitution, allows the assessment of the evidence to be corrected where the judgment plainly and manifestly disregards essential factual elements.
Fourthly, we recalled that what has been agreed is binding and that its effectiveness cannot be left to the discretion of the party denying it. Articles 1255 and 1258 of the “Código Civil”, the Spanish Civil Code, subject the parties to validly concluded agreements and to all the consequences flowing from them in accordance with good faith, and articles 4.3 and 18 of the “Ley de Arrendamientos Urbanos”, Spain's residential and commercial tenancies act, refer, in tenancies for purposes other than dwelling, to the will of the parties as the primary regime. Against that, article 1256 of the Civil Code prohibits the validity and performance of contracts from being left to the discretion of one of the contracting parties. If it were enough to deny the existence of the agreement in order to shift its effectiveness to the date of the judgment, it would be the party in breach who fixed the day from which the contract binds, and it would do so with no effort other than litigating. The longer the proceedings ran, the greater the benefit.
It should be made clear that, of the three grounds of breach of procedure, two were dismissed. Those alleging internal inconsistency and failure to give reasons did not succeed, because the Supreme Court took the view that the judgment under appeal clearly expressed what it was deciding and the reasons for its decision, even if those reasons were wrong. The third was upheld, the one concerning the omission of the contractual clause and of the burofaxes. The difference between them is not one of degree but of kind: the point was not that the Audiencia had reasoned badly, but that it had decided without taking into consideration the document that was decisive.
8.What the Supreme Court decided
The First Chamber upheld the extraordinary appeal for breach of procedure on that third ground and upheld the cassation appeal on both of its grounds, examined together. As to the case law on non-retroactivity, it stated that indexation cannot have retroactive effects in respect of annual periods preceding the moment at which, in exercise of the power to index, that exercise is notified, so that it takes effect from the time the declaration is made and received and not from the time at which it could have been made. It added that, where the review results in a reduction of the rent, as was the case here, the rule means that less can be paid only for the period following the notice.
From there, the decisive reasoning is condensed into two propositions. First, that this case law in no way allows a party which receives the notice and denies the right to review the rent on the ground that no agreement exists to claim that the review is payable only from the judgment declaring that the agreement did indeed exist. Secondly, that the judgment is not constitutive of the existence of the agreement reached by the parties, but merely recognises and declares the existence of the novation and rejects the alleged absence of consent, so that the novation takes effect in accordance with what was agreed, both as to the method of calculation and as to the date of application.
The Supreme Court quashed the Audiencia's judgment, allowed our appeal in full and upheld the claim in full. It fixed the rent at 850 euros a month plus VAT, with effect from 1 November 2019, and ordered the owners to repay the sums paid in excess from that date, together with statutory interest. It also ordered the defendant to pay the costs of the first instance, the very costs which five years earlier had been imposed on our client.
9.Why it matters
The interest of this matter goes beyond the premises, the rent and the parties. Market-value review clauses are common in long-term tenancies for purposes other than dwelling, and the temptation to dispute the very existence of the agreement when the review turns out to be unfavourable is obvious. The reading adopted by the Audiencia made that strategy profitable in itself, regardless of whether it succeeded on the merits.
The correction introduced by the Supreme Court puts matters back in their place. The dies a quo is fixed by the contract and triggered by the declaration of intent of the party exercising the power. The proceedings serve to verify whether that power existed and whether it was properly exercised, not to shift the day from which it takes effect. And, in the meantime, the prudent course of continuing to pay the previous rent while expressly reserving the right to claim back the excess meant that five years of litigation did not turn into a possession claim for non-payment.
