What happens if the premises have no business activity licence or I am refused one?

Question

José Manuel Alburquerque · Accepted Answer

It depends on why the licence is refused and on what the contract says. Unless otherwise agreed, applying for and obtaining the licence is a matter for the tenant, because the activity is the tenant's. But if it is refused because of a problem with the premises themselves, such as the planning rules not allowing that use or a missing formality that depended on the landlord, the landlord has not handed over premises fit for the agreed use. The tenant can then bring the contract to an end and, depending on the case, claim damages. If it is refused because of the tenant's project or activity, the risk is in principle the tenant's. What the Supreme Court said The “Ley de Arrendamientos Urbanos” (LAU), Spain's urban tenancies act, does not regulate the licence. What was agreed applies and, failing agreement, the Spanish Civil Code (“Código civil”), which requires the landlord to hand over the premises in a fit state for the agreed use. The “Tribunal Supremo”, Spain's Supreme Court, applied this in its judgment 316/2022 of 20 April to commercial premises in Valencia. The contract made the tenant responsible for the licences and released the landlord from liability. The town council refused to transfer the licence to the new holder because the application had not been made by the representative of the previous holder, something that fell within the landlord's sphere. For the Supreme Court, not being able to use the premises for the agreed activity was a breach of the obligation to hand them over and allowed the tenant to terminate the contract, that is, to bring it to an end. The clause did not protect the landlord, because the town council had not rejected the tenant. In commenting on the judgment, some legal writers distinguish between two cases: If the licence is refused because of the premises, their planning status, the condition of the property or the landlord's title, the tenant can terminate the contract and claim damages. If it is refused because of the tenant's activity or project, the business risk is the tenant's. At most the tenant could walk away from the contract, because no rent is payable for a use that is impossible, but could not claim damages. What the contract says Between businesses, a clause placing on the tenant the risk of not obtaining the licence is in principle valid. But the courts interpret it strictly and do not extend it to matters that depend on the landlord or on the premises unless it says so clearly, as happened in the Supreme Court case. The safest course for both parties is to make the contract conditional on the licence being obtained within a set period. The contract should also state what happens if it is not obtained, who pays for the technical project and whether there is a rent-free period, a period with no rent or reduced rent, while the application is processed. Before signing Ask the town council to confirm that the activity you want to carry on is compatible with the planning rules for those premises. In Barcelona, the land-use plans (“planes de usos”) of several districts restrict new bars and restaurants in many streets. Check what permit your activity needs. Many activities no longer need a licence, but rather a prior notification or a “declaración responsable” (declaration of compliance) filed with the town council. The underlying problem is the same, because the use must fit within the planning rules and the premises must meet the technical requirements.