The Resolution object to analysis, is the decision dated July 20th 2012, by the High Court -first section, civil division- takes as a starting point a lease of premises for business in which the landlord claimed for an increase of the rent as a result of different mergers the tenant had made with different divisions of its business group that eventually occupied his contractual position successively.
It is worthy to mention the fact that the parties had contractually provided authorization to the tenant to sub-let whether totally or partially the estate subject to lease in favor of the offices that were part of his business group, what served as the basis for the decision of the first instance judge, that excluded the application of Section 32 of the Spanish Law for urban rents (LAU as per its Spanish acronyms), and therefore, the right to raise the rent by 20% for each assignment or subletting of contract, believing that both dispositions were incompatible.
The above decision was appealed and rejected following by the Court, with the recognition of the right of the landlord to raise the rent by 20% for each of mergers that had taken place. Such decision was issued by the Appeal Court as they considered that the implementation of Section 32 of the LAU was perfectly compatible with the aforementioned contract statement, considering then that both statements were not contradictory in any way.
However, in regards to the time in which such right should be recognized, the Appeal Court fixed this when the extrajudicial claim was made to the tenant, thus discarding the specific time in which each merger had taken place.
Such decision was based on the analog implementation of Section 18.3 of the LAU, which governs the right to update the rent in the lease of housing, and its developed case law, according to which, given the imperative character of this right in contracts to those cases for housing leases, the Appeal Court stated the non-retroactivity of such updates.
Against this decision of analogical implementation of Section 18.3 of the LAU, and its case law development, the landlord filed a writ of appeal before the High Court alleging infringement of article 4 from the Civil Code, regulatory of the analogy, by understanding that leases of houses and the leases of properties "for using different from the housing " respond to different fact assumptions, and considers that as the legislator did not reach to make a distinguishing, the interpreter of the law should not do so.
The High Court starts its analysis by determining the applicable law to the particular lease subject to dispute that, in view of what the parties contractually had stated, such agreement should be governed in first place by what freely was agreed in the contract, and in matters not provided by them, should apply specifically titles I, III, IV and V of the LAU. The parties themselves, therefore, would have excluded the application of title II, specifically applied to the housing leasing.
On these bases, the High Court considered applicable Section 32 of the LAU, as Section included in title III of the LAU, and therefore recognized the right of the landlord to raise the rent by 20% by each of the mergers that had been carried out by the tenant throughout the contract.
Regarding the issue under discussion about the analogical implementation of Section 18.3 of the LAU and its case law, in order to determine at what time should the right to raise the rent by assignment produce its effects, the High Court observes the different economic realities to which the rental housing responds, against the lease for different uses, and in addition, emphasizing the difference between the right to update the rent as stated in Section 18.3 of the LAU, and the right to raise it by assignment or subrogation pursuant to Section 32 of the LAU, therefore, the High Court excluded the analog application agreed in the decision ruled by the Court of Appeal.
So, after having stated the total lack of identity between both types of rights, and both types of leasing, the High Court determines the time in which the effects from the right to raise the rent pursuant to Section 32 of the LAU arise, it should be the time when the merger was produced, this is therefore, given its constitutive character, when the merge was duly registered in the register.
The High Court thus dismissed the decision ruled by the Appeal Court, and ruled as stated.