The Supreme Court declares that the right of the lessor to raise the rent of a business premise following the merger of the lessee is appropriate as of the registration in the Mercantile Registry of the merger and not as of the notice from the lessor to the lessee of such increase in rent.

Supreme Court Judgment number 514/2012 (Civil Chamber, Section 1)

This Judgment of the Civil Chamber of the Supreme Court, Section 1, 20 July 2012 analyzes, among other issues, whether following a merger of the lessee, the moment at which the right to increase the rent on such grounds is that of its registration in the Mercantile Registry or as of the moment at which the lessor notifies the lessee of the increase in rent.

With regard to the issue at hand, the Provincial Court adjudged in second instance that the update of rent should take place following the notice from the lessor to the lessee on the increase thereof, and not as of the registration of the merger in the Mercantile Registry, even if this takes place first. Such Court followed the criterion on the non-retroactivity of rent updates in dwelling rentals set forth in Article 18.3 of Urban Leasing Act 29/1994, 24 November (hereinafter, the “LAU”) which establishes that the updated rent will be required of the lessee as of the month following the one in which the interested party provides written notice of this to the other party, expressing the percentage of change applied and attaching, if the lessee so requires, the appropriate certificate from the National Institute of Statistics or reference to the «Official Gazette» in which it was published.

In view of this resolution, the plaintiff filed an appeal for cassation before the Supreme Court in that it considered that the procedural requirements for application of the rent increases of Article 18.3 LAU by analogy or interpretation of the rule for non-retroactivity to the case of business premise rentals were lacking.

The Supreme Court upheld the appeal for cassation of the plaintiff with the understanding that Article 18.3 LAU cannot be applied by analogy, since the parties did not submit to Title II LAU, where such Article is located, as inferred from Clause Three of the contract “applicable legislation”.

The Supreme Court likewise considers that since this is a rental contract for a business premise and not a dwelling, this is not a case of rent review but rather a case of the right of the lessor to collect, by legal provision, a raise or increase in the rent stipulated as a result of the mergers performed.

The Court clarifies that the effects of the merger on the rental relationship occur as of the moment at which these take place, irrespective of whether or not it is known by the lessor company. To this regard it understands that the alleged knowledge of the mergers by the Mercantile Registry is not the equivalent of the obligation of the lessee by virtue of the contract to obtain the express and prior, written authorization from the lessor for the assignment, or of the obligation stipulated in Article 32.4 LAU that requires that the lessor be given certified notice of the assignment as well as of the sublease within one month of their arrangement.

Additionally, the Supreme Court states that the increase in rent is not subject to the decision of either party but instead entails a right established in favor of the lessor (“will have the right” as per Article 32 LAU).

Lastly the Supreme Court concludes that the lessee was aware, as inferred from the contract as well as from the law to whose application the parties submit suppletorily, of the right of the lessor to increase the rent and do so as of the occurrence of the events that determined the increase, whereby as of that moment it should have made the appropriate financial provisions in order to be able to adapt itself to this new situation, without the action of the lessor in any way entailing the retroactive application of the rule and, conversely, a benefit for the lessee that did not provide notice of the mergers and failed in due time to withstand the increase that the lessor could have legally applied to it.

The establishment of a surface right for the installation of solar panels on the roof of a building does not require the prior segregation or individual specification of the property to which it corresponds, providing that the property seeking access to the land registry is sufficiently defined.

Directorate General of Registries and Notary Publics (Land). Resolution number 3593, 15 February 2012

In this case, the Property Registrar suspends registration because, in his opinion, the surface rate established in the deed does not comply with the requirements for the principle of specification, since by not being established over the entire property the prior individual specification of that part of the property to which it corresponds is necessary, by any of the means envisaged in mortgage legislation such as segregation, material division, constitution in a horizontal property regime, etc.

The Directorate General establishes that, while various theories exist on the nature of the surface right, the truth is that broad consensus exists that the surface right holder is the entitled owner of what is built or the construction on the land of another, albeit temporarily, and of the right to have or maintain the construction. In this sense, the land ownership – projection ownership dualism is going to define a special legal regime when this affects a portion of property that clearly differentiates it from the rest and which requires specific publicity by registration.

Pursuant to this, according to the Directorate General, there is no reason whatsoever to prevent the opening of a separate page on the portion affected by this right, in that there are sufficient legal and economic reasons for this; without the need to previously individualize that part of the property on which the surface right is established, providing that the essential rules that govern the real estate registry regime are fulfilled.

Therefore, for the registration of the surface right established in this case, the segregation or individual specification to which the Registrar refers in his rating is not necessary, since it complies with the requirements deriving from the principle of specification and from the specific legal regulation on this matter, in that the property seeking registration in the Land Registry is sufficiently defined.

Consequently, the Directorate General resolved to uphold the appeal filed and to revoke the challenged rating.

In the event of the nonpayment of rent, notice from the lessor to the lessee must solely be certified, and it is not necessary to advise him of the consequences of nonpayment in the interests of a possible enervation of the action for eviction that could be filed as a result of the aforementioned nonpayment.

Provincial Court of Las Palmas, Section 5, Judgment dated 30 March 2012, appeal 564/2011

In this appeal, the Court analyzes the enervative power of the eviction that assists the lessee according to the current Civil Procedure Code and by means of which eviction processes for nonpayment of rents or quantities owed by the lessee will end if prior to the hearing “the lessee pays the plaintiff or places at his disposal in the court or via notary, the amount of any quantities claimed in the complaint (…)”, although the foregoing will not be applicable when the lessor “shall have requested payment from the lessee, by any certified means, at least 4 months prior to the filing of the complaint and payment has not been made prior to such filing”.

The main legal issue focuses on determining whether the request for payment made to the lessee by the lessor should include a mention of the consequences of nonpayment. In this sense, several Provincial Courts have opted to follow the mainstream doctrine that requires an inclusion in the notice for payment of a true declaration of the will of the lessor to terminate the rental contract if the quantities set forth in such notice are not paid.

In the case at hand, the court of appeal has aligned itself with another trend, according to which “it is solely necessary to have provided the lessee with a certified request for payment”, without the need to warn him of the consequences of the nonpayment or warn him that if he does not pay he will be unable to enervate any action for eviction that could be filed as a result of the aforementioned nonpayment.

Consequently, the Provincial Court upheld the appeal filed by the lessor party, revoking the judgment of first instance, declaring the grounds for the eviction of the lessee and convicting him to the payment of the quantities claimed plus the corresponding legal interest, as well as to the payment of the costs borne by first instance.