Traspaso (Business Transfer)

A traspaso is the sale of a running business to a new operator. What changes hands is the business as a going concern: the lease on the premises, the fixtures and fittings, the customer base and, where they can be transferred, the licences. The freehold of the property is not part of it.

What makes it possible is article 32 of the Ley de Arrendamientos Urbanos (Ley 29/1994). Where the leased premises are used for a business or professional activity, the tenant may assign the lease or sublet without the landlord’s consent. In return the landlord is entitled to raise the rent by 20% on an assignment of the contract or a full sublet, and by 10% on a partial sublet. The landlord must be notified in verifiable form (de forma fehaciente) within one month of the deal being agreed. A change of tenant caused by a merger, transformation or demerger of the tenant company is not treated as an assignment, but the same rent increase still applies.

Checked against the consolidated text of Ley 29/1994 on the BOE on 09-09-26.

A traspaso normally includes:

• Leasehold: The right to occupy the premises for a specific period, established in the existing lease agreement. Negotiations may occur to revise the terms of the lease upon traspaso.
• Clientele: The established customer base of the business becomes an attractive proposition for the new owner.
• Fixtures and Fittings: Equipment, furniture, and other essential items needed to operate the business are often included in the traspaso agreement.
• Licenses and Permits: The necessary licenses and permits to operate the business are usually transferred to the new owner.

Why Consider a Traspaso?

For aspiring entrepreneurs, a traspaso offers several advantages:

• Reduced Start-up Costs: Compared to starting a business from scratch, a traspaso can be a more affordable option as it eliminates the need for significant investments in furniture, equipment, and establishing a clientele.
• Turnkey Operation: A traspaso allows you to take over a functioning business with an existing customer base, potentially leading to quicker revenue generation.
• Proven Track Record: Inheriting a business with a history of success can provide valuable insights and a foundation to build upon.

Things to Consider with a Traspaso

While a traspaso can be a tempting option, there are some crucial factors to keep in mind:

• Lease Agreement: Carefully review the existing lease agreement, including remaining duration, rent terms, and any potential renewal clauses.
• Financial Records: Scrutinize the business’s financial records to understand its profitability and identify any potential liabilities.
• Reason for Traspaso: Investigate the reason the current owner is selling the business. Is it due to retirement, lack of profitability, or other factors?
• Business Reputation: Research the business’s reputation among customers and ensure it aligns with your vision for the future.

In Conclusion:

A traspaso can be a viable entry point for those seeking to own a business in Spain. However, meticulous due diligence and careful consideration of all aspects are essential before embarking on this business venture.
 
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Disclaimer: The information provided in this document is intended for general informational purposes only and does not constitute professional financial or legal advice. Entering into a traspaso agreement involves complexities and potential risks. Consulting with a qualified lawyer and accountant in Spain is highly recommended to ensure a smooth and informed decision-making process.