The Supreme Court establishes case law on the term of business premises lease agreements entered into after May 9, 1985.

The Supreme Court has delivered an important ruling that clarifies the term of certain leases, an issue that had raised doubts mainly due to contradictory case law.

This refers to the Supreme Court judgment of March 12, 2015, which confirms the Court’s judgment of November 17, 2011 and makes it possible to establish binding judicial doctrine.

The Supreme Court clarifies the term regime applicable to business premises lease agreements entered into after the entry into force of the well-known “Boyer Decree” of April 30, 1985 and before the entry into force of the 1994 Urban Leases Act (LAU), but which voluntarily submitted to the mandatory extension regime established by the 1964 Urban Leases Act.

The Supreme Court reiterates the reasoning of its judgment of November 17, 2011 and holds that, just as the 1994 LAU sets certain term limits for leases entered into before May 9, 1985 depending on the circumstances, the same regime and term limits must also apply to those agreements that, although entered into after May 9, 1985, stipulated that they would be governed by the mandatory extension system provided for under the pre-1985 legislation, namely the 1964 LAU.

If the criterion established by the Court were not followed, it could be argued that some lease agreements might become perpetual—particularly those granted in favor of legal entities, which do not “die” in the strict sense, with mandatory extensions agreed that would prevent the landlord from terminating the contract.

“The Court considers that the lease must be temporary in all cases and that ‘sine die’ contracts should not be admissible,” thus preventing situations like those described from arising.

With this judgment, the doubts that had existed to date on this matter are removed, and multiple legal proceedings will likely be initiated with the aim of terminating leases subject to mandatory extension.

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