| When buying a business in Spain, the property holding | | | | leasehold to buy. If you have ample funds to buy a |
| this business will either be freehold or leasehold. This is | | | | freehold business, you would be better off investing all |
| called tenure. There are advantages and | | | | those funds into a better leasehold business than to tie |
| disadvantages to both. Get financial and legal advice | | | | a substantial part of your capital in the freehold of the |
| on tenure issues. In certain cities (such as Madrid and | | | | property. |
| Barcelona), you will rarely find freehold business | | | | Leasehold businesses |
| premises. And in locations such as the Costa del Sol | | | | In Spain a leasehold is called a “traspaso“. The |
| you will find quite a few freehold premises. | | | | leasehold sum is the amount of money paid to the |
| Freehold businesses | | | | exisiting tenant (business owner), to take over the |
| As a business broker providing invaluable consulting | | | | business. The new owner will then take on the right to |
| services to his clients, Gregor Schellhammer (manager | | | | re-sell the business whenever he or she desires. In a |
| of Crystal Consulting Spain SL) advises that buying | | | | leasehold operation, the owner of the premises is |
| freehold means you acquire ownership of the land and | | | | entitled to a percentage of the traspaso (leasehold |
| building forever, and are able to do with it as you wish | | | | paid), this can be from 10% to as high as 25% - |
| (subject to the law obviously). As specialists in bars, | | | | different on a case by case basis. Understandably, |
| restaurants, nightclubs and hotels, we at Crystal | | | | given that you are not buying property a leasehold |
| Consulting Spain SL get many enquiries from people | | | | business is much cheaper than freehold and more |
| who wish to buy a business, yet who are unfamiliar | | | | accessible to most investors. |
| with the advantages and disadvantages of the two | | | | Advantages: |
| types of tenure. Many buyers resolutely set their sights | | | | Leasehold property is usually much cheaper to buy. 2 |
| on purchasing a freehold, yet because of their limited | | | | months deposit and a traspaso payment can get you |
| capital (and restricted market conditions) are unable to | | | | a business (some owners require an aval - bank |
| find anything they are capable of buying. | | | | guarantee). For the price of one freehold you could |
| Let’s say you buy a freehold bar and after some | | | | buy several leasehold businesses. Including a |
| time decide you no longer fancy working in the bar, | | | | purchasing option in the rent agreement could allow |
| you can then: | | | | you to secure owning the property in the future. |
| - Rent the premises by selling the business (and | | | | Disadvantage: |
| charging a leasehold-traspaso for the license, | | | | You can only change the use of the building or make |
| machinery and business). | | | | alterations, perhaps even decorate, with the prior |
| - Rent the premises to a manager (keeping ownership | | | | approval of the leaseholder so operating in a leasehold |
| of the license and machinery). | | | | property can be far more restrictive. Leasehold |
| - Perform a sale and leaseback (whereby you sell | | | | property is actually written off in the balance sheet |
| your premises but make an arrangement to rent it | | | | over the life of the lease and so shows on the |
| back for a good rent for a number of years). | | | | balance sheet as a ‘depreciating asset’. You do |
| - Or sell off both the premises and the business to a | | | | not own the "bricks and mortar". |
| new business owner. | | | | Generally speaking, both freehold and leasehold |
| Advantages: | | | | premises are viable options and will depend on both |
| Property normally appreciates in value over time and | | | | the personal situation of a business investor and the |
| so would show on your balance sheet as an | | | | market they are looking at. |
| increasing fixed asset. When you sell, you may make | | | | Before doing business in Spain, you might want to ask |
| a considerable capital gain. | | | | a question or two on the forum for doing business in |
| Disadvantage: | | | | Spain, where Greg regularly responds to business |
| Freehold property is usually more expensive than | | | | related questions about Spain. |