Buying a business in Spain?

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Buying a business in Spain can be a complicated and expensive procedure; however, with the right agent and the right advice, it can be made very simple.

Who can buy a business in Spain
Quite simply, anyone though it is always easier for EU citizens as they have the same rights as a Spanish national. You must have available funds as Spanish banks very rarely loan money for business purchases and you must have a residency certificate.

What types of businesses are available?
You can always purchase empty premises and set up any kind of business but generally there are all manner of established businesses available for sale such as bars, cafes, restaurants, retail outlets, hairdressers, beauty salons, offices, shops and many more.

Freehold or leasehold?

Freehold
If you purchase a business freehold, it is exactly the same as buying a home in the UK. You are buying the building, bricks and mortar. You then own the property and can sell it at any time. You can also sell a lease of your own to someone else or rent it out. In some cases it is possible to raise finance to purchase a freehold. We have mortgage companies who will lend up to 70% providing you have a home in the UK. Freeholds in Spain are rising in value each year by up to 40%.

Leasehold
Buying a leasehold bar in Spain is a good way of acquiring a business without the massive outlay of a freehold and this is the preferred method for most buyers.

Purchase price
The price quoted is for a new lease at the terms stated in that lease. You will normally pay this in one lump sum on signing over of the new lease. It is normal practice to secure a sale in the first instance with a 10% deposit. This deposit is non-returnable unless the sale falls through because of the seller. If you simply change your mind, you will lose your deposit.

Length of lease
This will be clearly stated in all publicity advertising the business and will be written into the lease agreement. The norm is 5, 10, 15 or 20 years. Sometimes an endless lease is offered.

Renewing a lease
You have an automatic right to renewal of the lease providing you pay the rent on time and keep within the terms of the lease.

On renewing the lease you do not have to pay another lump sum but your rent could increase by up to 20%.

During the lease
You will pay the agreed rent on a monthly basis.

You can run the business in accordance with the terms of the lease (ie as a bar).

You can alter the theme of the bar, the décor, the furniture etc but you cannot, without the landlord’s permission, alter the structure of the premises.

You will be responsible for the electricity, water, community charges etc

Your landlord is responsible for external repairs and major structural work

The rent will increase by the rate of inflation each year

On renewal of the lease the rent will be increased (usually 20%)

Selling the lease
At any point you can sell the lease, at whatever price you want. You will normally have to pay your landlord a commission on the sale of 10-20%. A new buyer will be responsible for any legal costs involved in the sale.

Security issues

You may be required to insure the property

You will need to give your landlord a security deposit of 2 months rent. This is returned to you when you leave, providing the premises are in good condition

You will also need to pay your rent one month in advance

Disputes with your landlord

Your lease is a legal contract and is governed by Spanish law. If you have a disagreement with your landlord, either party can take legal action in the local court. You have rights as a tenant and your landlord has rights to protect his property.

How much does it cost to set up a business in Spain?

When you purchase a business in Spain you should always use the services of a lawyer (Abagodo) or legal accountant (Gestor). This is for your protection. The lawyer will check the licenses on the business as well as checking for any outstanding debts. He will oversee and translate the lease for you. He will also oversee the completion, making sure everyone gets paid the right amounts. Your total legal fees should be around 2,800 euros. You will also need to allow 3 months rent on your lease. 2 months is a security deposit, returned when you leave, one month is your rent in advance.

The purchase procedure

The real estate agent will negotiate the purchase price on your behalf.

Once your offer has been accepted, you pay a 10% deposit

The agent then collect all the paperwork from the seller and introduces you to a lawyer

The agent should also help you open a bank account and arrange for you to register for your residency certificates, with the lawyer.

Contracts are signed and you have 30 days in which to pay the balance (this can be varied by negotiation with the seller)

The lawyer meanwhile begins to check the paperwork and obtain a new lease for you

During this 30 days, the seller withdraws the business from sale and cannot sell to anyone else, nor increase the agreed price and terms

On the set day of completion, you will meet with the agent, the seller, the landlord and the lawyer. Contracts will be exchanged, money changes hands and you get the keys to your new business

Nightmare stories?

As with everything in life, there are stories of things going wrong and you will probably have heard many about bars in Spain. We too have heard of people losing all their money, buying an illegal bar, being closed down and many more. Not all the stories you hear are true, however, all these problems can be avoided. It is a proven fact that most of these problems arise through the agent not doing his job correctly, not having a legal advisor or coming across a dishonest agent.

What about all the other things you have to think about?

Part of the service offered by your acting agents should be a total settlement in Spain. Your agent should help with bank accounts, schools, tax, accountants, social security, residential rentals, connecting to services, suppliers and anything else that you need. Here are a few points to consider;

Electricity and water
These will normally be connected and we can help you have the accounts changed into your name. If they are not connected (if the business has been closed for some time), we can help you establish a new account with the suppliers. Electricity in Spain is 220v so all your UK electrical goods will work in Spain. All you do is purchase Spanish two-pin plugs or plug adaptors. The water is safe to drink on the coast but most people prefer to buy bottled water.

Gas
In most places there is no mains gas. Gas is supplied in bottles which are delivered to your door on a regular basis. Gas bottles are approx. 12 euros each for a refill.

Telephone
If this is connected, we will help you have the customer name changed with Telefonica. If you want a new line installed, we will help you contact Telefonica. We can also put you in touch with a supplier of discount phone calls. This means you can call the UK for as little as 3 cents a minute! Your UK telephone set will NOT work in Spain so don’t bother bringing it over.

Suppliers
All suppliers to your business will call to see you. Deliveries are made on a regular basis and most suppliers speak English. This guide has a separate section on suppliers. Most insist on cash on delivery but eventually you may be able to establish accounts with them.

Accountants and Gestors
Once your business is up and running you will need an accountant (gestor). He/she will be happy to take care of your income tax returns etc. He/she is a registered Gestor (advisor) and can help with all legal/tax/financial matters.

Social Security
The lawyer who oversees the purchase of your business will apply for your social security number, which is compulsory to work in Spain. It’s a simple trip to the Police station with your passport (and it’s free). Your social security payments are made on a monthly basis and can be paid at the bank or by standing order.

Information supplied by Sol Commercials. If you are thinking of buying or selling a business in the Costa del Sol, Contact Lindsey on 952 198 832 or 646 448 309

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