Buying a flat with a sitting tenant: what happens to the contract

Contractual subrogation and the Urban Tenancies Act

The legal cornerstone regulating the transfer of rented homes in Spain is Article 14 of the Urban Tenancies Act (Ley de Arrendamientos Urbanos, or LAU). This provision establishes the principle of subrogation, whereby the buyer steps into the rights and obligations of the landlord. Upon completing the purchase, you become the new landlord to the tenant, without any need to sign a new tenancy agreement or alter the clauses originally agreed.

The duration that must be respected depends fundamentally on the date when the original tenancy agreement was executed and the legal status of the original seller:

• Contracts signed from March 2019 onwards: If the original landlord was an individual, the buyer is required to maintain the tenancy for the statutory minimum term of 5 years. If the selling landlord was a corporate entity (a company or business), the minimum required term extends to 7 years.
• Statutory and tacit extensions: If the term agreed in the initial contract was longer than the statutory minimum, or if the contract is within a mandatory extension period, the new owner must fully respect the agreed duration until its expiry.
• Registration in the Land Registry: For contracts entered into after the 2019 reform, tenant protection against the new buyer applies as a matter of law, regardless of whether or not the tenancy is registered in the Land Registry.

Tenant rights when a property is transferred

When evaluating the option to buy a flat with a tenant, it is essential to analyse the preferential acquisition rights granted by law to the occupant, as well as the practical limitations on taking possession of the property for personal use.

The right of first refusal (tanteo) and right of pre-emption (retracto)

Unless the tenancy agreement contains an express waiver of this right (a common practice in main residence agreements since recent legal reforms), the tenant holds pre-emptive rights to purchase the property ahead of third parties.

The formal process operates in two stages:

1. Right of first refusal (tanteo): Before selling, the owner must formally notify the tenant of their decision to transfer the property, detailing the sale price and key conditions of the transaction. The tenant has 30 calendar days from notification to exercise their right to buy the flat under those exact terms.
2. Right of pre-emption (retracto): If the owner fails to give prior notice, omits relevant details, or sells the property below the notified price, the tenant can exercise the right of pre-emption. This allows them to step into the buyer's position post-sale, with a 30-calendar-day window from the date they are formally notified of the public deed of sale.

Is it possible to refuse an extension for personal use of the property?

One of the most frequent questions when buying a flat with a tenant is whether the new owner can recover the property for personal residence. The Urban Tenancies Act provides for this possibility, but requires strict compliance with several concurrent conditions:

• Express clause in the agreement: It must be explicitly stated in the original agreement that the landlord may decline extensions if they require the property for themselves, first-degree relatives by blood or adoption, or for a spouse following a final decree of judicial separation, divorce, or annulment.
• Minimum duration: The personal need requirement can only be claimed once the first year of the contract has passed.
• Formal advance notice: The tenant must be notified at least two months before the date the property is required, specifying the exact ground of necessity.

If, three months after vacant possession is surrendered, the new owner or their relatives have not actually moved into the property, the tenant can demand to be reinstated in the flat with compensation for expenses, or receive one month's rent for each remaining year of the contract term.

Financial adjustments, deposits, and administrative procedures

Acquiring a rented property requires auditing the operational accounts of the tenancy to avoid inheriting debts or accounting discrepancies after completion at the notary.

When executing the public deed of sale, two key financial matters must be settled:

• Transfer and registration of the security deposit: The seller must transfer to the buyer the full amount of the tenancy deposit provided by the tenant at the start of the lease, along with any additional guarantees (bank guarantees or additional deposits). In the Comunidad de Madrid, it is mandatory to complete the administrative transfer of ownership of the security deposit with the Housing Institute of the Comunidad de Madrid (IVIMA).
• Pro-rata rent and utilities: Rent for the month of completion must be apportioned between seller and buyer according to the exact date the deed is signed. It must also be verified that utility bills (water, electricity, gas) and local taxes such as IBI are fully up to date.

Legal checks and social housing (VPO)

Before committing funds under a deposit agreement (contrato de arras) to buy a flat with a tenant, it is necessary to perform a thorough legal and technical review of all existing documentation.

If the property is designated under an official social housing scheme (VPO) in the Comunidad de Madrid, the transaction is subject to specific administrative controls:

• Rent and sale price caps: It must be verified that both the monthly rent charged to the tenant and the agreed sale price do not exceed the maximum statutory price caps set by regional Madrid regulations for the corresponding housing bracket.
• Regional rights of first refusal: In certain protected developments in the Comunidad de Madrid, the regional authority may hold pre-emptive purchase rights, requiring prior notification to the competent regional housing department.
• Disqualification period (descalificación): It is advisable to review the VPO file to establish the remaining years of public protection status and the requirements for voluntary or statutory disqualification (descalificación).

Pre-completion checklist for signing before a notary

To ensure a seamless transaction when buying a flat with a tenant, it is advisable to request and review the following documentation checklist:

• Original tenancy agreement: Verification of addenda, inventory lists, applied rent reviews, and any waiver clause regarding rights of first refusal and pre-emption.
• Certificate of up-to-date payments: Document signed by the seller (and ideally confirmed by the tenant) certifying that there are no arrears or outstanding debts for rent, service charges, or utilities.
• Updated land registry excerpt (Nota simple): Confirmation of ownership, absence of prior encumbrances, and verification that no preliminary court attachments exist against the landlord's rights.
• Proof of deposit registration: Receipt showing the deposit was lodged with the relevant regional body (IVIMA in the Comunidad de Madrid).
• Occupancy verification: Prior inspection visit to check the condition of the property and confirm that the actual occupants match the signatories to the tenancy agreement.

Professional advice for properties purchased with tenancies

Acquiring real estate with existing tenancies offers highly attractive yields, but requires a rigorous command of property law and technical negotiation to mitigate procedural or financial risks.

Specialised support allows you to objectively evaluate contract viability, adjust the purchase price to reflect temporary limitations on use, and manage the transfer of landlord identity to the tenant with complete confidence. At Sky Real Estate, we offer internationally recognised legal expertise, having won awards at the Sky Law European Legal Awards (2023-2025), and we guarantee full regulatory compliance as registered real estate credit intermediaries with the Banco de España under number ICI D-286.

If you wish to structure your investment with total legal certainty and ensure that every clause protects your financial interests, trust our specialised personal shopper inmobiliario (PSI) service to guide you through every stage of the transaction.