Urban Leases

Differences between the parties regarding the lease agreement can be resolved through the followingdispute resolution mechanisms:

- agreement between the parties;

- arbitration, whether legal or equitable, if there is an agreement to submit conflicts to this resolution method; or

- ordinary jurisdiction.

Prior negotiation(LO 1/2025 art. 5)

Effective from3-4-2025 and generally applicable to all proceedings, with the exception of expressly stated exclusions, it is apreliminary requirement to previously resort to an appropriate alternative dispute resolution method -ADR- for the claim to be admissible, provided there is identity between the subject matter of the negotiation and the subject matter of the litigation, even if the claims that can be brought in court regarding said subject matter may vary.

The requirement is consideredfulfilled when any of the following assumptions occurs:

- prior recourse to mediation, conciliation, or the neutral opinion of an independent expert;

- submission of a confidential binding offer or the use of any other negotiating activity, recognized in this or other state or regional laws;

- negotiation activity is carried out directly by the parties, or between their lawyers, or if they have resorted to a collaborative law process.

Theinitiative to use an ADR method may come from one of the parties, both by mutual agreement, a court decision, or the court clerk's referral of the parties to this type of method.

The ordinary jurisdiction procedures listed below require prior negotiation, except for the European small claims procedure (LO 1/2025 art. 5, 3). Themonitoring procedure is not expressly excluded from this requirement of procedural steps. However, this can be a controversial issue leading to different practices.

Any negotiating activity, or its unsuccessful attempt, must be documented inwriting signed by the parties.

The termination of the process without agreement occurs in the followingcases(LO 1/2025 art. 10, 4):

• After 30 calendar days have elapsed from the date of receiving the request, without holding the first meeting or contact, or without receiving a written response.

• When, after starting the negotiation activity, 30 days have passed since the date of a specific agreement proposal without reaching or receiving a written response.

• For a period of 3 months from the date of the first meeting without reaching an agreement. The deadline may be extended by mutual agreement of the parties.

• If either party addresses in writing the termination of the negotiations, making this clear.

The agreement that concludes the negotiation process must be formalized in a document,signed by the parties, stating all the data of the participants, date and place, and obligations assumed, which may be elevated to a public deed (LO 1/2025 art. 12). Itscontent may focus on part or all of the matters under negotiation and is

bindingfor the parties (LO 1/2025 art. 13). ProcedureTo establish the procedure applicable to lease matters, the criterion of the subject matter prevails over that of the amount. Through theoral trial, the following are processed:

Procedure

The criterion of the subject matter prevails over that of the amount to establish the procedure applicable in matters of lease.

Through theoral trial the following are processed:

• Quantifiable actions exercised by the lessor or lessee, whose amount does not exceed 15, 000 euros -up to 19-3-2024, 6, 000 euros- (LEC art. 249, 1. 6º and 250, 2).

• Actions of the lessor that, regardless of the amount, refer to (LEC art. 250, 1. 1º):

- Claim for rent;

- Eviction lawsuits for non-payment of amounts or expiration of the contractual term; or

- Accumulation of rent claim and eviction for non-payment or expiration of the contractual term.

For all other matters related to urban or rural leases of real estate, the appropriate procedure is theordinary trial.

The verbal and ordinary trials aredeclarative processes, meaning their purpose is to declare the establishment, modification, or extinction of a right. They have in common that it is the parties involved who provide the Court with the facts, evidence, and claims they wish, and the Court decides solely based on such submissions -principle of requested justice-. Both processes differ in that the verbal one is simple, mainly oral, concentrated, and fast, with short deadlines; while the ordinary one is a slow, complex, and mainly written process.

Likewise, it is possible to resort to themonitoring procedure for the claim of the lease debt, if eviction is not requested.

Finally, there is the possibility of resorting to theEuropean small claims procedure for claiming rent or amounts due under a lease contract provided that they do not exceed the amount of 5, 000 euros and one of the parties to the lease contract has their domicile in a Member State of the European Union, either the lessor with respect to a property leased in Spain or with respect to a lessee who has changed their residence after the end of the contract (Regulation (EC) 861/2007;Spanish Civil Procedure Law final provision 24th).

Amount in dispute(Spanish Civil Procedure Law art. 251)

For procedural purposes and for the subsequent calculation ofcosts, it is necessary to determine the amount in dispute in the lawsuit. Depending on the type of procedure initiated, the amount varies:

• In the case of verbal proceedings with aclaim for rent or amounts derived from the contract, the amount is the outstanding balance up to the date and those that will accrue until the complete termination of the contract.

• Both in the case ofeviction for non-payment of rent or for expiration of the contractual term, the amount is determined by the amount of an annual rent, regardless of the frequency with which it is fixed in the contract.

• In verbal proceedings where there is aaccumulation of income claim or amounts derived from the contract and eviction, either due to non-payment of rent or expiration of the contractual term, the amount of the procedure is determined by the most valuable action, either the annual rent or the rents and amounts derived from the contract claimed.

Jurisdiction(CCP art. 52)

In lawsuits regarding real estate leases and evictions, the Civil Section of the Court of First Instance -until its establishment, the court of first instance- of the place where the property is located is competent, without the possibility of submission, express or tacit, of the parties to other Courts (CCP art. 54, 1 However, when the lawsuit arises from the opposition to an injunctionpreviously filed, it is not clear whether the jurisdiction belongs to the Court of the defendant's domicile or to the one where the leased property is located:- based on the

CCP art. 818, 3- conversely, in accordance with CCP art. 52, 1. 7

Prescription of actionsLEC art. 818, 3 it can be argued that whoever initiated the procedure must conclude it; and

- on the contrary, in accordance with theLEC art. 52, 1. 7, since the claim arises from a lease relationship, the competent court is where the leased property is located.

Prescription of actions(LAU disp. adic. 10th)

All rights, obligations, and actions arising from the lease contracts provided for in the LAU, including those existing at the time of its entry into force, are subject to the general prescription regime of the Civil Code when there is no specific prescription period provided:- personal actions, which do not have a specific prescription period indicated (CC art. 1964); and- actions to demand compliance with the obligation to pay the rent, whether for rural or urban properties, and those for other payments made annually or in shorter periods (CC art. 1966) also prescribe after 5 years.

Claim for rents and other amounts arising from the leaseThe lessor, in case of non-payment of the rent and amounts that the lessee is obligated to pay under the lease contract, has the following options for judicial proceedings:- verbal;- monitorio; or); and

- theactions to demand compliance From the obligation to pay the price of leases, whether for rustic or urban properties, and those of other payments made annually or in shorter periods (CC art. 1966).

Claim for rents and other amounts derived from the lease

Thelandlord, in case of non-payment of the rent and amounts that the tenant is obliged to pay under the lease agreement, has the following options for judicial proceedings:

- verbal;

- monitorio; or

exercise the accumulated claim for rent with eviction for non-payment. It is the most commonly used option in practice.

They are processed through theverbal procedure all rent claims or amounts due by the tenant arising from the lease agreement, regardless of theamount even if it exceeds the quantitative limit of 15, 000 euros (LEC art. 250, 2).

If the contract had been previously terminated and pendingrents are claimed, the appropriate procedure is also the verbal one, since the termination of the contract does not change the nature of the rents. The Law does not distinguish between rents claimed before or after the recovery of the property (LEC art. 250, 1. 1).

Likewise, both in rural and urban leases, all matters that can bequantified within the limits of this procedure must be processed in a verbal trial (LEC art. 249, 1. 6º), therefore, the rest of the landlord's claims, not related to rent claims or evictions, which previously had to go to an ordinary trial, will be heard in a verbal trial if they do not exceed 15, 000 euros.

On the other hand, this modification of the regulation also allows the access of thetenant to this procedure, without having to resort to an ordinary trial to claim, for example, the return of the security deposit or a repair that the landlord was responsible for, as long as the amount does not exceed 15, 000 euros.

The verbal trial for the claim of rents or similar amounts has the nature of afull trial in which the parties can argue all the vicissitudes that have affected the lease agreement and, therefore, the existence or not of the debt being claimed.

1. Initiation of the procedure(Civil Procedure Law art. 437)

Complaint(Civil Procedure Law art. 437)

The verbal trial is initiated through a complaint in whichthe following are stated:

- the data and identification circumstances of the plaintiff and the defendant;

- the address or residence where they can be summoned;

- the facts and legal grounds; and

- what is being requested, clearly and precisely stated.

The complaint must include theprior negotiation process carried out or the impossibility thereof, and, where appropriate, the documents justifying that a suitable means of dispute resolution has been pursued (LEC art. 264, 4º redacc LO 1/2025).

Thedomicile or residence for service of process is usually that of the leased property.

The claim in the lawsuit must also specify, in addition to the overdue and unpaid rents, the claim for therents that accrue until (LEC art. 220, 1):

- they are brought up to date with the payment of the rents and amounts due, if the lease agreement continues; or

- until the termination of the lease agreement.

Admission(LEC art. 404 and 438 -redacc LO 1/2025-)

Upon examination of the lawsuit, it is admitted or referred to the Court for a decision on admission in the following cases:

- when a lack ofjurisdiction or competence of the Court is deemed; or

- when inconsistencies are identified in the lawsuit.formal defects not remedied by the plaintiff within the deadline.

In theadmission decree of the lawsuit, it is indicated, when possible, that the defendant can act without a lawyer or solicitor and that standardized forms are available at the judicial body or on the electronic platform that can be used to respond to the lawsuit.

Response to the lawsuit(Civil Procedure Law art. 438, 1)

Once the lawsuit is admitted, the defendant is given a deadline of10 days to respond in writing.

If the defendantdoes not appear within the granted period, they are declared in default (Civil Procedure Law art. 496).

Counterclaim(Civil Procedure Law art. 438, 2)

It consists of the defendant exercising a new claim against the plaintiff, to be processed in the same lawsuit and decided in the same judgment resolving the initial lawsuit.

The counterclaim is filed with the response to the lawsuit and must meet therequirements required for the concise claim (LEC art. 437). The counterclaim isserved on the plaintiff at least 5 days before the hearing date.

In the verbal trial for a claim for a sum of money, if a counterclaim is admissible, it is subject to the followingexclusions:

- does not determine the inadmissibility of the verbal trial; and

- there is a connection between the counterclaim requests and those that are the subject of the main claim.

2. Hearing(LEC art. 438, 8 to 10 and 440 -redacc LO 1/2025-)

Evidence submission

After responding to the claim and counterclaim, the court clerk grants both parties aperiod of 5 days to submit evidence, summon witnesses, experts, or necessary parties, and make the challenges they deem appropriate.

Once this period has elapsed, the Court rules byorder on challenging the amount in dispute if it has occurred, on the procedural exceptions raised, on the admission of the proposed evidence, and on the relevance of holding a hearing.

Against theadmission or dismissal of evidence by the Court, only an appeal for reconsideration is possible, which is processed and resolved immediately; and if it is dismissed, the affected party may file aprotest in order to appeal in appeal.

The Court, even if requested by the parties, may decide thatthere is no hearing and issue a judgment when the only evidence admitted is that of documents, and these have already been submitted to the process without being challenged, or when expert reports have been submitted and the Court has not deemed it relevant or useful to have the experts present at the trial.

Summons(LEC art. 440 -redacc LO 1/2025-)

Ifthe holding of a hearing is agreed, the parties are summoned to appear on theday and time designated for this purpose, within 5 days following the completion of the response process, and must take place before one month.

The followingwarnings to the parties:

- they must attend the hearing with theevidence that they try to use;

- may be subject to anegotiation to try to resolve the conflict, including mediation, in which case the parties must state their decision at the hearing and the corresponding reasons; and

- the hearing is not suspended due to theabsence of the parties. If they do not attend and their statement is proposed and admitted, the facts of the interrogation may be considered admitted. If the plaintiff is absent, they are deemed to have withdrawn and the costs incurred are imposed on them, and if the defendant fails to appear, they are declared in default (CPL art. 442).

Evidence practice(CPL art. 445 - redacc LO 1/2025- and 446)

The evidence that is admitted is practiced.

Once the evidence has been practiced, including the final proceedings, the parties may formulateconclusions to assess the results thereof (CPL art. 447, 1 redacc LO 1/2025).

3. Judgment(LEC art. 447 -redacc LO 1/2025-)

Once the evidence has been presented and the conclusions have been formulated or after the allegations of the parties, in case no evidence has been admitted and presented, the Court concludes the hearing and issues a judgment within10 days. The judge may decide to deliver the judgment orally, which will later be documented on the audiovisual support of the proceeding (

LEC art. 210redacc LO 1/2025). Judgments issued in verbal trials for

claims for rent or amounts duearising from the lease contract have the effect of res judicata. Likewise, the judgment in lawsuits where

the claim for eviction is combinedwith the claim for rent or similar amounts due to non-payment of rent or similar amounts, as well as actions brought against the guarantor or joint guarantor, have the effect of res judicata. Registry of final judgments for unpaid rent

(L 4/2013 art. 3)This Registry is created with the purpose of providing

information on the riskinvolved in leasing properties to individuals who have a history of failing to meet their payment obligations in lease contracts and who, for this reason, have been convicted by final judgment in an eviction procedure in accordance with leasing properties to individuals who have a history of failing to meet their rental payment obligations in lease contracts and who, for that reason, have been convicted by final judgment in an eviction procedure in accordance withLEC art. 250, 1. 1º or theLEC art. 438 wording LO 1/2025.

Thecorresponding Court must send said information to the indicated Registry.

Likewise, thearbitration bodies competent must inform said Registry of the data regarding those persons who have been declared responsible for the non-payment of lease rents, through an arbitral award issued for that purpose.

Ownershave access to the information contained in the Registry, who wish to enter into lease agreements on them, whether they are individuals or legal entities. To do so, they must submit alease contract proposal identifying the potential tenant, limiting the information to which they will be entitled, to the data contained in the Registry, related exclusively to said tenant.

Individuals included in the Registry may request thecancellation of the registration when in the corresponding process they have paid the debt for which they were convicted. However, the record in said Registry has amaximum duration of 6 years, proceeding to its automatic cancellation at the end of said period.

This registration is in any case subject to what is established in the regulations ofdata protection of a personal nature.