Real property / Estate law

Law 42/1998

In accordance with the resolution of the Spanish court dated December 15 1998, it is declared that the regimes existing prior to Law 42/1998 must be assessed not by the date on which the rights were transferred, but by the way in which those regimes were adapted to the new legislation. The rights arising from pre‑existing regimes are to be promoted and transferred in line with the option chosen by the owners in the adaptation deed registered in the Land Registry, one of which may be the continuation of the original regime.

This interpretation allows rights derived from such regimes to remain valid and transferable with the same legal nature, exploitation method, and duration—whether indefinite or fixed term—without being subject to the fifty‑year maximum limitation introduced by Law 42/1998. Furthermore, contracts are not rendered null merely because they involve the floating modality, where rights refer to accommodations or determinable time periods. As long as identification is possible through reservation procedures or other established criteria, these contracts retain full legal validity.

Doctrine of the Supreme Court in matters of leases.

The Supreme Court Judgment of 7 October 2025 changes the traditional doctrine and declares that a clause providing for an indefinite extension is valid if it has been freely agreed by the parties. The 1994 Urban Leases Act does not prohibit this type of agreement and only establishes mandatory minimum periods, not maximum limits on duration. A contract is not perpetual if it may be terminated on legal grounds; therefore, an indefinite extension does not in itself infringe Articles 1256 and 1128 of the Civil Code.

Although it upholds the validity of the indefinite extension, the Supreme Court establishes that the lease may not exceed thirty years, by analogy with usufruct. The dissenting opinion states that this limit is not provided for in the Urban Leases Act and constitutes a judicial creation.

Thus, the judgment reinterprets the Urban Leases Act as a system of minimum mandatory rules in favour of the tenant, combined with broad contractual freedom beyond those minimums. Accordingly, the new case law doctrine allows the parties to agree on a level of stability greater than that provided by law, provided that mandatory rights established in the Urban Leases Act are not infringed.

The Court emphasises that the indefinite extension must be justified by an economic or functional cause, such as the tenant's investment in renovation works. This suggests, according to the Court's reasoning, that not every indefinite extension will be valid, but only those that are reasonable and balanced.

The judgment reopens the debate on the temporary nature of leases, introduces legal uncertainty through the use of an analogy with usufruct, and has immediate effects on contractual negotiations, increased litigation, and restrictions in the rental market. All of this highlights the need for legislative reform to clarify the rules on duration and extensions.

In short, the judgment transforms the regime governing the duration of leases by validating agreed indefinite extensions, while judicially limiting them to thirty years, on the basis of party autonomy and a justifying cause.