Buying a flat with a tenant inside: what to check before signing

Buying a rented property requires reviewing more than just the price

Buying a flat with a tenant inside is not impossible, but it is different from a sale with no occupiers. Before signing a reservation agreement or deed, it is worth checking what contract exists, how long it lasts, whether it has been registered with the Land Registry and what obligations you will take on as the new owner.

The general basis is set out in the Urban Leases Act: the letting of a main residence has a specific regime for duration and extensions, and the sale of the property does not always end the contract. In particular, article 14 of Law 29/1994, on Urban Leases, regulates how the buyer is substituted into the landlord’s rights and obligations depending on the length of the contract and whether or not the Land Registry protection requirements apply.

1. First check what type of tenancy agreement exists

Not all tenancy agreements give the buyer the same scope. Before closing the deal, ask for a full copy of the contract and check:

1. Whether it is a main-residence tenancy or a temporary tenancy.

2. The date of signature.

3. The agreed duration.

4. Whether any extension is currently in force.

5. Whether the contract was registered with the Land Registry.

6. Whether the current landlord is a natural person or a legal entity.

This is important because the purchase does not automatically wipe out the tenancy. Under article 14 of the LAU, the purchaser is substituted into the landlord’s rights and obligations during the first five years of the contract, or seven if the previous landlord was a legal entity, except in cases where the requirements of article 34 of the Mortgage Act are met.

### Common mistakes

- Signing without requesting the full contract.

- Assuming the tenant will “move out” after the sale.

- Confusing an occupation in fact with a valid tenancy.

- Failing to check whether annexes are let along with the property, such as a storage room or parking space.

2. Check whether the sale will affect the length of the tenancy

The practical question is simple: how long will you have to respect the contract?

The answer depends on the case. Article 14 of the LAU states that, if the contract does not exceed the statutory protection periods, the buyer must bear the tenancy for that period. If the agreed duration is longer, the purchaser may be substituted for the entire agreed term, unless the mortgage-law protection requirements for a third party apply.

That is why, before buying, it is advisable to ask for a clear timeline:

1. Start date of the contract.

2. Expected end date.

3. Whether the mandatory extensions have already been used up.

4. Whether the landlord notified any need to recover the property.

5. Whether there were any additional agreements on notice to quit or extension.

### Practical tip

Do not limit yourself to reading the first page of the contract. The final clauses often contain agreements on notices, duration, rent reviews or ancillary rights that can significantly alter the true value of the transaction.

3. Ask for the land registry extract and verify the registry situation

Registry information is essential to separate what was agreed in the contract from what can be enforced against third parties. The Community of Madrid notes that the legal situation of the property can be known through the informative land registry extract, which shows encumbrances such as mortgages or attachments and also whether the seller is in fact the owner. In addition, if the property is mortgaged or otherwise encumbered, this may affect the transaction and financing.

The regional guide to property sales also states that the buyer should check, among other things, the IBI and community fees, because any outstanding debt may end up affecting them as the purchaser.

Pay particular attention to:

1. Registered ownership.

2. Charges or encumbrances.

3. Whether the tenancy is recorded.

4. Cadastral reference and description of the property.

5. Whether the physical reality, the title deed and the sale documentation all match.

4. Confirm which payments and documents you should request from the seller

If you are buying a rented flat, it is not enough for the seller to tell you that “everything is in order”. It is advisable to set out in writing what they are handing over and what they are responsible for. Ask, at the very least, for:

1. A copy of the tenancy agreement.

2. The latest rent receipts.

3. Proof of deposit, where applicable.

4. A certificate confirming that community charges are up to date, where relevant.

5. The latest IBI receipt.

6. Information on utilities and any possible issues.

The Community of Madrid’s guide to property sales reminds buyers that it is important to check the financial स्थिति of the property and to request receipts for the IBI and community fees. In practice, this helps you avoid surprises after signing.

### Practical action

If the flat is let, include a clause in the reservation agreement or private contract that precisely identifies:

- whether you are buying with an existing tenancy;

- what rent is being charged;

- who will keep the deposit;

- from what date you will assume the landlord’s position.

5. Do not confuse purchase with automatic eviction

One of the most costly mistakes is thinking that buying the property allows you to recover it immediately. That is not always the case. If there is a valid contract, the buyer takes over the landlord’s legal position in the relevant terms. So if you need the property for your own use or want to put it on the open market, you must first study whether the contract allows this and when it could end.

In addition, if there are long-term agreements or contracts with special protection, the strategy changes completely. In some cases, the transaction may still be profitable; in others, it may be better to negotiate with the tenant or adjust the purchase price to reflect the time remaining.

### Final advice

- Do not sign a reservation agreement without calculating the impact of the existing tenancy.

- Do not assume physical possession is the same as legal availability.

- Do not accept verbal explanations without documentary support.

- If there are doubts about substitution, duration or registration, ask for an individual legal review before committing money.

If you would like to assess a specific transaction or need support when buying a property occupied by a tenant, you can request an online indicative valuation, with a price range and PDF report, or contact us on our contact page. Our office is at Montesa 29, Madrid, and we are open Monday to Friday from 10:00 to 15:00 and from 16:00 to 19:00.

This information is general and does not replace an analysis of your specific case.