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Commercial premises and tenant goodwill compensation under article 34 LAU
A commercial tenant may receive up to 18 months' rent in compensation when a lease ends. We examine article 34 LAU and contractual waivers.
Article 34 LAU gives a commercial tenant a right to compensation from the owner when a lease ends, but only where specific conditions are met. This needs to be reflected in the transaction price from the outset rather than addressed at exit.
The rationale is simple: if a tenant has spent years building up a location through its shopfront, reputation and customer recognition, and the owner refuses renewal to benefit from the established customer base, the law requires compensation. This is indemnización por clientela, or goodwill compensation.
The hierarchy of rules for commercial leases
Leases for uso distinto de vivienda—non-residential premises—are governed by Título III LAU. The hierarchy is: first, the parties' express contractual terms; then Título III LAU for matters the contract does not address; and finally the Código Civil as supplementary law. A well-drafted commercial lease can settle many issues in advance, including compensation rights.
When compensation becomes payable
Article 34 LAU applies if all the following hold: the lease ends because its term expires, rather than through the tenant's fault or another cause; the tenant has conducted customer-facing retail business there for at least the last 5 years; and, at least 4 months before expiry, the tenant notified the landlord that it wished to renew for at least another 5 years at market rent, but the landlord refused. The right arises specifically where the tenant tried to stay and was refused, rather than whenever a lease ends.
How the amount is calculated
Compensation is calculated at one month's rent for each year of the lease, capped at 18 monthly payments. Even if the lease lasted more than 20 years, no more than 18 months' rent can be claimed. For example, a 10-year tenancy followed by refusal to renew on article 34 terms produces a calculation based on 10 monthly payments, not 18. The cap only becomes relevant when the lease itself exceeds 18 years.
If the lease includes a clause by which the tenant waives article 34 rights in advance, that provision is effective and the tenant has no compensation claim.
How this affects a transaction
When buying premises with an existing tenant, or ending a lease to reposition the property, this is a direct financial-model input. If the lease has no article 34 waiver and the tenant meets the conditions, compensation is a real cost that must be budgeted in advance rather than assessed afterwards. See the commercial property strategy and commercial tenant strategy.
Source: bourgeoisfincas.com.
Questions and answers
Is compensation payable if the tenant chooses not to renew?
No. Article 34 rights arise only where the tenant wanted renewal, gave timely notice, and the landlord refused. If non-renewal is the tenant's decision, no compensation is due.
Can this right be excluded after the lease has been signed?
An article 34 waiver must be agreed as a contractual term. It cannot be inserted retrospectively by one party alone: both parties must consent, generally through an addendum.
Does the tenant's activity affect entitlement?
The right arises specifically for customer-facing retail activity. Office or other non-retail leases fall outside article 34, regardless of their duration.