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   What is a Traspaso

    
AN EXPLANATION OF THE DIFFERENT TYPES OF BUSINESS SALES IN LANZAROTE


LEASEHOLD
A traspaso sale (as they are known to most people in Lanzarote) is the most similar sales system to a leasehold in the
UK. The contract with the landlord is set for a period of time and if the contract states it can be renewed. When a traspaso is renewed at the end of its life you are only renewing the rental agreement and so the only cost is usually the rent increasing by a certain percentage, again this is stipulated in the original contract.

When you purchase a leasehold business in Lanzarote you are buying either the existing rental contract time period from the current tenant or (most common) a new rental contract from the landlord. The purchase also includes transfer of the licence (if you wish to run the business in the same way), the inventory and the right to be able to run your business from these premises for more detailed information on what a traspaso is then select our buyers guide - what is a traspaso.

When you have bought a leashold business in the majority of contracts of the rental contracts you will be able to sell the business (traspaso) on to someone else after a period of trading. It is usual that the landlord will then issue a new contract for the new tenants (as above) and you will receive the purchase price of the business less any fees and costs involved.


FREEHOLD
A freehold business purchase is very much the same as purchasing a house in the UK as you are purchasing not only the current business, licences and inventory but also the bricks, cement and land (or local in a commercial centre). When you purchase a freehold business you must allow upto 10% of the purchase price to cover the same taxes as are present when purchasing a property.

When you own a freehold business you are then the landlord of the property and this gives you the option to sell a traspaso of the business and receive a rental income. The banks in Lanzarote will help finance the purchase of a freehold business and are currently (August 2010) offering around 50% of the valuation price on commercial properties. We can of course assist you to find out the valuation of commercial properties and assist with negotiations with a bank for finance.


RENTAL
A rental purchase can be complicated and has several legal issues that must be explained. If the person who is offering the premises for rent is the landlord then there are no complications, however if the person is the current traspaso holder then there are legal implications for both parties. The traspaso holder must have permission from the landlord firstly to be able to effectively sub-let their business, as the majority of traspaso contracts don’t allow for this to happen. The traspaso holder must then create partnership agreements between the renters and themselves as the licences and according liabilities will remain in the traspaso holder’s name, effectively the traspaso holder must employ the renters as managers and ensure that their social security and national insurance is paid correctly. We will provide legal advice to see if this can be done correctly on the specific business.

If all of these criteria are met (by agreement either way with the landlord) then generally a holding deposit is taken to cover the fixtures and fittings of the business and a 2 month deposit to protect the rental contract. The contracts usually have a fixed term and a notice period for both parties should either wish to dissolve the assumed partnership. Given the right opportunity this can be a good way to learn how to operate a business, however our legal advice is strongly advised to ensure security for both parties.


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