PIMECO has listed a range of ways in which the government can support small commercial units. Yesterday, PIMECO said that it has chosen this moment to make the request to the ministry for Commerce and Industry as the Balearic government is drafting its budget for the next year.

In an official publication, PIMECO has warned all of its members that over that past few months, the economic indicators of the region show that it is suffering due to the world-wide credit crunch.

Freehold businesses for sale, are seldom seen in the open market as many Mallorcans keep the freehold business as an investment for their families. As if they rent this or Traspas it then the money is a source of income.
For this reason they are few and far between, so if this is what you are looking for and you find a suitable one make sure you close the deal as soon as possible.

Remember that if you then become the freehold owner you can then rent out the business property and receive an income yourself.

With a freehold sale there will usually be an additional 8% to 10% cost on top of the freehold price for notary fees, legal charges and transfer taxes and expenses.

Freehold businesses can usually be financed up to about 60% of the building valuation.

Leasehold Business – Traspaso

Here in Mallorca this is known as Traspaso, The majority of bars, restaurants, cafés etc over here are Leasehold Businesses.

The building shell being owned by the landlord, the buyer owns everything else that forms a part of this business.

The lease term for leasehold business can be for any fixed period with five years being the minimum normal tenure. It is quite normal for this five year period to be automatically renewed for additional periods of five years.
During the contract period you agree to pay a rent to the landlord or freehold owner “Propetario” sometimes this rent is paid annually in advance, sometimes twice yearly and sometimes even monthly is allowed. As long as you pay your rent then everything will be fine with your landlord. Most of them are just looking for a quite life!

During the contract period, the rent either remains fixed or it can be increased only on the basis of the annual ‘cost of living index’ published by the Spanish Government. Currently this is between 2 to 3 per cent.

All this will be checked with us and by your Gestoria before you sign any contract.

These Traspaso agreements are by far the most common forms of business transfer in the whole of Spain and give you an option to be able to sell on the Traspaso at a later date. So if after a few years, if you take a decision to sell or Traspas the property, the landlord would usually agree to a new lease term as per the original contract for the new buyer.
However they do have the option of asking for a rent increase at this time.
So this would be a new lease period and not the remaining years in the old contract. The landlord has the power to terminate the lease only in case of non-payment of rent but this has to be done legally through the court system which is quiet slow in Mallorca.

So in summary, a Traspaso is the most common form of business contract, you buy the Traspaso from the current owner and you pay a rent to the Propetario. You can sell this Traspaso on, if and when you decide to.

Rental Business – Alquiler

Rental businesses or as they are known over here Alquiler are basically what it says. Its a rental of the business premises, they are not very common in the Mallorca bar and restaurant market.

They are more usually for either empty shop or office units. However we do sometimes have bars and restaurants that we can negotiate on a rental contract or some that the owners only want to rent out.

This may have two benefits. If the business is also available with a Traspaso or Freehold option then it may give you a chance to “try before you buy”.
If the business for rent is just a rental contract only, then it could give you an insight into life and work in Mallorca before you make a long term financial commitment.

These contracts can be renewed every year or for a longer fixed period. You don’t make a payment for a Traspaso but would normally be asked for a deposit to cover any equipment and initial bills such as electricity and water.

Any deposit paid would be refundable as long as the business was returned in its original condition and all bills have been paid.

Normally you would be required to pay the first year rental in advance along with the deposit and ingoing legal and administrative fees, then the second year would be just the rental cost only.

Occasionaly you may be able to get agreement from a landlord to turn a Rental into a Traspaso. This would mean you could take an empty unit or a business that is not working well or fitted out properly, invest some time and money into it, turn it into a working business and have the right to sell the Traspaso at a later date.