Balearics Commercial Surcharge Defaults & Penalties

The application of late payment penalties for commercial premises in the Balearic Islands (SME tenants, offices, or industrial warehouses) is primarily governed by the Ley 29/1994 de Arrendamientos Urbanos (LAU) and the Civil Code. While B2B agreements favor freedom of contract, the Spanish Supreme Court (STS 624/2019) has explicitly ruled that urban leases are excluded from the scope of Law 3/2004 (the "Late Payment Law").

1. Penalty Clauses (The Free B2B Agreement)

Under the principle of freedom of contract (Art. 4.3 LAU), the owner of a restaurant in Ibiza or a retail space in Mallorca can agree with the tenant on late payment surcharges. These agreements take precedence over supplementary laws.

You can agree on fixed or percentage-based default surcharges, but they must be reasonable: While landlords often try to apply arbitrary fixed penalties, such clauses can be challenged if they are deemed abusive or disproportionate. Parties may choose to contractually adopt the interest rates found in Law 3/2004, but these do not apply automatically by law to commercial rent.

2. Supplementary Application (Civil Code Art. 1108)

If the B2B contract for your warehouse in Mallorca omits what happens if the tenant does not pay on time, the following regulations apply:

• Civil Code (Art. 1108): If the obligation consists of the payment of money and the debtor is in default, the indemnity (in the absence of a specific agreement) consists of the Interés Legal del Dinero.
• Current Rate: The legal interest rate for 2024 is 3.25%.
• Exclusion of Law 3/2004: Per the Supreme Court (STS 624/2019, 22 Nov), the automatic interest rate of the ECB + 8 percentage points and the fixed 40 euro recovery fee do not apply to commercial leases unless they are explicitly written into the lease contract.

3. The Balearic Ultimatum: The Obligation of VAT without Collecting It

Having "patience" with a commercial tenant in arrears in the Balearics is financially risky for the landlord. The Treasury requires the payment of the VAT (21%) on the rental invoice in the corresponding quarterly settlement (Form 303), even if the rent remains unpaid.

To stop this capital drain and recover uncollected VAT under Art. 80.Cuatro of Ley 37/1992 (LIVA), the following requirements must be met:

1. Debtor Status: The tenant must be an entrepreneur or professional.
2. Waiting Period: At least 6 months (for SMEs) or 1 year (for large companies) must have passed since the default.
3. Formal Demand: You must issue a formal demand via Burofax or file a judicial claim.
4. Corrective Invoice: A corrective invoice must be issued within the 6 months following the end of the waiting period mentioned above.

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