Saturday, 21st September 2019
LEGAL Article
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This Month's Magazine
Is your tenant not paying the rent?

Is your tenant not paying the rent?

Have you considered insurance or arbitrage (arbitration)?

With so many unsold properties, investors can find themselves in a right pickle if the tenants, on whom they rely for mortgage payments, actually default.
 
Bearing in mind that tenants are so well protected in Spain, many landlords prefer to leave their properties unoccupied or even give them back to the bank rather than experience a rogue tenant, especially a professional rogue tenant who might be deliberately abusing the law to his advantage in order to live rent free for as long as possible out of every property he occupies.

If you thought that your 11 month contract automatically means that it is a short term contract which you can refuse to renew, think again. Under Spanish Law, whatever the length of the rental contract might be, as long as the tenant can prove that the property is his main residence, he is entitled to extend the term for up to 5 years. How difficult is it to prove that where you live is your home?

It is not unheard of rogue tenants actually renting a flat to 30 or 40 illegal immigrants at the time thus making a good living at the expense of the true property owner.  


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It is of no surprise that in recent years landlords have increasingly been applying for credit insurance from companies that specialise in taking the risk for non payers of goods or services. These companies will assess the individual risk and then offer cover as a percentage of the unpaid rent plus costs of eviction, until eviction is achieved. It may be worth investigating this recourse, though I am not sure what the premium cost might be.

As the process of eviction can be very lengthy, a system of arbitration was introduced a few years ago which short-circuits and replaces the long and expensive conventional process. It is reported that this practise is beeing extensively used already, however the draw back is that both parties, landlord and tenant, must agree that this is the course to follow. If the tenant refuses it cannot be applied and the chances are that he will probably not agree if he is ill intentioned anyway.
 
If both parties do agree by signing a form which is added to the contract, an Arbitration hearing is guaranteed to take place within 30 days at an immensely reduced cost. The actual cost of arbitration is defined as €42 plus an estimated €300 should there be complications that delay the outcome. This form is available at any estate agency approved by the Arbitration Court.
      
Remember that in the case of a rogue tenant, who could cause substantial damage to your property, the main objective is eviction rather than rent recovery. What you need to preserve is your capital rather than the income, therefore getting the tenant out as soon as possible is the main priority and as the eviction process can be very lengthy and costly, it may be worth eating “humble pie” and try to come to an amicable solution with the tenant before embarking onto the available legal process.

Please remember that the above information is given as guidance only, you should always consult a lawyer in respect of your own personal circumstances.



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