Renting in Spain: Top 10 Mistakes

By Raymundo Larraín Nesbitt Lawyer – Abogado
5th of June 2011

As summertime draws lazily upon us, with its beckoning sunny days and even longer nights, the rental season in Spain reaches its peak. With this in mind, I thought it would be a good idea to summarise in a brief article the most common faults that both landlords and tenants stand to make on letting out property in Spain. Despite what the poet Thomas Gray would have us believe, “Where ignorance is bliss, ’tis folly to be wise”, this line of thinking when it comes to renting in Spain can get you into trouble. Some of these slip-ups, besides being expensive,may even lead landlords to be criminally prosecuted by their own tenants in the most extreme cases.

Many problems can be traced to the fact that landlords remain largelyunaware ofthe legal implications of renting out a property in Spain.What renting entails is actually losing possession of the propertyfor a certain pre-agreed period of time in exchange of perceiving a regular income. This means you can no longer enter the property for the duration of the rental if it is not with the express permission, preferablyin writing, of your tenant, regardless if he’s up-to-date or not with the rental; that is not an issue.Landlords cannot enter their own property even if it’sjust for “inspection” purposes without the said permission. This frequently overlooked fact is single-handedly responsible for stemming most of the letting misunderstandings.

There are many morethat I could have listed below, butfor simplicities’ sakeI’ve decided to cut them out to keep the article reasonably sharp and short.Read further to help avoidturning renting into ranting under the sun.

Landlord’s Top Five Mistakes

Many expat landlords are unaware of the different mechanisms in place to secure rental income and often fail to implement them in their rental agreements which can leave them unprotected if the tenant does not, or cannot, pay the rent.These mechanisms are explained in detail in my article “Landlord: Keys to Successful Rental Income”.

Most of the blunders made by landlords are related to their tenants becoming non-paying tenants. This can understandably exert great pressure on landlords, especially if they are relying on the rent to offset it against their mortgage repayments, which can easily lead them to take rash decisions that may come back to haunt them later on in life-

1. Shutting off utilities (water & electricity). Landlordsoftenfeel the urge of doing this on their tenant missing out on their rental. If you happen to do this your tenant can report you to the police. Doing this may be labelled as either coercion or harassment or even both. Your tenant can prosecute you criminally on doing this. So you may want to think twice before doing this. If the utilities are in the name of the landlord and he stops paying them on purpose to mount pressure on the non-paying tenant he can equally be prosecuted as it’s equated to shut-off the utilities physically.

2. Changing the locks.Same as above, it may be regarded as either coercion or harassment or both and you may be prosecuted criminally for this.

3. Evicting non-paying tenants with the assistance of newly-acquired “acquaintances”.Landlords may feel tempted to take justice in their own hands and break-in their own property assisting the decision-making by bringing in some ad hoc square-jawed tattooed acquaintanceasbackup. This is seldom a bright idea and may land you and your “friends” in a Spanish jail for unlawful entry (trespassing). The only –legal–way to evict your tenant is to hire a lawyer and initiate a formal eviction procedure through the Spanish law courts. New laws have been enacted to help speed-up the eviction procedure. But on average it is still taking 5-9 months depending on how clogged local law courts are.

4. Entering the property to perform a “routine check”. Althoughit may behighly temptingto take a quick peak from time to time, especially after a noisy summer party that’s kept the neighbourhood up all night, it is seldom agood idea.“It’s my property and I will enter it when I please.”I’ve often heard this line from disgruntled landlords who just cannot stand the fact they are forbidden from entering their own property in Spain if it’s not with the prior –written– permission from their tenant.You simply need their permission following Spain’s Tenancy Act regardless if they are paying the rent or not.

5. Eleven month contracts are short-term and watertight. Erm, I’m afraid not.This single blunder is responsible of many legal problems at a later date. What qualifies a rent as either short or long-term is not the fact that it’s labelled one way or the other. What matters really is that the tenant and his family are not using the property as theirmain residence and this must be expressly built and worded into the Tenancy agreement so it’s truly a short-term tenancy. Tenants can successfully challenge at court short-term 11-month contracts morphing them into long-term ones (5 years). During the next 5 years you will be unable to recover possession of the property whilst the tenant pays being forced to rent it out. The new Express Eviction Law has now amended this and allows landlords to introduce clauses that waive the statutory long-term requirement of 5 years i.e. a clause whereby it is stipulated that the property will be needed for the landlord’s own use or for that of his family. However, if after 3 months’ time the landlord -or his family-has not taken possession of the property, he will be forced to re-install his ex-tenant and award him a suitable compensation to offset the expenses of the move.

Luxury rentals waive this protection as Spain’s Tenancy Act does not apply tothem; luxury rentals are ruled by the will of the parties.

Tenant’s Top Five Mistakes

To be fair to landlords tenants also make their fair share of mistakes.-

1. A verbal Tenancy contract is better than a written one. Erm, no. I really don’t know where tenants get this idea from. In Spain verbal contracts are equally valid as written ones. The problem lies when there are disagreements. It’s very difficult to prove what was actually agreed in a verbal contract i.e. landlord pays for the utilities. It’s in the best interests of both tenant and landlord that rental agreements are always put in writing. Tenants have a right to demand having a verbal contract put in writing by their landlord.

2. I can always offset the 2 months’ rental security deposit against my unpaid rental. No you cannot.That two month’s initial security depositservesits own legal purpose and at no time can be used to compensate rental shortfalls.

3. I can always leave the property ahead giving 30 day’s notice. Yes you can but you will be held liable to pay for the remaining months you agreed to rent. i.e. say you signed an 11-month contract and on the third month of the let you give notice that you will be leaving ahead of the expiration of the agreed rental. You may leave ahead but you will owe the let for the remaining 8 months despite you giving notice; it is unrelated. Some landlords will pursue you legally if you fail to pay the balance owed while others willrather turn a blind eye thinking it’s hardly worthwhileall the legal hassle. The sum owed will normally be the decisive factor on whether legal action is warranted.Whatever the case may be, you ought to know that legally you owe the outstanding months and if you decide not to pay them you are taking a legal gamble that may or may not payoff.

4. Deducting damages from the rent. All tenants feel tempted to fall for this one.
Classic examples of this would be:
i) After heavy rainfall I’ve had this terrible damp patch with an aggressive mould growth which has cost me €300 to be removed. Plus my new laptop got damaged as a result (€1,000). I’ll deduct the €1,300 from my let to make up for both.
ii) The washing machine broke down and cost me €150 to repair.
iii) My landlord is not paying the community fees and as a result I’m now being disallowed from using the complex’s facilities i.e. swimming pool. I’ll just pay €300 less a month to offset for this.

I could put more real-life examples of the queries I’ve received over the years but I think that’ll do for now. At no time can a tenant decide unilaterally to pay less rent or withhold part of the rent to offset against these unforeseen damages or expenses. First of all some damages have to be paid,under law,by the tenant himself;especially those relating to the normal wear and tear on renting out a property (Art 21 of the Urban Tenancy Act as well as Arts 1563 and 1564 of the Spanish Civil Code). It is seldom a good idea to practice retentions or withhold amounts when you feel it’s appropriate without having the prior landlord’s agreement in place, in writing as well. This may even be a cause for legal eviction as you are effectively breaching the signed Tenancy agreement.

5. The property is being repossessed and I’m being askedby the lenderto vacate it. Actually youdon’t have to in long-termtenancies.FollowingArt 13 of Spain’s Tenancy Act it allows tenants to stay in the property until they complete 5 years providing it is truly a long-term tenancy (i.e. your usual place of abode). This is true for urban rentals signed after the 1st of January 1995. The bank after repossession takes on the role of landlord. Lenders on repossessing the property must respect by law outstanding tenancy agreements.The tenant must continue paying the rent to the new owner, the bank. Obviously both tenant and bank (now landlord) are free to reach anamicable settlement whereby it is agreed the formerleaves the property ahead of the statutory five-year limit in exchange of a suitable compensation.

In Conclusion

Spain’s Tenancy laws are biased towards tenants for historical reasons that need to be addressed immediately. Government, both at a national and regional level, has taken notice of this and are regularly passing new laws, i.e. Express Eviction Law, with the aim of streamlining rental procedures. There is still much to be accomplished if Spain’s rental market is to become as strong and relevant as that of fellow European countries.

Landlords and tenants should always seek legal advice on renting property, particularly prior to making rash decisions related to non-payment so as to avoid costly mistakes.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

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