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Hi there
As you lnow the rental law inSpain is skewed heavily towards the tennant. Well I was speaking to someone yesterday who is Spanish and deals in rentals (in fact she actually locates suitable properties for clients to reform and rent out). Anyway I was talking to her about the problems I have had in the past about renting and why I wouldnt really consider buying again in Spain for rental purposes.
She told me that there was a new type of contract approved very recently that gets round this problem called contrato arbitage. She didnt say much about it except that it allows the landlord to evict the tennant if they fail to pay the rent on time. I believe there is a 7 day grace peirod after the rent is due and then the courts will act within days
It sounds a bit like the small claims court in the UK and if it is what she says it is then it sounds perfect for landlorsds who are stuck with what to do with their properties and have a fear of long term rentals.
I will research it and let you know if and what it is all about, or perhaps iof Drakan or Maria know anything about it they can enlighten us
best wishes
Vince
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Tilly
given the choice of having my property empty for most part of the year and having some kind of security such as this I would plum for the latter. The lady in question who told me is a professional property finder and deals with judges all the time. She also has a large portfolio of her own properties and has had recourse to use this law and she had the bad tennant out on the street within one week. Thats swift justice in my book
I am sure there are sceptics out there and rightly so, however I will research it further and have asked my lawyer to do so too. As I said in my previous post it is the speed of justice in this contract that is the key ‘ the fact that you can indeed get someone outr in a hurry if need be. This lady is not a forehigner nor is she trying to sell me something, she is a friend of a friend who I was speaking to about other matters and we got talking about the draconian law in Spain.
In Valencia as I mention in an earlier post they do have a very slick system already – aval bancario. No-one here will rent out to you unless you have one of these which effectively means that if you take a 5 year rental contract the bank must guarantee the pàyments for this term. So the bank will do a credit check on the person beforehand, and if the tennant doesnt pay then the bank has to and you can bet your bottom dollar they arent going to mess around.
For me it has been a real eye opener moving to Valencia and I have seen that things can indeed work, Still having had my fingers burnt once I am cautious but all these are steps in the right direction.
It just gives another option to those who are stuck with a property they cannot sell and cannot make ends meet with short term rentals and are cautious about renting long term. Now instead of being desperate to sell because they cant afford the mortgage payments there is another possibility. It wont be for everyone becuase even this contract gives the tennant the right to stay for five years and if you dont want a long term tennant then short term is the only way to go.
Niothing is perfect but at least things are changing. It wasnt THAT long ago that the law in UK was heavily weighted in favour of the tenant (and still is if you dont have a guaranteed short term let) and they say that Spain is a number of years behind UK. I say good that things are moving in the right direction.
Vince
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vbtudor, Various facets to your posting and I do realise that you only making us aware of the evolving situation. My concerens.
1) I do not beleive, that she can get people out in a week. Yes, she may sending the heavy.
2) The Bank. (aval Bancario) This needs to be investigated further. As you what you say seams to be a Bank Guarantee. I cant see Banks getting involved in landlord/tenant issues. I can see if the tenant has the five year rent placed in a account with the bank blockling this amount and releasing the monthly rent. This could be a large anmount, say the rent is €1000 x12x5= €60,000. Most tenants do not have this kind of funds, otherwise they would be buying a place.
3) Having the property empty/rented, is a decesion that one takes and their set of circumstanes and attitude towards risk. In monetary terms legal fee, damage to property, has to be added apart from the obvious stress.
As things stand Uk is best for buy to let, this however changing with licences, deposit schemes etc. ( A job creation scheme )
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Hi Shakeel
the Aval Bancario is indeed a bank guarantee. The bank will issue one based on the standing of the person. It is effectively a loan by the bank (or that is how the bank process it) so they will not issue one unless they know the person and would in fact give that person a loan for the amount asked for.
As I also said in Valecia trying to rent a property without one is impossible (I know from personal experience of trying to find a rental and I only wanted it for 6 months to a year). It is a great form of security because as I saod it is effectoivelñy the same a guranteed loan – which menas the bank wont goive it to you if they think you need it.
As for the other contract arbitage, I dont know the lady that well (as I said she is a friend of a friend) but she doesnt seem the type )very mild mannered) to send the heavies in – but I just dont know because I dont know her that well.
Once I know more I will post more about it, but perhaps Drakan or Maria couild throw some light on the subject.
Regards
Vince
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Hi Shakeel
oneother point. In answer to the point that it is apersonal choice to rent long term – I agree wholeheartedly. However many peole are put off long term rentals for this very reason because there is no real security. If this indeed does give you a security which aval bancario does, then it gives you one more option that you dindt have before or wouldnt consider before.
I am all for freedom of choice and now you have the choice if you have a property that you bought but vant afford to pay for of
1. Selling cheaply and losing money
2. Renting short term to cover the costs (and depending where it is there may be thousands of others doing the same
3. Renting long term.Consider this. If you bought somewhere and cannot afford the mortgage and need to sell on or cannopt complete – yu lose money. If you have an option to rent long term and can art least cover most of the mortgage (if you bought way opver the top then it is unlikely you willcover the mortgage) then that is guaranteed for 5 years, your losses are minimised and potentially the market mau have picked up enough to sell on at a small profit.
Such is the vale of longer term planning but now at least you have that additional option you owuldnt have considered before. Which has to be a bonus
By the way it isnt just the banks that can issue an avalñ bancario – you can get someone to sign on your behalf as a guarantor (but they owould obviously have tobe a person of good standing to be accpeted)
best wishes
Vince
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@vbtudor wrote:
Hi there
She told me that there was a new type of contract approved very recently that gets round this problem called contrato arbitage. She didnt say much about it except that it allows the landlord to evict the tennant if they fail to pay the rent on time. I believe there is a 7 day grace peirod after the rent is due and then the courts will act within days
Vince
She was referring to the Plan Nacional de Alquiler Garantizado (PNAG) launched by the the Spanish arbitration court (La Corte Española de Arbitraje Económico de Derecho y Equidad).
The plan uses a form which is signed by the tenant and landlord and attached to the rental contract and binds both parties to resolve any dispute by arbitration rather than using the traditional and slow court system. It means that an order of eviction for non-payment of rent could be issued in months rather than years.
These contracts can be bought for just 42 euros and we have some in our office near Valencia.
More info at http://www.pnag.es
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Aval Bancario/Guarantee.
1) If the Banks lends for a rental contract. This has to be notorised, to be enforacble by the Bank.
2) I dont see where, is the Banks collateral in the event of s default.
3)The Banks would block the tenants funds. In my example above the €60,000. You will not find many tenants who will have this kind of cash floating around and this limits the pool of tenants.
4) A personal guarantee can be taken as a secondary collateral. Not the main as they are very difficult to enforce. The net worth of the gaurantor has to ne taken into account. People are not keen to open this situation to third parties. ( They not going to talk about the Cash under the matress) > He c
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As I said earlier Shakeel, if you dont have an aval bancario you cannot rent a property in Valencia . period. No one will do it. So someone somewhere must be providing these aval bancarios. When I went to my bank for one they said no problem, bring in the contract, we will review it and process it as if we were offering a loan. You will get an answer in two weeks. (if they had been in Valñencia it would have been 3 days but they had to send it to the head office in Valencia for approval)
So whether you like it or not it is a fact of life here that you just wont get a rental in Valencia if you dont have one and the banks do give them. The only cost for it was about 100 euros to set it up and of course if you defauly on the payments you would then have top pay interest on the payments.
As for a third party guarantor it happens all the itme here in this area anyway. The amount of times that banks have asked parents or children to act as such (I for example had to act as guarantor to my parents because of their age when they ttook out a mortgage).
Spansih families are more than willing to sign on behalf of their familiy members to guarantee mortages etc. They are not difficult to set up and nor are they difficult to follow up in the event of default (unless of course it is a foreigner hence the reason why they would only accept an guarantor from someone actually resident here) nor do they consider the financial status of the guarantor that much.
So yes it does happen, and it does offer some security in the event of default. I for one think it is much safer than not having one and it opens up the long term rental market to people who wouldnt otherwise consider it.
Vince
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vbtudor
As you probebly gathered that I am playing the devils advocate here. I am only pleased that there is a sound and safe way out to some people who may be between the devil and the deep blue see.Is this law enforceable through out Spain or only in Valencia ? This may sound a strange question to forum users, as Valencia is in Spain.
As, a lot of Spanish regions have their own local legislations.
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Most of our landlords who take in long term rentals ask for an Avala Bancario.
But being in a small town if a client refused to pay then a friend of a friend who is no doubt a member of the guardia etc would be round to make sure all things are resolved.
Like most places in Spain it’s not what you know but WHO you know which get you results and helps smooth the process!
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Having read up a ñittlñe on this it is a National thing overseen by the COurt de Arbitaje.
The two parties agree to have the matter settled befire signing any contracts by the court of arbitaje and they agree to be bound by the decisions made.
If the tennant subsequently fails to pay the court are informed and both parties go through a judicial procedure which can last approximately one month.,
The next phase is eviction that can last up to 2 months. So in total 3 months which is a lot shorter than the normal process.
It costs €42 as mentioned by Rawlins and is an addition to the contract. So far 6,800 evictions have taken place (put of how many I do not know and nor do I know how many the normal stystem have excercised inthe same period)
So it would seem a step in the right direction. I still wouldnt advocate buying a property to rent in Spain (not only because of the law but because rental returns are usually very low) but if you already have one and you wish to rent it out then this is a possible solution.
Best of luck
Vince
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