Blog post copyrighted © 2007. Plagiarism will be criminally prosecuted.
By Raymundo Larrain Nesbitt
17th of December 2007
Non-paying tenants have become a real problem for landlords who rent out their Spanish property, a problem which seems to have been aggravated after August’s credit crunch. While the first thought of a distressed landlord is to lock the tenant out, or shut off the utilities, this is considered illegal by the Spanish Authorities and may lead the landlord to face criminal charges plus the payment of compensation to the tenant. If trying to reach an amicable agreement with the tenant fails, the only feasible option left to a landlord is to start an eviction process through a Spanish Court of Justice. Although the Spanish authorities have promised to enact a new ruling next year which will reduce the eviction time to only two months, currently an eviction of a non paying tenant takes anything between 10 to 18 months (typically one year).
The loss of rental income during this period of time can leave the landlord in bad financial shape, and things may turn uglier if the rental is partly being used to pay off a mortgage: if the monthly payments are not met, the bank could repossess the property. A horror story that many a landlord can be faced with.
The first signs of warning should be triggered once you’ve verified your tenant is two or three weeks late in the rental payment. With no delay, the first step will be to send the tenant a registered letter (“burofax”) giving him a reasonable deadline to pay the rental due (two weeks suffices). A lawyer should be able to arrange this for you for a reasonable fee.
We are still in the early stages where we are trying to reach an amicable agreement, as starting an eviction process through a Spanish court of justice should only be really used as a last resort. Eviction processes take long, and the tenant can remain (and will probably do so) in the property until the eviction order is issued. Landlords, therefore, should note that reaching an amicable agreement is in the best of their interest, even though this may involve, in many cases, relinquishing a few months rent. Not many landlords are happy with doing this, but it should be noted that the debt is rarely recovered (tenants usually declare themselves bankrupt after an eviction process), and the longer the tenant remains in the property, the bigger the financial loss is going to be.
Some unscrupulous tenants even request from the landlord an amount of money in order to vacate the property, which is in our opinion outrageous and should never be agreed upon.
If trying to reach an amicable agreement fails, there’s no other option but to initiate an eviction process.
The problem in cutting off the utilities, or changing the locks to the property is that the landlord may be subject of having a criminal proceeding being filed against him.
Changing the locks without the tenant’s permission can be considered either coercion (delito de coacciones) or unlawful entry (delito de allanamiento de morada), or both. These acts are punishable under the Spanish Penal Code. There is ample Jurisprudence on the matter, and as an example we can cite the Supreme Court ruling of the 28th February 2000 (rec 4642/1998).
If the landlord decides to cut off the utility supply, either directly or indirectly (not paying the invoices), he may also be prosecuted for this act, as it is equally regarded as coercion
In addition to this, the landlord will be breaching the rental contract and this weakens his legal position before a court on claiming eviction.
In any case, the debtor before the utility companies is the owner of the property, never the tenant. Any unpaid utility invoices will go against the property. The landlord will have to pay for all the expenses associated to reconnecting his property to the utility services as well as paying the invoices and any delay interests. For all the reasons outlined, this is not a recommended option.
If you have failed to reach an amicable settlement, you will then have to hire a lawyer and initiate what is known as a “juicio de desahucio”, or simply put, an eviction process. The lawyer will have to wait in some cases 4 months of unpaid rental before being able to file a lawsuit. An eviction process is actually quite slow and takes anything from 10 to 18 months (typically one year) until the tenant is effectively vacated from the property by the law enforcement agents.
An eviction process requires a solicitor and the assistance of a procurador, who acts as a conveyor belt between the lawyer in charge of the matter and the law court, does not belong to any law firm and under Spanish law it is compulsory to employ his services on litigation. A lawyer will typically charge you around 1,500 € in legal fees, plus an extra charge of 700 € in Procurador fees. Other costs may involve those of a locksmith.
The law suit is filed by your lawyer in a court where the property is located.
The priority for the landlord should be in many cases to recover the possession of the property and vacate the tenant, not to recover the lost rental income prior or simultaneous to the possession. The reason being is that the tenant may use to their advantage several legal mechanisms to delay such payment. These delay tactics allow the tenant to stay even longer in the property at the landlord’s expense. For this reason, the lawyer’s priority should be first to vacate the tenant, and only then to recover the lost rental. These are two separate and distinct legal actions from a procedural point of view.
The landlord can withhold the compulsory one month deposit, normally kept by the real estate agency until the end of the tenancy contract, to make up for the unpaid rental.
On letting properties in Spain, the landlord should be made aware of the numerous professional debtors there are which are very knowledgeable on Spanish Rental Law. These professional deadbeats profit on the biased Spanish laws which are devised to protect tenants, not landlords. They are very common on the coastal areas.
Tenants may choose to refuse to acknowledge all communications sent from the law court compelling them to pay the rental and interests due on the amounts owed. They can actually stall a process by alleging they were not notified in due form.
They can also carry out what is known as “enervación” by which the landlord has to forcefully grant them an opportunity to pay up before the judgment. Even if the landlord refuses payment they can deposit the amount owed at the court and the landlord is forced to continue the rental agreement. This forfeits the legal action taken. However, the tenant can resort to the “enervación” only once. Should they fail to pay a second time this will lead ultimately to an eviction.
The law court will issue an eviction order (lanzamiento) after the positive ruling from the judge sentence. The police will arrive at the property to force the tenant physically to vacate it along with all his personal belongings. You will then recover the possession of the property from that day and will be free to rent it out again.
The widespread fear of landlords not being able to vacate swiftly their defaulting tenants is justified. This helps to explain why there is a huge pool of empty properties in Spain which would be let if the laws were addressed efficiently.
On our next article, Landlord: Keys to Successful Rental Income, we deliver useful tips on how a property can be rented out safely securing your rental income.
There is a vast pool of properties in Spain which are not let due to landlord’s fear of unpaid rental, and the slowness of our eviction process. The good news is that the Government, having realized the importance of lets in our society as an effective alternative to purchasing property, has decided to take action. Plans to pass a new bill on eviction procedures sometime next year was announced on September 28th. This will prove most beneficial, as will speed up significantly the eviction process.
Also, as from 2008, ten new Juzgados de Primera Instancia (First Ruling Courts of Justice) will be created which will handle only eviction procedures. One of these will be located in the Málaga province and will cover all the Costa del Sol.
According to statistics, landlords take an average of 7 months to start an eviction process. Don’t wait any longer. Act now!
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