How to protect yourself from a non-paying tenant in Spain

Recently, more and more foreigners are buying property in Spain for investment purposes – in particular, for its subsequent rental. Owners of “vacation” housing are sometimes forced to take this step because they do not have the opportunity to visit it often and spend a lot of time there, as happened with Russians who do not have a residence permit in Spain. However, this method of receiving passive income carries a number of risks, from which it is not always possible to protect yourself.

It is not so rare for owners to decide to rent out a home in Spain on their own, without resorting to the services of real estate agency specialists, despite a rather vague understanding of all the intricacies of this process. However, there are several signs that the future tenant may be insolvent and eventually join the army of “paybacks”, the fight against which takes a lot of effort, time and money.

First of all, one should be wary of the client’s attempts to avoid formalizing the relationship in writing (lease agreement) in every possible way and instead limit himself to a “gentleman’s agreement.” More than suspicious is the lack of documents that in such cases are usually requested from real estate agencies: a copy of a permanent contract with an employer or a certificate of registration of one’s own company, confirmation of an official source of income and a bank account statement. Typically, foreigners wishing to rent an apartment or house in Spain are rejected for these reasons, although reluctance to provide references from previous landlords also plays a role.

Quite often, in order to lull vigilance, unscrupulous tenants themselves offer, in addition to the deposit and advance payment, to pay rent several months in advance, and then refuse to fulfill their obligations. It is no coincidence that many agencies in Spain began to charge one year in advance when signing a contract for the same period.

The most effective preventive measure is to obtain information about the future tenant from special databases that are publicly available. These include FIM Ibérica, BADEXCUG, Ibercheck, Registro de Impagados Judiciales, Registro de Aceptaciones Impagadas (RAI) and Fichero de Incidencias Judiciales. The latest database contains information about debts to government agencies – for example, the Tax Service (Agencia Tributaria) or the Social Security System (Seguridad Social), which will help to obtain a more complete “portrait” of the candidate. Its presence on one of these lists is sufficient grounds for refusal to conclude a lease, which the owner should set out in writing, indicating the reason.

Another way to partially avoid hassle and financial losses is to take out special insurance in case of non-payment, the cost of which usually varies between 3-5% of the established rent for the year. The insurance company will check the credit histories of each of the potential tenants and select the most suitable candidate, and if at some point he stops paying, he will take on this responsibility.

As of 2022, in Spain the share of willful defaulters is approximately 6%, and the average debt is 3,180 euros (the maximum is about 15 thousand euros). Most of them rent apartments or houses in the Autonomous Community of Madrid, Catalonia, the Basque Country and the Balearic Islands, while landlords least often encounter this problem in Extremadura, Aragon and Castile y Leon.

If, nevertheless, after a certain time after signing the lease contract and moving in, the tenant (or tenants) delays or stops paying rent – more than one month and deliberately, and any attempts to admonish him orally do not bring results, you should send him a burofax – registered letter with acknowledgment of delivery. It must contain all the facts, indicating the amount of debt and adding to it unpaid utility bills, if any. It is customary to set aside 10 working days to pay off debts (if there is disturbance to neighbors or obvious damage to the home, then 5), after which, in case of non-payment, the legal owner has two options for action.

The first involves continuing to seek a compromise by granting a delay for a longer period of time. During the Covid-19 pandemic, many owners found themselves in the position of tenants who, finding themselves in “quarantine,” were virtually left without a livelihood. The second option is to file a lawsuit, for which it is better to use the help of a lawyer. After 10 working days from the date of notification of the defaulter, he will have to either pay the missing amount, or leave the property, or appeal the claim.

As practice shows, most often landlords are faced with an appeal, and then there is nothing left but to initiate a lawsuit, which almost always ends with the eviction of the debtor. However, this happens on average only after 6-8 months, and the chances of receiving rent for this period are essentially zero. You can bring this day closer by contacting private companies that solve problems of this kind “without trial,” but in this case you need to be prepared for additional costs of several thousand euros.

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