REAL ESTATE PURCHASE & SALE WILLS AND INHERITANCE TAXATION CORPORATE LAW

Letting properties in Spain

If you have one or several properties in Spain that you do not use on a regular basis, letting them may be an interesting option.

Letting a property has important advantages:

  • You avoid the deterioration caused by lack of use. A residential property left closed and without maintenance for months can cause problems such as bad smells, damp due to lack of ventilation, broken blinds, unkempt gardens, etc.
  • The rent you receive helps cover the maintenance costs, the local taxes and maybe even the monthly mortgage installments.

However, letting a property may turn into an ordeal if you do not take the necessary precautions. The laws governing property letting in Spain protect the tenant’s rights to a great extent (possibly excessive), and the Spanish legal system is not as quick and effective as would be desirable in deciding on these matters. The Government has approved in June 2013 some legislative changes in order to bring some flexibility to rentals and encourage them. The vast majority of property owners are unaware of the law and the implications (up to and including criminal convictions) of certain actions against a tenant.

Once the tenants are given the keys to a property and take possession of it, they acquire certain rights that will continue to have even if they stop paying the rent or incur in nuisance. The only way to evict a tenant is to hire a solicitor who will represent the owner and file the corresponding lawsuit. The eviction procedure normally takes between 5 and 9 months depending on the workload at the court in question.

During that period, even if the tenant stops paying the rent or behaves in the most appalling way, the owner must not under any circumstances change the locks, enter the property without permission, cancel the utility contracts or attempt a forceful eviction. These actions are considered a crime (illegal coercion and threats) and may therefore result in a criminal conviction for the owner.

It is also important to distinguish between short-term and long-term tenancy agreements. The latter are automatically renewed every year, up to a maximum of three, so a good tenant who always pays the rent on time can become a real problem if the owner needs to take possession of the property before the end of the three-year period set out by the law.

There is a common misconception that tenancy agreements for a period of less than 12 months are short-term, whereas those for a period longer than a year are long-term. A tenancy agreement is considered as short-term if the tenant does not intend to use the property as his/her habitual residence, but needs it for temporary reasons (a holiday, attending a course, relocating provisionally for work, etc.). This means that, depending on whether or not the property is the tenant’s habitual residence, a judge may consider that an 18-month tenancy agreement is temporary, but one for a period of 11 months is a long-term agreement.

It is therefore vitally important for the owner’s interests that the tenancy agreement be drawn up by a lawyer.

At Vicente & Otaolaurruchi we recommend the following in order to limit risks to a minimum:

  • Do not sign a tenancy agreement unless it has been drawn up by your lawyer specifically for you and your property. This is the only way to be sure that the document provides all the necessary guarantees and that your interests are adequately protected against any eventualities.
  • Ask the potential tenants to provide references (letters of recommendation from their bank or their previous landlord, copies of their payslips, etc.). There are many unscrupulous individuals who simply jump from one property to the next: they merely pay the deposit and the first month of rent and then sit tight in the property until they are evicted by a court order. In general, they have no property in their own name, or a salary, or any other assets that can be seized, so the owner seldom recovers the amounts owed.
  • For short-term agreements ask the tenants to pay the rent in full and in advance.
  • Take a rental loss protection insurance policy that covers any unpaid rent and any possible damages caused to the property by the tenant.
  • Ask the tenant to provide a bank guarantee (it will ensure payment of the rent).

Finally, as we have already mentioned, the Government has approved a package of legislative measures in June 2013 that, among others, speeds up evictions for unsettled rents, gives more freedom to the parties covenant, reduces the extended forced agreement in long-term contracts to 3 years (previously 5), requires the registration of contracts in order that those have any effects against good faith third parties, and includes the creation of a record of final judgments of unpaid rents, where the debtor’s name will remain for a maximum period of six years.

Do you still have queries on this subject? Have a look in the FAQs about letting in Spain.