Landlord News: What Should I Do If My Tenant In Spain Stops Paying Rent?

Every landlord’s worst nightmare is a tenant that refuses to pay rent, for whatever reason. If you invest in a buy-to-let property in Spain then it’s likely that you will be relying on the income from your tenants to make your mortgage payments or as a significant source of your income.

So what happens if your tenant is not paying the rent amounts they have committed to? What can you do to ensure your own bills are being paid?

Much of this will depend on how late the rent payments are. If they are just a day or two late then contact the tenant directly and ask when you can expect the payment to be made: this could be nothing more than a simple cash flow problem. If they are a month late or more then this may be indicative of a bigger problem and it’s time to take steps to secure what you’re owed.

Three Steps You Can Take

If your tenant hasn’t paid their rent for at least one month then according to Article 27 of the Urban Leasing Law (LAU), this can be used as grounds for termination of the contract and eviction.  In theory at least this means that you can terminate the lease and the tenant must leave the property, leaving you free to rent the property to another tenant and regain your source of income.

However, it’s important to know that the eviction process isn’t as simple as it sounds. There are steps that you should take before you can evict your tenants.

These are:

Step 1: Talk To Your Tenants

There may be legitimate reasons why your tenants are not paying their rent: unexpected loss of employment or financial commitment for example. Obviously, this doesn’t ease the financial burden on the landlord, but communication and understanding can make the situation easier.

If your tenants don’t respond openly when you try to contact them (either by phone, letter or email) then you should contact them again but this time with legal proof that you have reached out to the tenant. This will be at your own expense and will involve sending a burofax (a registered letter from Correos), a message through a notary, or an act of judicial conciliation. If you don’t receive a payment after this notification you are legally able to take your tenant to court.

Step 2: Seeking Legal Support

It is your right as a landlord to either request that you are paid what you are owed but allow your tenant to remain in your property or to terminate the tenancy agreement and request eviction for non-payment at the same time.

The right path for you will depend on whether your tenant is solvent or not. If the tenant already has significant debt then dissolving the contract, evicting them from the property and cutting your losses may be the best solution in the long term.

Step three: Going to court

If you can persuade your tenants to leave the property without going to court then this will always be the best option financially. The court process can be expensive as well as time-consuming. In fact, you may find the court fees you pay are higher than the amount you are owed. For example for non-payment of two monthly installments of €1,200, the cost of the trial can be anywhere between €800 and €4,000.You are advised to get legal defence insurance as part of your property insurance as this will protect you from many of these expenses.

Aside from the expense the legal process is quite straightforward. An  eviction lawsuit will have to be filed, signed by a lawyer and a solicitor.  The court will then admit the claim, the tenant will be notified and a date will be set for the eviction, at which time they must return the keys and vacate the property.

The tenant will have one more chance to pay up and can do this before a notary. But if you’re not prepared to allow the tenants to remain in the property then you should consider forgiving the payment and asking that your tenants are evicted.

The best case scenario is that you will be able to get back the money you are owed, as well as interest for late payment. But you shouldn’t expect that you will receive this as standard.  Tenants in Spain are protected under Spanish law and the new Housing Law in the country states that if the tenant is in a vulnerable situation, a Court of Justice may set a period of suspension of two to four months, giving the tenants time to find a new property.

How Can I Protect Myself From Non-Paying Tenants?

If you read this article as a cautionary tale then you may be wondering what you can do now to protect yourself from non-paying tenants. No matter how careful you are when vetting your tenants, this is something that could happen to any landlord. To protect yourself as much as possible, you can take the following steps:

• Vet your tenants, ask for references from previous landlords, and follow up these references.
• Ask for bank statements from your tenants to confirm that they can afford the rental amount.
• Make sure that you have a good contract that protects you as well as your tenants.
• Request a deposit. Standard deposits should be used from property damage but you can also request an additional deposit of two months rent that you can keep as compensation should the tenant stop paying their rent.
• Secure good property insurance that will cover you if your tenant stops paying. Some insurance policies will cover rent payments that haven’t been paid and the legal fees for the eviction process.

Are you thinking of moving to Spain? Would you rather buy your dream property in Spain, instead of renting a property when you arrive? Then why not get in touch with our local property estate agents, Right Casa Estates, who are perfectly placed to help you find the home of your dreams.