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How to get ridd off your defaulting tenant (without losing cash)

By Andrés Díez Bronzini, Lawyer


CASE ONE: John has rented his apartment to Ángel who has stopped paying the rent. John wants to recover the unpaid rent amounting to € 3,000 and get Ángel out of his apartment. How can John proceed?

 

Firstly, John should claim the money in out of courts summons via registered and certified burofax (this is a letter you send by Correos, the Spanish Royal Mail service, which delivers your letter with proof of delivery and content, but only if it is sent as a burofax “certificado con acuse de recibo”) or Public Notary.

  1. If Ángel does not pay within one month from the time he has received the certified and registered burofax, John may present a lawsuit against Ángel to claim the unpaid rent of € 3,000 and at the same time the eviction of Ángel.
  2. If Ángel pays before the claim is notified to him, he will manage to avoid the lawsuit and he will be able to continue renting the apartment.
  3. But if Ángel pays after receiving the claim, then he will not be able to avoid the lawsuit by paying the outstanding rent. In this case Ángel will not be able to continue renting the apartment.

This is true, if John has made the out of court summons via certified and registered burofax or Public Notary. If John decides to present his claim directly without this out of courts summons, Ángel is allowed to pay the outstanding rent of € 3,000 after receiving the claim, but before the judgment. If Ángel pays, he avoids the judgment, thus, being able to continue renting the apartment.

If Ángel manages to avoid the court proceedings by making the payment, he has to pay for the costs of John for the lawyer and the “procurador”.

Smarts tenants used to disrupt the proceedings by boycotting the notification of the lawsuit. Nowadays, the law makes clear that the place of notification of the lawsuit is the rented apartment. If a notification is not possible, the lawsuit will be notified by exhibiting it in the bulletin board of the court where the apartment is located.

The law makes an exception if the tenant has informed the landlord previously and reliably of the new place of notification. In this exceptional case, the notification must be made at this new place.

Once the lawsuit is notified John and Ángel will be summoned by the court to the trial. The court will warn the tenant that he will be evicted automatically if he does not appear in the court trial.

In the court trial the judge will determine the day when the eviction will take place. The eviction will take place within one month from the time the trial takes place.

How much time will it take John to evict Ángel? In theory it should take two or three months. But, mostly, the reality is different: it can take up to one year depending on the workload of the court.  Furthermore, the risk John runs in this scenario is that he will not be able to get his money, because Ángel has no assets.

CASE TWO: Imagine JOHN MANAGES TO EVICT ÁNGEL. JOHN FINDS A NEW TENANT, BUT THIS TIME JOHN INSISTS ON signing a special arbitration clause which means that any dispute between the landlord and the tenant must be resolved in a special arbitration process. MIGUEL, THE NEW TENANT, defaults on his first payment. how can get JOHN rid off MIGUEL THIS TIME?

An arbitration clause stipulates that a dispute will not resolved by a Spanish court, but by a “private” arbitration tribunal: it will not be a judge who will take the decision, but some professional who will. Which process will this arbitration tribunal follow in order to take a decision?

Fundamentally, there are two types of arbitration processes:

  1. a legal arbitration process (arbitraje de derecho) in which the procedure will follow the procedure established by the law for that particular matter and,
  2. secondly, the equity arbitration process (arbitraje de equidad) which will more or less follow the legal procedure, but it will be handed much more flexible and adopted to the believes, necessities and capacities of the deciding arbitrator(s). This last procedure (arbitraje de equidad) may be found illegal and thus, its ruling, may be annulled by the Spanish courts. It is highly recommendable to opt for the “arbitraje de derecho.”

A potential arbitration clause could be as follows (copied from the homepage of Aeade):

“Any conflict derived from this contract or in relation to this contract including any matter regarding its existence, validity, termination, interpretation or execution will be definitively resolved via arbitration in (law), administered by the European Association of Arbitration of Madrid (Aeade), in accordance with its Regulations in force on the date on which the arbitration request is presented and the concerned parties are aware of this.

The concerned parties accept that the arbitration tribunal composed for such a purpose be made up of (one sole/three) Arbitrator(s) and the language of arbitration will be (Castilian/other) and the arbitration proceedings will be held in (city + country)”

There are several big important private institutions in the Spanish market (e.g. AEADE, Corte de Arbitraje Económico de Derecho y Equidad and many others) that offer special arbitration processes for rent disputes.

There exist plenty of other private institutions which present themselves as if they were public institutions, but in fact, they are not. Different arbitration companies mean different processes and, most important of all, different costs. The cost differences may be significant. So you need to read the small letters well.

Most of these arbitration institutions highlight that you can obtain a “laudo” within approximately 1 month. A “laudo” is the equivalent to a court sentence. Let us suppose that John obtains a “laudo” against Miguel within 1 month. However, Miguel does not leave the rented apartment voluntarily.

John must file a claim in the regular Spanish courts and apply for the execution of the “laudo” in order to evict Ángel. If Ángel does not leave the apartment voluntarily, John has only one option to enforce the “laudo:” filing the claim with the regular Spanish courts. The arbitration tribunal cannot execute its “laudo.”

How long can it take to execute the “laudo” if Miguel does not leave voluntarily? That depends on the concrete workload of the competent court. It can take two months, three months or, if John is unlucky, 8 months.

As mentioned before, not all “laudos” are accepted by the Spanish  courts. Some “laudos” will be judged illegal and, thus, annulled. This means, the defaulting tenant cannot be evicted.

Some court rulings have made clear they will only execute “laudos” if the arbitration procedure matches the legal standards: this means, for example, that the “laudo” should be ruled by an active lawyer and not just by a person 18 or older than 18 years old; the “laudo” should be reasoned more or less like a court sentence; the procedure must be impartial; the tenant must be guaranteed the same rights as in a judicial court process…. and so on and so forth.

If the judge believes the “laudo” does not comply with legal procedural standards, then he will annul the “laudo” and John –in the worst case scenario- has no “laudo”, that is, no sentence to execute: Ángel may continue living happily in the rented apartment without paying the rent.

John may repeat the arbitration process correctly and hope that this time the judge will accept the new “laudo” of the arbitration tribunal or, he may decide to do like in the first case: file the claim directly in the Spanish court. As the months pass by, John is losing money.

CASE THREE: Imagine John manages to evict miguel and finds a new tenant. this time, before signing the renting contract with the new tenant, john signs an insurance policy which will pay for the default payments of the tenant. THE NEW TENANT DEFAULTS AFTER MONTH NO. 6. HOW CAN JOHN GET RID OFF THE NEW TENANT, JOSÉ?

 

There are many insurance companies which promise to pay the rent if the tenant defaults. In general, these insurance policies cost approximately 500 euro.

It is very important to read the small letter: some do not pay the 1st month of default payment, others do not pay for unpaid electricity and water bills and so on. Some companies offer to insure also damages to the rented apartment or the furniture. Normally, they pay for the costs of your lawyer and the procurador too. It is all subject to negotiation.

The Spanish insurance market is starting to offer a variety of “insurance- products.”


Most of them offer to pay between 6 and 12 months of unpaid rents. That is sufficient time for John to evict José, either by following the public judicial court process (case number one) or the arbitration process (above case number two). Some insurance companies will force you to follow one particular arbitration process.

In any case, this time John will recover his money from the insurance company. His risk and cost will be reasonable.

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