Tenant Insolvency. Where to seek justice?

Tenant Insolvency

How to seek justice in cases of tenant insolvency in Spain?

What is considered as “tenant insolvency”?

Tenant insolvency is a failure to comply with the obligation to pay the rent and other fees included in the property rent receipt (IBI Spanish: IBI – Impuesto sobre bienes inmuebles- English: Real Estate Tax, repairs or conservation works) by the tenant. This obligation is communicated in advance, usually at the beginning of the month.

What can a landlord do when the tenant fails to pay? Is there a way to seek justice in cases of tenant insolvency? The most common solution would be to make a pre-trial claim by means of a service allowing to prove that the payment has been made. The most common public postal company which offers such service is called “burofax”. There is also an option to make it with a help of notary; however, it’s less frequent and much more expensive.

If none of the above works, the owner can always file a claim in the court having jurisdiction over the rented property. This procedure is called an “oral judgment” and is regulated by the Civil Procedure Law. In order to that, it is necessary to hire a lawyer or a solicitor who will file a demand for eviction due to the lack of rent payment and claim the pending amount with the monthly interest on receivables.

Essentially, two things are requested from the court: ordering the tenant to pay the amount due (the amount of the claim) and hand over the property.

If the judge acknowledges the economic debt and the tenant doesn’t pay voluntarily after receiving the order to pay, they can resort to the usual means of execution: the seizure of tenant’s bank accounts, wages, other real estates, etc., until the debt has been collected. For this procedure, which is separate from the previous one, you also need a lawyer and a solicitor.

If the judge decrees the eviction, it is carried out on the day which is indicated at the beginning of the procedure, if necessary, with the assistance of the public force. However, it may even take a year- from the moment of filing a claim until the eviction comes into force.

In the next post, we will discuss two special situations which a real estate investor should be prepared to face: renting a property to a company which has declared bankruptcy; and the “squat” phenomenon.

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