As a landlord, renting a property without taking any precautions can lead to disaster. Defaulting tenants is one of the main problems affecting the Spanish rental sector. However, there are several ways that you can avoid them. In this article, we explain how to avoid having tenants in arrears.
Avoiding tenants in arrears by checking the list of defaulters
The Real Estate Default Database is, without a doubt, the best way to prevent renting to tenants in arrears. Checking the list of rent defaulters is a simple and inexpensive process. For €4.90, you will obtain a complete report on the rental profile of the candidate in question, which will show everything related to their previous rentals and if they are in debt with any other entity.
You just need the person's details and their signed authorisation. Within about four hours on working days, you will receive a detailed report, including a colour risk analysis.
If the potential tenant makes it difficult or refuses to consent, this may be a clear warning sign.
Documents that prevent non-payment
The first step in knowing a potential tenant's solvency and avoiding defaulting tenants is to verify their financial and employment situation. To do this, you can request the following documents:
- Pay slips for the last three months to prove their income.
- Employment contract: Permanent contracts are usually preferred over temporary ones.
- Last tax return or quarterly tax forms for self-employed.
- Bank statement showing their bank balance.
- Non-defaulting tenant certificate: You can ask the applicant to provide this document stating that they are free of debts and have not been a defaulter in their previous tenancies.
Set a fair rental price to avoid defaulters
Another tip to avoid tenants in arrears is to set a fair rent. It should not be too high or too low but be in line with the property and the market situation, which you can find out from idealista's price reports.
If the rent is too expensive, only a few will be able to afford it and you will not have such a choice. You may, therefore, make a poor decision when choosing a tenant.
If, on the other hand, the price is too low, you may receive so many calls that, out of desperation, you rent to someone for convenience rather than the security it gives you. House viewings take time, and with the existing stock of rental properties, there are usually a lot of interested tenants for a single property.
Also, it is best to set a price that is in the average range.
Insurance against non-payment of rent, guarantors and additional guarantees
With the high levels of non-payment of rent in Spain, all measures to protect the renter are welcome. Firewalls against tenants who do not pay the rent exist, for example, non-payment insurance.
Although the type of insurance depends on the policy and company, rent non-payment insurance protects landlords should they stop receiving rent from their tenants, and paying the amounts owed themselves. Moreover, landlords usually invest time in screening the candidates and carrying out solvency studies to choose the best profile.
Another barrier to avoiding tenants in arrears is to ask the candidate for an additional guarantee. The Law on Urban Leases sets one month's deposit as mandatory. However, it allows for an additional guarantee of up to two months' rent.
In addition to the additional guarantee, it’s a good idea to add a guarantor to the rental contract. Guarantors ensure that someone will pay the debt in case of non-payment. This can be a third party or a bank.
Draft a good rental contract to minimise late payments
Another tip for avoiding defaulters is to draw up a correct and up-to-date rental contract. It should contain all the clauses and information required for the rental, leaving no room for uncertainty that could lead to a conflict. In addition, it is always advisable to add a non-payment clause to the lease, which will allow the landlord to include the tenant in the list of defaulters if the tenant stops paying the rent.
If you are looking for a printable contract in Word or PDF format, you can download idealista's contracts for free.
Ask for references to avoid non-payment
If the potential tenant has rented before and the relationship with the previous landlord was trouble-free, they may be able to request a letter of recommendation with references. It is always reassuring to know someone else who had a rental relationship with them.
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