In recent times, irregular practices have been escalating in the rental market. Experts are detecting landlords who are flouting mandatory renewals to which tenants are entitled. To do this, they claim they need to recover the home, reside in it for a time and then sell or rent it at a higher price. The number of tenants falsifying their salary or work history is also increasing, hoping to improve their economic profile and secure a rental property.
Owners flouting mandatory renewals
Among the irregular practices escalating among landlords are those aimed at preventing mandatory renewals that tenants are entitled to.
One consists of acquiring a rented property solely to claim, once the buyer has been subrogated to the contract, the need to evade the tenants' contract renewals.
In the opinion of José Ramón Zurdo, a lawyer specialised in leases and general director of the Rental Negotiation Agency (ANA), these bad 'practices' are a consequence of the deficient regulation made by the Urban Leases Law (LAU) in its Article 9.3, featuring the cause of necessity that allows the owner to recover the home.
According to Zurdo, “When a landlord sells a rented home, the Law protects tenants in two ways. Firstly, it offers them a preferential right to buy the home for sale unless it has been waived in the contract. And secondly, the new buyer must respect the existing rent until its termination (mandatory renewals included).”
However, the lawyer adds, "Sometimes, when purchasing a rented home, the new buyer may have other intentions so they don't have to wait until the end of the lease to which they have been subrogated to recover full possession. They do so by claiming, after the purchase, a cause of necessity (as long as they can prove such and it is included in the contract) to recover the rented home at an earlier date to the detriment of the tenants.
This way of acting, according to Zurdo, “would eliminate, in the event of a sale, the tenants' right to the mandatory renewal in the rented home, having to leave before its termination.”
The only way to avoid this practice – as the Director General of the ANA explains – is difficult to prove, as it would require proof of fraudulent collusion between the selling landlord and the new buyer, undertaken in an attempt to evict the tenant in advance, without waiting for the lease termination date.
The second irregular practice for recovering rented housing to the detriment of tenants consists of claiming a cause of necessity to evict tenants, living in the property for a few months and then selling or renting it back at a higher price.
The Rental Negotiation Agency states that it is detecting some cases with these characteristics, which use the “deficient regulation of the Cause of Necessity from Article 9.3 of the Urban Leases Law (LAU) to occupy the properties once they are recovered from the tenants for more than the three months regulated by the Law and then, in the fifth or sixth month, sell them or rent them out again, for more without incrimination because they have complied with what the law states.
In this case, Zurdo affirms that the only defence that tenants would have to go against landlords who act in this way is “to prove fraudulent conduct carried out to terminate the lease early, but often, once they've left the property, it is not easy for them to accredit such or they lose interest in doing so due to costs.”
Tenants who falsify their salaries and employment history
As for tenants, the new fraud is based on falsifying salary information and their employment history to rent a property.
ARRENTA – the company specialising in real estate insurance – assures that this already occurs in 10% of operations, after doubling during 2023, and that the most common thing is for tenants to 'make up' a higher income.
Mercedes Robles, general director of ARRENTA, maintains that the pressure on the rental sector for months, with increasingly reduced supply and higher demand, “has caused many tenants to resort to scams to secure a home, albeit illegal in some cases. The reason is that tenants know there are few available and many candidates, so they try to present the most outstanding economic profile.”
One of the most common alterations carried out by many tenants is modifying their salary information, such as increasing income or seniority or stating they are on a permanent contract instead of a temporary one. Some change their employment history or present a payslip for a company they no longer work at.
To avoid this type of situation, ARRENTA recommends going to a broker specialising in rental insurance since they have solutions to detect this type of alteration. They also have insurance options for all operations and can help find the best tenant for each property. Moreover, they look for formulas to make the lease viable, such as including a guarantor. According to the company's data, 29% of the rental agreements need this figure.