10 mistakes landlords make when renting out a property

Renting a property in Spain is currently viewed by many as a risky endeavour, particularly due to the lengthy procedures involved in evicting defaulting tenants.

According to José Ramón Zurdo, a lawyer specialising in leasing and CEO of the Rental Negotiation Agency (ANA), in an interview with idealista/news, “90% of rental issues are attributable to landlords who fail to adequately vet potential tenants.” However, errors are not limited to this aspect alone.

If you're a landlord, continue reading this article where we highlight 10 common mistakes made by landlords and how to avoid them.

Failing to consult the defaulting tenant record

The first mistake is, without a doubt, failing to properly vet potential tenants. The success of a rental arrangement hinges on this. Failing to take preventive measures can result in months, or even years, of unpaid rent.

To avoid this, it’s crucial to consult the defaulting tenant record and review the candidate’s rental history. By doing so, you’ll obtain a comprehensive report that reveals whether the prospective tenant has outstanding debts with other landlords or organisations.

Not taking out rental default insurance

Taking out rental default insurance is highly beneficial for landlords, and failing to do so is a mistake.

Such insurance policies assist in the tenant selection process, ensuring that the most reliable candidates are chosen. This significantly reduces the risk of non-payment, and if a tenant does stop paying, the insurance covers the owed rent. Moreover, some policies, such as idealista's rental insurance for landlords, also offer protection against property damage and provide comprehensive legal defence.

Not writing a proper rental agreement

Another common mistake landlords make is not drawing up a detailed rental agreement that is in line with the latest laws. The rental agreement serves as the foundation of any agreement between a landlord and a tenant. Failing to clearly outline all conditions can result in misunderstandings and disputes.

It is essential to ensure that the agreement complies with the Urban Leasing Law (LAU) and includes key details such as the rental amount, the duration of the agreement, each party’s responsibilities regarding maintenance, who pays expenses and clauses on pets or subletting.

Not making a detailed inventory

Handing over the property without a clear, photographic inventory of its condition and contents can complicate claims and the return of the deposit in the event of damage.

To avoid this, create a detailed visual and written report documenting every aspect of the property. This report should be signed by both parties before the rental begins.

Setting an unrealistic rental price

Setting a price above the market rate can result in the property remaining vacant, while a price that is too low may lead to limited or no profitability. It's important to research the market in your area to determine a competitive price that reflects the property's features.

You can consult the idealista price report to gain insight into the current rates in your city or district.

Opting for a verbal contract instead of a written one

Although the law permits formalising a rental agreement for housing verbally, doing so carries significant risks. The lack of a written document outlining the terms of the rental leaves room for interpretation, with both parties likely to act in their own interest. This can result in disputes over key issues, such as rent payments or specific clauses.

Not knowing the notice periods for terminating the agreement

Terminating a rental agreement requires adherence to the notice periods set out in the Urban Leasing Law (LAU). Failing to comply with this obligation can result in the automatic extension or renewal of the agreement, causing inconvenience for both parties.

According to Article 10 of the LAU, if, upon the expiration of the agreement or its extensions, and after a minimum duration of five years (or seven if the landlord is a company), neither party has notified their intention not to renew it with the required notice (four months for the landlord and two months for the tenant), the rental agreement will be automatically renewed for annual periods, up to a maximum of three years.

Asking for more than the legal deposit

For residential rentals, the law stipulates that the tenant must pay a deposit worth one month's rent. Some landlords make the mistake of asking for more months' worth of deposit, which is illegal.

However, landlords can request additional guarantees, such as a guarantor or an extra monetary deposit, the latter of which can amount to up to two months' rent.

Not defining who pays what expenses

It is essential to clearly define, agree upon and put in writing who will be responsible for the expenses associated with the rental, such as community fees, IBI (property tax), waste collection charges and maintenance costs.

Not registering the agreement in the Property Registry

While registering a rental agreement with the Property Registry is not mandatory, it is strongly recommended. Failing to do so can be a mistake, as registering the agreement expedites the process of recovering the property in the event of non-payment of rent.