The number of evictions of people not paying their rent has increased in Spain, accounting for almost 60% of all evictions in 2017. Data from the General Council of the Judiciary (Consejo General del Poder Judicial or CGPJ) show that they grew 4.3% in the last year.
This trend is not insignificant, especially considering that in many cases an owner can take almost a year to recover their property from a defaulting tenant. According to the law firm Pelegrí Abogados, the legal eviction of a tenant who doesn’t pay takes an average of 11 months in Spain. Andalusia, Catalonia, Madrid and the Valencian Community are the Autonomous Communities where it takes the longest, an average of 12-13 months.
According to the law firm, the main cause of non-payment is the disparity between the low salaries in Spain and the high average price of rent in the country's major cities. In addition, the 'express eviction' law that came into force this summer only focuses on evicting mafias who squat in houses illegally, so it can’t be used for tenants who don’t pay the rent.
As such, Pelegrí Abogados proposes taking out insurance against non-payment of rent, which in the last 12 months has grown 30% year-on-year, according to the Spanish Rental Insurance Observatory (Observatorio Español del Seguro del Alquiler or OESA).
As a consequence of the rise in the price of rented housing, the average rental price with non-payment insurance has also risen: at the end of 2017 it stood at 626 euro, 7.5% more than the 582 euro registered at the end of 2016. The cost of this insurance for the property owner is between 250 and 400 euro per year.
"That the owners invest in insuring against non-payment of rent will greatly facilitate the process of a legal claim in the event that a lease contract has been signed with a defaulting tenant,” says Amor Pelegrí, founding partner of Pelegrí Abogados. “Although the illegal occupation of the house is a possibility in the case that the tenant doesn’t want to or can’t pay, the increase in this type of insurance is proof of the existence of a problem that must be solved."
The firm points out that among the main advantages of these insurances are the advance payment of rents, so that an owner can collect from the insurer every month without waiting for a sentence or eviction. As part of these insurance packages, landlords can get coverage of non-payment for up to 18 months, as well as coverage for damages on the property and compensation for non-payment of services such as electricity, water or gas.
The rental contract
The length of a lease agreement in Spain is a minimum of one year and a maximum of three years. If the initial term established by the contract is less than three years, there is the option to renew the contract until this term is met.
The lawyers stress that this tacit renewal of a lease contract means that on the expiry date, a property owner can’t report a tenant who stays. "That is to say, if when it expires there is no notice by either party that they want the contract to end, it will be automatically extended for one more year (if so provided for in the clauses of the contract)". However, they warn that "the lease contract may expressly specify that there is no tacit renewal within the three-year period".
If there is an immediate renewal of the rental and there is no other provision in the contract, it will be understood that the contract has been extended with the same conditions, and then the rent can only be raised by applying an increase in the Consumer Price Index.
Where disagreements may arise between a lessor and lessee is if it’s understood that there is a new contract after three years, as this would then have an impact on the increase in the rent. In any case, it will be necessary to adhere to what is stated in the contract.