The shortage of mortgages has created a dramatic slowdown in the real estate buying and selling market. Buyers are denied access to credit which until recently was waved through with few checks being made. This is fuelling demand for rental properties; not just for holiday purposes.
For those letting properties this situation has improved their potential. There is a growing demand for properties at affordable prices; properties that three years ago would have been impossible or difficult to let.
Ironically this market has not reached its potential due to anachronistic legislation and judicial inertia in Spain’s legal system. The protection of banking interests must also carry much of the responsibility.
In Spain current legislation weighs heavily in favour of the tenant, not the property owner. For instance any contract longer than a year implies that the tenant can stay up to five years if he or she wants to.
Inspired by concerns for social justice this may have been reasonable in the past; it gave security to tenants but was hardly in the interests of property owners. Problems arise when unscrupulous tenants, often with professional zeal, take advantage of judicial inertia; settling into property and then decide to stop paying the agreed rent.
The dilemma for the property owner is that he or she cannot summarily evict squatters. They will need to hire a solicitor and file an eviction claim.
Cutting access to utilities; water and electricity is not the answer though it has been known to work. To do so makes the property owner vulnerable for this can be construed as a crime of coercion. No responsible solicitor will ever advise that course of action.
A TENANTS PROTECTION RACKET
There are occasions when eviction claims can be satisfied reasonably quickly, as in in the City of Alicante where the average procedure takes four months. However in Orihuela and authorities like it you can be stuck with irresponsible tenants withholding rent for up to a year.
With this lack of legal protection and security no wonder home owners prefer to take their properties off the rental market. “It is a well intentioned social initiative that has been turned into a tenant’s protection racket.” Says Michael McLaughlin of southerncomfit.com.
It doesn’t get any better for property owners. When the judicial procedure is complete and unscrupulous tenants finally abandon the property it will be virtually impossible to recover unpaid rent or put repairs right as tenants rarely have assets to pursue. As a consequence the housing crisis becomes more acute.
TOUGH TENANT REFERENCES
For both owners and tenants the problem is further aggravated as landlords become more demanding when taking up tenant references. Commonplace is not only to ask for deposits and payroll, but to even require bank guarantees.
In effect genuine tenants are paying the price of a minority who have abused obsolete housing legislation made worse by the inefficiency and inertia of the Spanish legal system.
Solicitors know, especially those with long experience in real estate matters, that some measures should be taken by the Spanish government to alleviate matters. First to go should be the mindset that all tenants are poor and all landlords rich.
That legislation should primarily protect tenants belongs to the agriculture past of Spain. Social change has led to tenants who are often better placed financially than are the property owners. They choose to rent simply as a means of maintaining job, social or educational mobility.
TENANT CHECKS, NOT BOUNCED CHEQUES
Once outdated ideas that inspired current legislation are changed we can move to a more socially equitable system. The first should be the creation of a national or European public registry in which any person having abused a tenancy agreement should be filed just as it would if they had a poor credit history. Legitimate owners would then be able to check the lease records of potential tenants
Such legislation would also benefit genuine tenants as property owners relax requirements for proof of reputation and good intent
Complementary to such legislation the setting up of fast track civil courts in which evictions and related judgements take place in weeks rather than up to a year. Each month’s delay is a month’s rent stolen from the property owners. It cannot be in anyone’s interest that legislation favours thieves. Inertia and justice are never compatible.
TENANTS ON TOP?
A third measure might be a national fund as with vehicle insurance; a safety net contributed to by tenancy and landlord to compensate owners in the case of extreme damage to their property caused by insolvent tenants.
Improving the rental market is essential not merely for reasons of social justice but also for sensible economic reasons. A modern economy in a global world demands mobility of labour. Such social change often makes property purchase less attractive for many. Sometimes it is simply better to rent.
To do so offers flexibility; a more dynamic and modern solution to the economy. If the rental market is stagnant, if empty properties proliferate because of landlords reluctance to rent, despite demand,. the interests of both tenants and owners will be damaged.
CORRUPTION BEHIND ‘SOCIAL JUSTICE’
Most will wonder why governments fail to adopt such practical measures. The reason has little to do with any desire to protect tenants from unscrupulous landlords. It is because a healthy rental market is in direct competition to the building industry, the mortgage industry; the banks and lending houses.
Clearly it is in the interests of many buyers to rent rather than buy; equally clearly it is not in the interests of the banks. A good tenant has all the benefits of ownership without the handicaps.
With more socially responsible legislation the only losers will be the banks and lending houses. The rental market undermines it so paradoxically a system put in place to protect the vulnerable is being abused to protect the powerful.