Valencia Property Guaranteed Rental Scheme

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Spain's Court of Arbitration gives a long awaited Legal Protection to Landlords

Added: (Wed Jan 03 2007)

Spain's Court of Arbitration has finally come to the aid of Spain's long suffering landlords. Historically in Spain, the vast majority of people with second or multiple properties have decided not to rent them out due to there being insufficent legal safeguards for landlords vis a vis tenants. Basically tenants had more rights than landlords and in cases where a tenant/s refused to pay their rent, a lengthy and costly process had to be started so as to recover the property. To obtain an eviction, tenants had to be declared bankrupt thus ensuring a legal process of anywhere between 6 and 18 months.

It was in reply to this situation that the Court of Arbitration introduced a Rental Guarantee so as to ensure both a speedy and cheap binding resolution to any problems that might arise between landlords and tenants who are parties to such agreements. Rental Guarantees via the Court of Arbitration came into being in late 2005 and proved quite successful in their first few months of operation with 12,000 property owners and 400 estate agents using them.

The Rental Guarantee itself costs just €42.If a problem arises with a tenant the landlord has to send all the relevant documentation in writing to the Court in Madrid. The Court of Arbitration guarantees to make a finding within 3 months of receiving the complaint.Neither party needs to be represented by a lawyer, something which helps speed up and simplify the decision making process. The sentence once handed down is irrevocable and binding on both parties something which is very useful in eviction cases.

The losing party pays all costs and if necessary compensation.

It is estimated that Spain has in the region of 3 million empty properties out of a housing stock of 21 million. The Spanish government is intent on invigorating the rental market in an attempt to cool property price inflation. Tenants for example can write off their rent against tax. While there is a fear that if a significant proportion of these properties were to come onto the market prices could be adversely affected. That said Rental Guarantees and the government's Guaranteed Rental Scheme will obviously take time to make an impact. Once one buys quality property in a good area such changes over time shouldn't have too much of an impact especially when one bears in mind that in Valencia city for example property over the last 21 years has given an annualized return of over 10%.

Article by Dermot Quinn, Valencia Property Hound Ltd