Law and order: Rental agreements on foreclosed properties

Columnist Antonio Flores' advice on renting foreclosed properties

LAST UPDATED: 6 Jul, 2016 @ 16:52

Antonio Flores
Antonio Flores

A COUPLE of weeks ago, I received a telephone enquiry relating to an imminent bank repossession where the soon-to-be ex property owner, seemingly knowledgeable in rental law, requested a quote to draw up a rental agreement.

Out of curiosity I asked him if he was going to submit it to the Courts to stop the eviction and, unsurprisingly, he confirmed my question.

His ‘plan’ was pretty simple: he as the landlord would sign a backdated tenancy agreement with a friend, for a smallish rent (around €200, inclusive of utilities!), with a view to not be considered an ‘unlawful occupant’ and therefore, avoid eviction on grounds that Spanish laws do actually dispense protection to tenants.

For rental contracts signed prior to June 6, 2013, provided evidence of payment of rent was available, tenants would have the right to enforce their contracts fully.

The Spanish Supreme Court has been very clear on this point: “…not even a bank foreclosure extinguishes tenancy agreements agreed to after signing the mortgage loan, if there is no sufficient proof that there was collusion or fraud.”

But there have been cases too where the rental agreement was deemed a simulation and thus did not express the true intent between the parties.

One was was because, according to the presiding judges, it was signed between brothers, the monthly rental was €400 on a 2,000 m2 warehouse, there was no visible activity in it (a big lock on the door is mentioned on a photographic report) and there were only private receipts to prove the rental payments.

An accumulation of evidence that, in the eyes of the Court, was consistent with that of a simulated contract and thus, the repossessing bank was granted possession.

This has now changed: for contracts signed after June 6, 2013, if the landlord loses the property ownership by forcible transfer i.e. through bank foreclosure, Court action, exercise of option to purchase etc. This will automatically imply the termination of the rental contract and thus, the tenants’ rights. The one exception to this rule is that the contract was registered at the Land Registry prior to any third party exercising its rights against the property ownership.

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Lawyer Antonio Flores is the legal columnist for the Olive Press. Antonio has been practising law since 1997, year in which he began working for a large law firm in Marbella as a Property Lawyer. In 1998 he left the company he had joined a few months earlier, and used his knowledge and the experience gained to build his own practice. He is known throughout the community as independent, reputable and trustworthy. Through a combination of strong work ethics, determination and international exposure, his competence of Spanish Law is unparalleled and demonstrated through his fluency in English and Spanish.