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Jan15

The bank guarantee, how can you avoid it?

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The bank guarantee, how can you avoid it?

You have found a nice house close to Madrid and you discuss the conditions with the landlord. Although it happens less frequently, landlords may require a bank guarantee. The aval bancario.

Why do landlords require such a bank guarantee?

You have found a nice house close to Madrid and you discuss the conditions with the landlord. Although it happens less frequently, landlords may require a bank guarantee. The aval bancario.

Why do landlords require such a bank guarantee?

Unfortunately, some Spaniards do not pay their rent. At any given moment, they simply stop paying. The landlord feels powerless and the tenant continues living in the house. Of course the landlord may start eviction proceedings as well as trying to obtain monies owed but this is not always that easy.

This is why Spanish landlords insist on a bank guarantee.

What is a bank guarantee anyway?

A bank guarantee is a guarantee from the tenant to the landlord which states that if the tenant stops paying rent, the landlord can invoke the bank guarantee.

It often involves an amount equal to 3 to 6 month´s rent which the tenant pays into an account specially opened for this purpose. This amount is then frozen within the account.

What disadvantages are there to a bank guarantee? There are a few ones. The first disadvantage is that the tenant has to put aside quite a large amount of money which, during the rental period, he cannot gain access to.

Another disadvantage is that the tenant has to pay a commission to the bank in order to maintain the bank guarantee. This is about 80 euro every 3 months.

There is also a downside for the landlord - if the tenant does not pay his rent and the landlord wants to invoke the bank guarantee, he has to go to court to do this. This costs money and effort. Therefore, the bank guarantee is somewhat of a formality but one which many landlords stick to.

Alternatives

In an attempt to avoid a bank guarantee, I would like to discuss two scenarios that will give the landlord an alternative in the event that rent is not paid.

The first option is a guarantee from the employer. In this situation, the employer would draft a written declaration that becomes part of the rental contract. This certificate guarantees that the employer will pay the rent to the landlord if the tenant, the employee, stops paying.

The second option is an insurance the landlord can take out, a seguro de impago. If you would like to compare several seguros de impago, visit el Rastreator.

© Lilian Hermans ~ Quilantro

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Real Estate Madrid
+ 34 910 483 215