UK man beats Spain’s banks on home ground

Thanks to an all but forgotten 45-year-old property law he found with the help of Google Translate, Englishman Keith Rule has provided hope to thousands of expats who lost money in failed Spanish property ventures during the credit crunch.

UK man beats Spain's banks on home ground
Thousands of apartment blocks accross Spain have been left unfinised since the property bubble burst. Photo: Jorge Guerrero/AFP

In 2006, Keith Rule bought two houses off the plan in Albacete province in the south-eastern Spanish region near Murcia.

The high-end Finca Parcs development had everything he was looking for. It was located in inland Spain, the town was nice and there was a good school for his young children.

"But then Spain's housing bubble burst and our house was never built," Rule told The Local by telephone from the southern Spanish city of Algeciras.

Like many other investors, Rule saw initial attempts to reclaim his deposit thwarted. The bank he had paid his money to — then CAM, now Sabadell — refused to return his outlay of £45,983 (€53,000, $70,000).

Unlike many investors in his position, though, Rule refused to give up the fight for the money he'd lost in the property deal.

While trawling the internet with the help of Google translate, this Englishman based in Milton Keynes came across a law which dated back nearly 50 years.

"Law 57/68 (from 1968) was designed exactly to protect people in my situation," Rule told The Local.

"It made banks liable for all kinds of cases where developers didn't meet their end of the bargain."

Armed with this law, Rule eventually went on to win back his deposit with judges ruling in his favour.

Thanks to his hard work, 46 other buyers at the development also had their down payments reimbursed.

The process was far from easy though. Rule had to do some serious lawyer shopping before he found a firm prepared to take on his case.

"It was his persistence that won me over eventually," Maria L. de Castro, Director of Costaluz Lawyers said to The Local, explaining why she had accepted the case.

The lawyer explained that she had come across a relevant ruling in the high court of the Spanish region of Navarre.

There, judges found banks could be liable in certain cases where property developers failed to deliver their products.   

The opinion of a lawyer in Seville also helped persuade de Castro to take on Rule's case.

"But mostly it was the fact that Keith clearly saw that the bank was liable in his case, and that we had to find a way to enforce that liability.

"At the beginning they called us crazy," the lawyer freely admits of her firm's fight to see banks cough up deposits.

"One lawyer criticized Keith very harshly online, saying that he was a cheat and that he was trying to steal clients," de Castro told The Local.

Being a woman didn't help either, she explained. "I think the legal profession thought we were dreamers." 

There were also issues with Law 57/68 which mentioned bank liability without specifying how this would be enforced.

"We had to change people's thinking," said the lawyer.

"Luckily the law came to light at the same time as society was changing as a result of the crisis. There was more acceptance among judges that you can fight the banks".

Given the results of Rule's case, de Castro is now optimistic about similar cases in future.

"A lot of people had given up on getting their money back but this decision has reignited their motivation." 

But de Castro sounded a note of warning for people who may be looking to see their deposits again. "We need to have data," she said.

"You need to be able to show that you cancelled your contract with the developer, and you also need to see if a bank guarantee existed on the property.

"You will also need to be able to show that you made payments to a bank account held by a developer."

Some clients were also lacking a certificate of guarantee (certicado bancario), she added.

"What we have done now (with Law 57/68) is provide a new way to look at these cases," Rule told The Local.

"Of course the judges have to choose on a case-by-case basis. Now, though, we have seen some 35 to 40 similar decisions around Spain."

And despite everything, Rule still feels he has been fortunate.

"We were lucky we bought off the plan in Spain where there is a law. If we had bought in Bulgaria, for example, it would be quite different.

"There was a lot of corruption and greed in Spain during the building boom," Rule says.

"But Spain is slowly rebuilding the confidence people had."   

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How to rent a property in Spain without a job contract

When looking to rent in Spain, property owners and estate agents often ask for a 'nómina' and work contract - something that can prove tricky if you're self-employed or not working. Here's how to prove your solvency and secure the rental.

How to rent a property in Spain without a job contract

If you’re looking for a house or apartment to rent in Spain, there can be a multitude of different factors to consider.

The price, the size, the location, the neighbourhood, which floor the flat is, on and whether there’s a lift, whether it’s interior or exterior, how many apartments there are per floor, whether to go private or through an estate agents and, of course, the search itself.

When you’re going on visits, you’ll have to contend not only with owner or agent trying to ‘sell you’ the place, but also explaining the terms and conditions (often referred to as las condiciones or requisitos para entrar).

In Spain, the process can be a little complicated. Often landlords ask for two months deposit upfront, and those that go through an intermediary estate agent tend to ask for two months, plus an extra month (plus VAT, or IVA as it is in Spain) that goes to the agent! It certainly adds up. 

Not only that, but very often in Spain you are expected to prove you will be able to pay your rent every month. And it’s not as simple as you might think. 

Most estate agents or landlords think hat the best way to ascertain this is by you providing proof of an employment contract (contrato laboral) and recent payslips (la nómina) that demonstrate you are paid the same amount every month, and that it’s enough to cover the rent and other expenses.

Here’s where things can start to get tricky for self-employed people (known as autónomos in Spain), who number more than 3 million in Spain.

Regardless of whether your monthly autónomo earnings are high pretty much every month, regardless of how consistent they may be, or even if you have regular clients, the irregular and insecure nature of Spain’s work market have ensured that landlords and realtors take a rigid attitude towards the rules.

This is especially true following the turbulent economic times of recent years as we’ve moved from global pandemic to war in Europe to spiralling inflationary pressures on the global economy.

Landlords want to be sure you can pay the rent. Therefore, they may favour a waiter with a nómina of €1,000 a month over an autónomo who can prove monthly earnings double that for the previous six months. Doesn’t seem fair, right? 

READ MORE: Why you should be raising your rates if you’re self-employed in Spain

Well, that’s often how it can be in Spain. Fortunately, if you find yourself in this situation, there are various ways you can convince potential landlords that you are financially solvent enough to rent their property, with or without a fixed contract

The law

Now, it is not unheard of – in Spain nor anywhere else in the world – for an estate agent or landlord to try and squeeze more money out of you, or to add on some extra charges. In most people’s experience, Spanish estate agents and landlords are no better or worse than anyone else, but it’s worth keeping in mind.

It has been known, however, for some in Spain to try and get an extra month’s deposit by telling potential tenants that they need a nómina by law in order to rent a property in Spain, and that they’re doing you a favour by allowing it.

Simply put, this is not true. According to Spanish law, more specifically, La Ley de Arrendamientos Urbanos (Urban Renting Law), although many landlords require some form of financial insurance, there is absolutely nothing to say a nómina is necessary to rent a property in Spain. A deposit is legally required, but a nómina?

Helpful? Certainly. Legally necessary? Definitely not.

That said, if you explain to the property owner that you’re self-employed, some landlords maybe be willing to make other arrangements to ensure the rent.

Here are some options, and other bits of paperwork that could help:

Aval bancario: Like a bank guarantee, some landlords request tenants without nóminas or work contracts to set up an aval bancario.

You must pay in an agreed amount (often worth the value of two or three months of rent, sometimes more) into a bank account that you’re a customer with.

It’s money that you cannot touch for an agreed period of time and which you pay some interest on, and in the event that you do not pay your rent, the landlord will be able to access said funds.

This is not the cheapest way to rent a property, but it may be one of the more effective ways of convincing a landlord to accept you as a tenant.

If you pay your rent diligently every month and prove that you are reliable, after a year you should speak to your landlord to ask them them to cancel the aval in order to not continue paying interest on it and recover your stored money.

Anuncios de particulares: If you’re using the usual rental search engines like Idealista or Fotocasa, the vast majority of rental adverts are from estate agents (inmobiliarias) who ask for all the proper documentation, including contracts and pay slips, and often the extra month’s rent as a fee.

When you’re making your search, keen an eye out for anuncios particulares , which are private ads direct from landlords.

Sometimes if you deal directly with the owner themselves, they are less strict about rules with regards to nóminas and contracts. Maybe you’ll get really lucky and find a landlord that takes a liking to you and who only asks for one month’s deposit.

Seguro de impago de alquiler: A landlord may be more likely to rent to you even if you don’t have a nómina when they have seguro de impago de alquiler, non-payment rental insurance. It protects the landlord for the duration of the contract and covers the rent and any repairs or legal fees.

IRPF: IRPF is Spain’s personal income tax, and providing your most recent income tax return could help put your potential landlord at ease by proving that what you’ve earned over the last year could cover the cost of the rent.

Seguridad Social: Similarly, providing proof of your social security payment can help prove your financial solvency.

Bank statement: a simple bank statement to show account activity – and that you have enough to pay the rent and deposit, of course – might ease the mind of your landlord as it allows them to see your incomings and any debts you might have.

IVA: Showing your VAT (IVA in Spain) returns could be another tool that, when used in conjunction with other ways of proving your solvency, could convince a landlord to rent to an autónomo.

Pensioner documentation: If you’re retired and you’re looking to rent, any official documents which show how much pension money you receive every month, along with bank statement reflecting savings, should suffice to convince a landlord or estate agent that you’re solvent.

READ ALSO: Renting in Spain: Can my landlord put up my rent due to rising inflation?