Owner not paying mortgage but we're paying rent!

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duncan disorderly
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Owner not paying mortgage but we're paying rent!

Postby duncan disorderly » Thu Aug 27, 2009 4:35 pm

Hi Its been ages since I've been able to have a look at the forum but I have a bit of a problem I'm hoping someone will be able to give me some guidance on.

My partner and I rent a house (since Feb 2009), we have a rental contract and have receipts for all rental payments, elec and water payments etc paid to date.

REcently a letter arrived via courier for the owner of the house - we took it to the rental agent (without opening it) and expressed concern that the sender appeared to be a bank in Madrid. WE had previously heard rumours that the owner of the property had not been paying his mortgage.

THe rental agent opened the letter and tried to tell us it was just to inform the owner that he was slightly behind with his mortgage payments but, he said "who's not behind with their rental or mortgage payments these days". (Us for one!)

My partner asked to see the letter which was written in spanish - it basically said that the owners credit and mortgage with the bank had been withdrawn and the matter had been referred to a Notary in Madrid for action.

This seems to me to be much more serious that just a couple of missed payments.

My concern is that the contents of the property are entirely mine (I had everything shipped over in January this year).

I'm worried that the bank will start proceedings to repossess the property and with it all my furniture which is nothing to do with the owners debt.

We've indicated to the rental agent that no further rent will be paid until he can provide proof that the mortgage has been paid to date. Obviously I'm not sure this is something he will be able to do given the contents of the banks letter.

Can anyone tell me what I should be doing now - is it possible that the house and my contents will be repossessed =- could I come home one day to find the locks changed and no way to gain access or remove my personal belongings.

Sorry this is so long but if anyone can give me some advise I'd really appreciate it.

Best regards

Michelle

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Re: Owner not paying mortgage but we're paying rent!

Postby Jool » Thu Aug 27, 2009 5:05 pm

Dear Michelle,

This process will take months and months.......I know of people still living in their houses after the re-po order went through late last year!!!

The bank will only be able to re-po assets of the property owner, not your property. The worst thing you can do is to stop paying the rent. I don´t know how official this tenancy is (ie if owner is paying tax etc) but I would ask the rental agent to register your interest in the property as a tenant with the bank. Put this in writing and give a deadline for him to reply to you. Get a signature and NIE when you hand deliver it (or send via registered post with notification of receipt). This should mean you are notified of any proceedings.

Tell the property owner that you consider him to be in breach of the tenancy agreement as the property will shortly not be available to you legally as agreed and ask what he is doing about the missed mortgage payments. Seek legal advice to see if you can get out of the rental agreement in view of this under standard spanish law and if so find somewhere else to live, you do not want the uncertainty.

duncan disorderly
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Re: Owner not paying mortgage but we're paying rent!

Postby duncan disorderly » Thu Aug 27, 2009 10:21 pm

HI Jool - thanks for your reply. The rental agreement is the usual sort - signed by both ourselves and the owner. However, I'm pretty sure he hasn't registered officially that he is renting the property out.

Will do as you suggest - As you pointed out I don't really want to be hanging around waiting for the axe to fall lol. By the way - would I need to prove to the bank that the contents are mine?

THanks again for your time.

regards

Michelle

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Re: Owner not paying mortgage but we're paying rent!

Postby barry » Fri Aug 28, 2009 1:20 pm

Just a thought but lodged in my mind is, could you not contact the bank or whoever is owed the mortgage money and arrange to pay this out of/or all of your rent monies and pass the receipt to your letting agent?
Personally, if the above wouldn't work, I would not pass any monies for rent to letting agent or landlord but put into a seperate account regularly on due date and show this when in court.

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Re: Owner not paying mortgage but we're paying rent!

Postby Jool » Fri Aug 28, 2009 1:53 pm

If your rental contract states unfurnished then you do not have a problem.

I would not advise Barry´s option as that puts you in breach of your rental agreement, you need to keep on proving you are complying with the contract. If the owner signed the contract do you have the owner´s address? If so can you write to him registered post and ask him what his plans are in respect of his mortgage? Ask Rental Agent what he/she is doing about the situation........are they being paid by the owner still for instance?

Otherwise there is not much you can do, how much notice do you have to give? If 2 months I would give it now and start looking elsewhere. Just make sure you do everything by the book as someone on here had enormous problems getting out of a rental agreement......so do everything with signed official receipts for keys returned, inventory checked off, deposit refund etc etc....Ensure you get a copy of meter readings on departure.

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Re: Owner not paying mortgage but we're paying rent!

Postby barry » Fri Aug 28, 2009 3:23 pm

I am fully aware that you would be breaking your tenancy agreement by not paying but what course of action will the landlord take, he could evict you!
I know the below applies to UK but I would be inteerested in Davis Searl's views on this.

Malcolm Harrison, a spokesman for the Association of Residential Lettings Agents, says tenants are not normally in a bad position in the case of repossession. 'What tends to happen is that the lender will let the tenancy run to give the landlord time to sort themselves out, or they will use the rental payments to cover the mortgage repayments until the tenancy is up. That is fairly standard procedure.'

Jool
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Re: Owner not paying mortgage but we're paying rent!

Postby Jool » Fri Aug 28, 2009 5:54 pm

Barry read Blondie´s posts here about not fulfilling a rental contract, it cost them 10k.........and the law you cite is ARLA info which applies to the UK not Spain.......its a much tougher world here.......

The owner could sue them for breach of contract and claim it was their lack of rent that caused him to lose the house, or default, stranger things have happened in Spain with no justice or logic attached to them !

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Re: Owner not paying mortgage but we're paying rent!

Postby julian » Fri Aug 28, 2009 6:01 pm

legally the owners mortgage payments problems are no business of the people renting, they should stick to whatever the rental contract says..even if the house gets sold at auction they can stay there paying their rent to the new owner till the end of their rental contract.

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DavidSearl
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Re: Owner not paying mortgage but we're paying rent!

Postby DavidSearl » Sun Aug 30, 2009 4:30 pm

Rentals

As Julian correctly notes in his last post, a tenant in Spain has considerably more protection than tenants in most countries. You have not mentioned the duration of your contract, whether it is in Spanish or English, and what the terms are. Is it a Spanish contract? Does it say "Contrato de Vivienda"? Does it give a reason why you are renting the place?

If the contract gives a time, say one year, then you are protected. If it says "Vivienda" then you are protected. Only if the contract specifies "Por Temporada" and says it is a holiday let for two or three months, then you have to vacate when the contract ends.

If you are protected, as above, then you have the right to extend the contract up to five years total, as your principle residence.

It makes no difference who the owner is. If the bank repossesses the property, it has a sitting tenant, namely you. If the bank sells the property at auction, it is sold with a sitting tenant, namely you.

So do not stop paying the rent. Make sure you have a receipt for the rent, or a bank record that it has been paid into owner's account.

Thank you Julian, for your observation.

Good Luck with it, David Searl
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Re: Owner not paying mortgage but we're paying rent!

Postby crazyred » Sun Aug 30, 2009 4:40 pm

Very interesting David. I have an apartment that I only let out on renewable 6 month contracts. However, the title says "CONTRATO DE ARRENDAMIENTO DE VIVIENDA". Do I need to change this so that I won't be legally obiged to extend to 5 years? Or are we protected by the fact that it is only a 6 month contract?

Many thanks.

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DavidSearl
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Re: Owner not paying mortgage but we're paying rent!

Postby DavidSearl » Sun Aug 30, 2009 4:49 pm

Yes, crazyred,

You have exposed yourself to any tenant wishing to stay for five years. If your contract says "Vivienda", this establishes it as a residential contract subject to the yearly renewals up to a total of five years.

The six month contract certainly indicates your intention of short-term only, but there is no legal limit below which a contract is short-term. The popular use of 11-month contracts gives the landlord no protection at all. The "purpose" for which the contract is made is the real deciding factor.

If you say "Vivienda", the purpose of the contract is to make the place their real home. If you say "Por Temporada" and make some reference to a holiday or seasonal stay, then your intention is much clearer.

See the Chapter on Renting and Letting in You and the Law in Spain for more on the details.

Good luck with it, David Searl
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