Renting Property in Spain: Aval Bancario and Advance Rent Payment

Renting Property in Spain

You may be surprised to hear that renting property in Spain can be extremely tricky. Not only is there an over demand for good rental properties, rent prices are increasing and owners, particularly Spanish owners, are becoming more and more demanding.

Sourcing a good rental property is only the start of this challenge, although we are able to do that for you as part of our relocation packages. Securing the property is the tricky part, particularly if you are one of the many foreigners moving to Spain, without a Spanish work contract.

If you are thinking of renting property in Span, having all the pieces in place, before you start your search, will make everything easier. Let us explain …

In some areas, particularly Malaga Capital, owners are very protective of their properties and require solid proof of income and solvability before signing a rental agreement. This is often the case when the tenant does not have a Spanish work contract. In some cases, even a Spanish work contract is not enough.

So, what options exist to overcome this?

The most popular options we have come across to placate demanding property owners when renting property in Spain are:

  • An aval bancario (bank guarantee)
  • Advance rent payment

Let’s have a look at these two options …

What is a aval bancario?

An aval bancario,  a bank guarantee, is a commitment contract whereby a banking entity guarantees to a third party that its client will proceed to the payment. In this case, the rental income.

How does an aval bancario work?

  • As the tenant, you should speak to a bank where you have an account
  • The bank will ask for documentation to assess your financial situation. Among these documents, the bank will request information on employment status, income and loans that are being paid.
  • If the bank agrees to grant the bank guarantee, it will inform you about its conditions. That amount to deposited will be the one stipulated by the landlord. This is usually the deposit of between three, six and sometimes even twelve months of the rental income in an untouchable account, until the end date of the guarantee. In addition, the bank will inform you of the commissions and interests associated with the granting of the bank guarantee. The guarantee fees are changed according to the bank, this usually involves an opening fee and interest.
  • Once the guarantee has been granted and the conditions accepted, both parties will sign a contract that includes the conditions of the guarantee.
  • This bank guarantee for the rental is provided to the owner of the house and is held by them until the termination of the rental contract.

What happens in case of non-payment of the rent?

  • In the event of non-payment of rent, the property owner can present the aval and receive owed monies from the bank. The bank will then take monies owed from the amount originally deposited by the tenant.

How is advance rent payment different?

Unlike an aval bancario, advance rent payment is made directly to the property owner, and this must also be stipulated in the rental agreement. In more and more cases, owners are requesting six or twelve months of the rental to be paid in advance. ie. Instead of paying the rent one month in advance, which up until recent years has been the norm, payments of 6 or 12 months are now sometimes required upon signing a rental agreement.

This may appear unfair, however, in defence of property owners, too many tenants sign 12-month rental contracts only to end them before the contract expires. Requesting advance rent payment gives the property owner peace of mind and also helps them pay the high agency fees, as many estate agents take one-month rental as their commission.

Which option is less risky when renting property in Spain?

To be honest, I do not think either option involves any risk for neither tenant nor property owner. An aval bancario incurs more time and effort and maybe a slight cost, but in the long run, both options provide a means of trust between both parties.

So, the next time you are asked to pay rent in advance or provide a bank guarantee, please do not take this as an insult or abuse of power, as some people do. This is merely a way for a property owner to protect their interests and your way to prove that you are a reliable and desirable tenant. Put yourself in their position, you wouldn’t allow just anybody to live in your property, especially if they were not prepared to prove their solvability, would you?

How can we help you?

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