Handing the keys back when property is tenanted

[Lawbird Lawyer]

Dear Madam,

I wrote the first article in English on the matter which has been unduly "borrowed" extensively by others, please read it:

The Dación en Pago Explained - 28th March 2009

The Dacion en Pago Procedure - 21st November 2008

Lenders will not accept a dación en pago de deuda unless the property is vacant. If there are tenants inside they cannot take possession of the property lawfully even if they repossess it much less if you hand them over the keys waiving repossession altogether.

The reason is because Spain's Tenancy Act in Art 13 enshrines the right of tenants to remain in the proeprty for 5 years as long-term tenants. A new law has been passed which leaves the door ajar to waive such a provision if the contract is drafted professionally: Express Eviction Law Passed by Congress - 30th October 2009.

Tenants in Spain are overprotected by our laws for historical reasons that need to be addressed. The above law is a piecemeal attempt at it: New Express Eviction Law: Much Ado About Nothing - 13th July 2009

Bottomline, if you want to hand over the keys to your lender you will need to remove your tenants first. Otherwise your lender will turn down your offer and will repossess you if you default.

You can legally sell the property even if it has tenants inside but nobody will be interested unless you sell it at a knock-down price. Again the same reason.- buyers cannot take possession of the property even if the deed is under their name. They would have to formally evict the tenants. And nobody wants that kind of hassle on buying unless it's significantly BMV.

Yours faithfully,
Raymundo LarraÃ*n Nesbitt