Bank Guarantee - Reqrd for Rental

[dupree]

I am told that in order to sign a lease for a rental property in Madrid that I will have to come up with 1 months rent, 1 or 2 months deposit and 1 months rent for the real estate agent (which is all fine and expected) and, this is the kicker, a bank guarantee for 6 months of rent.

According to the bank, being that I don't own any spanish assets nor have any credit history in Spain that we will have to deposit 110% of the value of the guarantee and pay 0.5% set-up fee and a fee of 1% each quarter (so I am paying them to guarantee a contract with my own money?). So roughly this comes out to about 20K USD (using an optimistic exchange rate of 1.50)that we have to come up with just to move into an apartment in Spain.

Does this sound right to anyone? Surely there is another way to secure this guarantee...Understanding that I have excellent credit in the US but no collateral to speak of...I do have a car but technically the bank still owns that asset. One agent mentioned an insurance specifically for this but most of the "landlords" of the properties I have seen are unwilling to go this route.

Thanks for sharing your knowledge and experience.

[Big Pete]

Originally Posted by dupree

I am told that in order to sign a lease for a rental property in Madrid that I will have to come up with 1 months rent, 1 or 2 months deposit and 1 months rent for the real estate agent (which is all fine and expected) and, this is the kicker, a bank guarantee for 6 months of rent.

According to the bank, being that I don't own any spanish assets nor have any credit history in Spain that we will have to deposit 110% of the value of the guarantee and pay 0.5% set-up fee and a fee of 1% each quarter (so I am paying them to guarantee a contract with my own money?). So roughly this comes out to about 20K USD (using an optimistic exchange rate of 1.50)that we have to come up with just to move into an apartment in Spain.

Does this sound right to anyone? Surely there is another way to secure this guarantee...Understanding that I have excellent credit in the US but no collateral to speak of...I do have a car but technically the bank still owns that asset. One agent mentioned an insurance specifically for this but most of the "landlords" of the properties I have seen are unwilling to go this route.

Thanks for sharing your knowledge and experience.

I am no expert but !! it sounds to me like there taking the wee wee . I have heard of loads who have rented with just deposits and a months rent in advance . so look elsewhere

maybe a expert can confirm that shortly for you

[dupree]

Yes that is what I thought but this isn't just one agent that has mentioned this...an ERA agent and a "Look/Find" agent both wouldn't even show me flats without this paperwork...and other agents, though willing to show property, have all mentioned it as a requirement.

And the Bank (Citibank) rep. knew exactly what I was talking about like it was "business as usual" so all signs point to this being on the up and up...at least for the places we are looking for...most of which are fully furnished if that makes a difference though some have been un-furnished.

[dupree]

Ok i found this...not sure how old the pages are... my contact here and all the leasing agents are telling me this is standard (albeit a new) practice in today's market:

[well they will not let me post the link....]

"...For some properties, you may also be asked for a bank guarantee, which is essentially a sum of money (6 month's to a year's worth of rent) held in trust by your bank, which they will hand over to the Landlord if you break your side of the contract. They are best avoided."

Hoping to hear from others who have direct experience with this and how they managed to deal with it....seems like quite the hurdle for a renter...I mean if I had that kind of cash I would just buy a home...

[Stravinsky]

Originally Posted by dupree

Ok i found this...not sure how old the pages are... my contact here and all the leasing agents are telling me this is standard (albeit a new) practice in today's market:

[well they will not let me post the link....]

"...For some properties, you may also be asked for a bank guarantee, which is essentially a sum of money (6 month's to a year's worth of rent) held in trust by your bank, which they will hand over to the Landlord if you break your side of the contract. They are best avoided."

Hoping to hear from others who have direct experience with this and how they managed to deal with it....seems like quite the hurdle for a renter...I mean if I had that kind of cash I would just buy a home...

I can confirm that we have people on our books who will ask for bonds as deposit for their properties, generally for 3 or 6 months ... what you mention is not unusual although 12 months would be a little unworkable

[Big Pete]

Originally Posted by Stravinsky

I can confirm that we have people on our books who will ask for bonds as deposit for their properties, generally for 3 or 6 months ... what you mention is not unusual although 12 months would be a little unworkable

But you must have normal Landlords as well surely ? If you going to pay all the money upfront place a deposit and put xxxx ammount of cash in a bank as a Guarantee then any rentor would be better off just buying the place on a Mortgage and it does somewhat defeat the object of Renting ,

Rentors should avoid them like the plague in my opinion as if they have a Guarantee can you imagine when you come out the rental the hassles on if that scratch on the sink was there before you took it or after etc..Specially when they have your open bank account to fleece .

bad news..


ps; How come in the Rugbymat forum , onlineamiga went over there and got a flat easy peasy with no bank accounts or anything ?

[Stravinsky]

Originally Posted by Big Pete

But you must have normal Landlords as well surely ? If you going to pay all the money upfront place a deposit and put xxxx ammount of cash in a bank as a Guarantee then any rentor would be better off just buying the place on a Mortgage and it does somewhat defeat the object of Renting ,

Rentors should avoid them like the plague in my opinion as if they have a Guarantee can you imagine when you come out the rental the hassles on if that scratch on the sink was there before you took it or after etc..Specially when they have your open bank account to fleece .

bad news..


ps; How come in the Rugbymat forum , onlineamiga went over there and got a flat easy peasy with no bank accounts or anything ?

Yes there are landlords that just ask for a months deposit, it depends a lot on the value of the property.

Its not the Rugbymatt forum BP
Yes he did, and I guess it was a small one and I also guess he paid a month up front, but he did get a job within 8 days of arriving there

[dupree]

Couldn't agree more but...

this is turning out to be very much the norm here, as fact I haven't yet run into a place that didn't have this as a contigency and all of my dealings are with property agencies that are not fly by night shops/individuals.

Also the guarantee in this case is not for damage (that is the 1 or 2 month deposit paid to the landlord) but rather protection if I up and walk away and/or refuse to pay rent...apparently here it is a 3-5 month legal process to get judgement so this is the landlords protection.

And, from what I have read, as in the US there is a document filled at at the time of move in where we would document all "existing" damages to the property. Though you raise a good point I will have to check with the bank/agents as to what the landlord must do in order to actually withdraw these monies...I am sure it is more than just calling the bank (at least I would hope).

and I do agree with you that this does defeat the purpose of renting for the average Spaniard and I find it a very peculiar practice... But there seems to be some "insurance" that you can get in place of this Aval where you pay some dollars per month but this is also new and not all landlords (so I am told) are accepting this in place of the Aval.

Luckily for me the company shipping me over here is going to take care of the Aval. But how does the young spanish couple just starting out afford to rent....

[Big Pete]

Originally Posted by dupree

Couldn't agree more but...

this is turning out to be very much the norm here, as fact I haven't yet run into a place that didn't have this as a contigency and all of my dealings are with property agencies that are not fly by night shops/individuals.

Also the guarantee in this case is not for damage (that is the 1 or 2 month deposit paid to the landlord) but rather protection if I up and walk away and/or refuse to pay rent...apparently here it is a 3-5 month legal process to get judgement so this is the landlords protection.

And, from what I have read, as in the US there is a document filled at at the time of move in where we would document all "existing" damages to the property. Though you raise a good point I will have to check with the bank/agents as to what the landlord must do in order to actually withdraw these monies...I am sure it is more than just calling the bank (at least I would hope).

and I do agree with you that this does defeat the purpose of renting for the average Spaniard and I find it a very peculiar practice... But there seems to be some "insurance" that you can get in place of this Aval where you pay some dollars per month but this is also new and not all landlords (so I am told) are accepting this in place of the Aval.

Luckily for me the company shipping me over here is going to take care of the Aval. But how does the young spanish couple just starting out afford to rent....

Well i agree on the young Couples nowdays , cant afford to buy cant afford to rent not easy

Well good luck to you anyways and i would still look around , maybe look out the area could be different outside the town..

[dupree]

Originally Posted by Big Pete

Well good luck to you anyways and i would still look around , maybe look out the area could be different outside the town..

thanks, hopefully in the near future I will be able to contribute instead of leach..this is a great forum..lots to read. Funny I just got back from a village to the north of Madrid and it was the same there as well 6 mo Aval though probably room for negotiations...seems they were willing to deal with the "insurance" type option which is like a monthly payment to an agency...anyway.. Thanks again to you both. I am sure I will have more Qs soon.

Buenos dias