Neighbour has rented out our property abroad without permission!

[unsurebut]

My father has a property in Spain. It's been in the family since the 70s as a holiday home. Until 3/4 years ago my father travelled there regularly and the place was occasionally used by other family. Then my father had a catastrophic stroke and wasn't able to travel for a while and the place wasn't used as much.

The neighbour there offered to keep an eye on the place in return for his family being able to stay there on the odd weekend/couple of weeks in the summer. He's a nice guy and has done a lot to modernise the property. My father then gave him permission to rent out the flat when it wasn't being used, again, for the odd weekend / couple of weeks in the summer, nothing permanent or long term and we were to be kept informed about who was staying there and when in advance of it being rented out.

Fast forward to this year and my father has recovered enough to travel. We've booked to go there in June, all very excited. My father emailed the neighbour, only to be told that it's not possible because he's rented the property out until January! Not only is this not permitted, we weren't even told! I am absolutely outraged and my father is very cross. He's emailed the neighbour to say that we will be arriving on said dates and that's non-negotiable, the neighbour has replied to say that he's away this week so will respond next week. Meanwhile, flights have been booked, all on the assumption that we were to be notified in advance of it being rented out.

There's communication between my father and the neighbour referring to the agreement, but no specific contract or anything, and the arrangement has worked well until now. I think what has happened is that the neighbour has become used to us not using it and has been renting it out far more than we were aware.

So what do we do now if he refuses to get the 'tenants' to leave?! Surely their contract with the neighbour is null and void because he doesn't have permission to rent it out on this basis? The neighbour DEFINITELY knows this.

AIBU to demand the people leave so we can use the flat as and when we want?

He has received what sounds like, very little money (cash) in the last 4 years.

Any money transaction in cash has to be proved and it cant.

This is SO common. I would not worry about tax. I really wouldnt. Its a whole different kettle of fish here.

Good its a flat and not a house. Makes it easier. Do you have the name of the "president of the building"? (There will be one)

He probably hasn't, and that is the crux of the matter (well, one of them).

Course you would. 😂

If you can find a group of heavies to clear the house in the night with absolutely no consequences then I'm pretty sure you could do this.

Depends whether they have a legal rental contract. Also, many parts of Spain require rental licence numbers so if they don’t have this could be illegal renting. Huge number of issues. They need legal advice asap

The tenants have presumably agreed the rental in good faith. Suggestions to "get the heavies" onto them are dreadful.

At this point you don't know what was agreed between your dad and his neighbour as there's nothing written down. How reliable is your dad's memory? Does he speak fluent Spanish, does the neighbour speak fluent English? If not, there might be complete misunderstanding as to what's been agreed.

What does seem clear is that your father has agreed to the property being rented out without the relevant paperwork and licences, and hasn't declared/paid tax on the rental income. This clearly started before he became incapacitated so he knew what he was doing.

I'm sorry you're having to pick up the pieces but I'm even more sorry for the poor tenants.

That's an appalling suggestion. The tenants are presumably paying rent in good faith. I really hope you never become a landlord if that's your attitude

It wasn't my suggestion.

The tax situation is going to be extra-complicated to sort out because non-resident owners of Spanish property have to pay Spanish tax on their rental income at a flat 19%. That tax can then be deducted from whatever they might owe HMRC after adding the rental income to their UK income, but it has to be paid first.

This means that if push comes to shove with the neighbour, he could report your Dad to the Spanish tax authorities for having taken the money in cash. Or (perhaps more likely), if you call the police to try and get the tenants out, the police might well ask what has been happening on the tax front too.

OP, I feel bad for you inheriting this situation, but it does rather feel as if your Dad tried to bend the rules and may be about to have to deal with the consequences of that.

Given that your dad is potentially exposed I wouldn't have suggested initiating legal proceedings but I see you've done it now.

Good luck OPs dad 🙏

So for 3-4 years your dad hasn't had a bundle of cash, but you have no idea how much renting has gone on in this time?

The taxation rules for non residents that aren’t part of the EU is complicated- I think if you rent the property even just for a week of two a year that you have to pay an annual tax of a set amount - if it’s not declared a rental property and you are caught you could be fined and owe back taxes. So if your dad has been dealing with cash and not filing in the tax forms in Spain you could be between a rock and a hard place. I’d maybe bring up this element with the Spanish lawyer too in case it changes anything.

My partner’s dad used to rent out his apartment in Spain for just 2 months a year but decided it would cost him a lot to continue doing this when the rules changed and Brexit happened. It sounds like the taxes are high for non resident landlords and complicated!

Your dad can simply deny ever receiving anything, so i doubt tax etc is a worry.

I had my landlady in mind. We have a valid contract. So yes, I would take her to the cleaners. But bearing in mind this owner is renting not paying any tax on the proceeds or declaring the property a rental apartment, has he drawn up a contract or is it by word? I wouldn´t want to be in his shoes if the tenants get difficult. He needs legal advice and playing it cool. No locks being changed, at least without giving the tenants a copy.

@unsurebut this all sounds so complicated!! It's a shame it's not straightforward for June but best wishes with getting this sorted.

I have just spoken with a Spanish lawyer who has advised a letter before action be sent to the neighbour and take things from there. The ultimate aim would be to get the contract with the tenants annulled - if there even is one.

Eek do you think that's a good idea OP considering it sounds like your dad has been taking money and not declaring it for tax in either Spain or the UK? I imagine you could open quite the can of worms and end up much worse off.

At the moment he hasn't 'lost' money as such, he's just not profited from the horrible neighbour pocketing rental money. Still awful but no money 'lost'. Whereas legal processes will cost money and could end up exposing the fact your dad hasn't declared income and may need to make tax repayments = real money lost and trouble caused.

I would think hard about which course of action has the most potential risk vs potential reward.

Oh my God.

Unless you have lived/rented in Spain you do not understand.

All transactions are in cash. It is SO common, simply because NOBODY can be implicated. Let alone OPs father who has received no money for at least 4 years.

Tax is not the worry at all.

Considering he collects in cash and hasn't been there for years he might be just about to collect a bundle.

Bear in mind that the non-resident “deemed income tax” is payable annually whether you receive rental income or not. It’s calculated on the rateable value of the property. It’s another thing that a Spanish tax adviser can help you deal with.

I think you need to get a Spanish solicitor asap.

@AdriftAbroad1 this is such an outdated view; licensing, taxation etc etc are very much enforced in many parts of Spain now. Rental laws are complex. Much better to get legal support now then risk losing the property; backdating taxes etc will be a small amount in comparison (if it comes to that). And yes the OP’s father should have been paying annual local and non local taxes every year even without an income in Spain. We all have to. The OP needs to sort this all out and not listen to the advice to hide from it. - all of this will come out if the property is ever sold and any withholding tax from the sale value will be automatically retained by the state until the seller can prove all taxes over th years have been paid etc etc.

I have quite a bit of experience of the Spanish rental shitshow system.
I really do hate to be the bearer of bad news but you may have a fight on your hands; not so much with the neighbour who can be dealt with legally but potentially with the tenants and Hacienda.
In this situation I would try to get the tenants on side as much as you can because they potentially could be the major sticking point here.

You say the current tenants have “long term” term agreement until January. Do you know when their agreement started? Time is of the essence here. If they can prove that they have been paying and when they have been there more than 11 months they have the legal right to stay for 5 years on the existing agreement (rent can be increased by only 2%)
Threats to disconnect utilities are illegal.

If less than 11 months the tenant can give notice but the “landlord”(who this actually is in this case is very grey ) has little power.

The contract doesn’t necessarily have to be in writing, Spanish law allows the parties involved to choose.
As a result, it may be oral or written, but the parties must be able to prove it exists and that it includes the essential conditions for its validity.

For a short term let which it would seem this is SO FAR, there should be a tourist license in place and tax to pay. So again, keeping this “quiet” and trying to keep the tenants onside is the best course of action.

I think I’d plan a visit and accept that you may have to rent accommodation elsewhere on this occasion to get this sorted with as least fuss as possible and cut your losses because you really don’t want to make a monster out of it.

On a positive note, your Dad is on the mend and fit to travel which is massive after a stroke so feel very blessed that this can happen and try to move on.
Good luck 💐

I totally disagree. It is not my current experience at at all. The neighbour knows it too. I have lived here 18 years. I rent/have rented and have bought.

If the neighbour wants to do this on the sly with a sick ex pat, there are SO many ways to do it.

I'm afraid you're quite wrong.

If HMRC gets ANY information to indicate the property has been available for letting and they open am investigation the onus will be on the legal owner to prove that he didn't receive any

Which he has. Bundles of cash periodically. Which has been banked (easy win for HMRC) or spent (Bank accounts would all be analysed to prove cash shortfall).

Once we get hold of all the bank statements from all his accounts it's not rocket science to prove potential undeclared income.

They might own the title, but it sounds like its also someone else's home as in, the place they live day to day, sleep, eat and generally have their lives. That counts too.