Bank Guarantee when Renting |
|
The Bank Guarantee is a typical way of legal securing, it is legally independent from the principal or main obligation, which is being guaranteed by this, therefore needs to be considered as a separated, different and autonomous contract but linked to the principal by the fulfilment or breaching of the payment obligation of the principal contract.
The fulfilment of the obligation is not going to depend on the financial situation as if there is a breach of contract, the bank guarantee can be directly executed and the money can be recovered without judicially executing the main contract. You all already know that the bank guarantee is a legal obligation to developers for the consumers securing of handed amounts in off-plan purchases in Spain since 1968. Today, I want to show another useful way to use the Bank Guarantee, this time at lettings or renting: A bank guarantee can be used at renting in order to secure the result and execution of the obligations included in the rent contract either as the guarantee which is legally prescribed in provision 36.1 of General Renting Act or, as a complement, which is allowed by provision 36.5 of that General Act. This last modality is experiencing a very widespread use as a personal complementary guarantee which is constructed as a mean of immediate availability. This has been declared by Decision of the Supreme Court dated the 15th in April of 1988. This way, if there is a breach of contract, the landlord can claim against the bank (guarantor) the execution of the bank guarantee and he must obtain automatically and without any opposition, the amount which has been fixed in the Bank Guarantee. The Bank will just have the possibility to go to Court afterwards and claim the amount back from the tenant. Tenant will have this same mean if he considers that the execution of the Guarantee was not justified. The guarantee deadline needs to be fixed in the same rental contract, determining the time for the landlord to execute the guarantee before the guarantor bank. If that deadline passes without executing it, the guarantee will be extinguished. |
| < Prev | Next > |
|---|
