Santiago Thomás de Carranza is managing partner and founder of the firm Thomás de Carranza Abogados, a firm that began its journey at the height of the real estate bubble in 2004. The lawyer recognizes that throughout the firm’s history there have been “difficult moments” , something that is assumed to be normal for a company that legally manages nearly 15,000 properties. “When you have many assets, the case mix is very different,” he acknowledges. Thomás de Carranza believes that the residential market is going through another complicated time, both due to the vertical increases in housing prices and the worsening of legal security in the market, something that, in his opinion, has been influenced by the new Law for the Right to Housing. The rule, approved in May of last year, is already in application in Catalonia, through the declaration of a tension zone in which 140 municipalities will be able to cap rental prices.
Ask. Is investing in rental housing more or less profitable than it was a few years ago?
Answer. Rental demand is growing. The price is going up too and although there are many factors, I think one of them is [la falta de] legal security. It must be understood that 95% of homeowners are small holders. When these people see the problems with illegal squatting, with the difficulty in enforcing their lease contracts, in recovering possessions from the homes and the uncertainty about what state they are in… People are afraid. It is very important to provide legal stability and comfort to the owner.
Q. But is it less profitable?
A. It is still profitable, but not for everyone. You have to have the ability to endure. This causes large owners to concentrate in big cities and they are the ones who have more concentration in big cities, against small owners who find it more difficult to buy and face those risks. That does happen.
Q. Catalonia applied the price regulation contemplated in the new law, what does it mean for autonomy?
A. It is the example of everything that should not be done in the real estate sector, especially in Barcelona. The promoters flee Catalonia. There is also an unacceptable tolerance for illegal squatting, due to the obstacles and difficulties in enforcing contracts. It is very difficult to recover your home, especially if there are cases of economic vulnerability involved. It is a tragedy, but the burden should not be placed on the narrow shoulders of the owners because the administrations have not carried out their mandate to build more social housing and subsidized housing over the years. In the end, people stop investing. He does not want to invest in Barcelona, they do not have legal security. Furthermore, they have opted for a logic of ‘the good guys and the bad guys’ and the owners are not to blame for the fact that public housing has not been built.
“There have been worse times of squatting, but the new law does not help”
Q. Illegal squatting is often mentioned as one of the biggest problems in the sector, but in absolute terms the data is minimal in relation to the housing stock. Are there really reasons for alarm?
A. It is concentrated in specific areas, such as Catalonia or Madrid. Perhaps we are not living in the worst times as far as squatting is concerned, there have been worse years, but it is a phenomenon that we have been experiencing for a year. We are improving. It is true that the housing law does not help, but society has less and less tolerance, which translates into less tolerance in a court. People have begun to see that it is a scourge and that there cannot be a man who can stay in a home that does not belong to him and that the owner spends a fortune on the entire judicial procedure. There are very reasonable people who look for a home for their family because they have nothing else. But there are also many mafias, a lot of crime or many people who occupied illegally to sublet. Yes, illegal squatting is a problem, but above all, society is less tolerant.
Q. I suppose that non-payment insurance is also experiencing a golden age because of this…
A. Yes, they have grown a lot. But because what people are looking for is security, they don’t want problems. Owners look for tenants who pay every month, don’t cause problems, and who take care of the house reasonably well. Non-payment insurance saves this part, but they are also more expensive and in the end this increases the rent and is passed on to the tenant. Insecurity also has an impact on so-called ‘scoring’. The requirements for renting are high and only those who have greater stability can rent, the people who need it most cannot enter a home because there is no market for them.
Q. In Madrid there has once again been a confrontation between a real estate investment fund and its tenants. Specifically, between Elix Rental Housing, the investment fund that acquired the building on 7 Tribulete Street (Madrid) to renovate the building and increase its profitability, and the neighbors who had been living in that house for years and are looking to stay in their homes. . . How are cases like these resolved in which two rights collide?
A. I do not know the specific case of Tribulete 7, but when a problem of this type arises, there is no need to prosecute an issue. It is the worst thing you can do to manage a portfolio. What you have to do is pick up the phone. Call the tenant and ask what’s going on and most of the time, by asking, you save the contract, which is what you both want. And when it really can’t, you look for an alternative. It seems reasonable to me to seek profitability, but not at any price. If you buy a building and there are rents, those rents must be respected. And if you try to set conditions for people to leave, that is morally unacceptable. Not everything can defend a change from profitability. It is legitimate to seek profitability, but not at any price. There are other formulas. Talk to tenants and reach agreements. And if you try to go down the middle street it is neither legal nor acceptable.
