On Thursday, February 16, the Spanish financial daily EXPANSIÓN published an article on landlord/tenant arbitration under this headline: "Evictions to be resolved through arbitration". The article is a brief look at landlord/tenant relations and arbitration as a way to resolve disputes under the "National Rent Guarantee Plan", a/k/a the PNAG.
By way of background, Spaniards do not like to rent, or don't seem to like to rent. Over 80% of the population owns their home. As an example, emancipation rarely takes place unless the family helps with the purchase of a home. Be that as it may, there are hundreds of thousands of empty homes purchased for speculative purposes. These homes are empty and they are not being rented because landlords are afraid of not getting paid and afraid of costly repairs and maintenance due to tenant abuse and/or misuse.
While the name "National Rent Guarantee Plan" may suggest to the reader that the "Plan" is a Government plan, it is not. This "Plan" is a private ADR initiative of a private ADR services provider interested in offering arbitration services to landlords under the Housing Plan 2005-2008, which is a Government Plan. Neither Government nor the Minister of Housing of Spain have anything at all to do with the PNAG.
It is true, however, that the Ministry of Housing wants to promote the residential rental market, and it has been doing so since April 2005, through the Public Rental Society, a public organization established by the Ministry itself to run and manage its Housing Plan 2005-2008. The Public Rental Society intends to give landlords a guarantee that rents will be timely paid throughout the rental contract, and that necessary repairs will be made when the rental contract expires. In exchange for a fee, Government will manage all aspects of the home rental transaction and relationship, such as collecting and disbursing monies, arranging repairs, and so on. This official government plan does not contemplate ADR.
The PNAG, on the other hand, offers dispute resolution to evict tenants who default on their monthly rent. Needless to say, landlords are interested in this plan, and are beginning to list their empty speculative homes with this ADR outfit through its plan.
Back to the article in the newspaper. Thus far some 12.000 home owners and some 500 home rental agencies have signed to participate in the PNAG, the latter to attract listings. The complete paragraph follows.
“De hecho, más de 12.000 propietarios de toda España han puesto ya en alquiler sus inmuebles a través del PNAG, una iniciativa privada desarrollada específicamente por la Corte de Arbitraje Económico de Derecho y Equidad, organismo arbitral con funciones de interés público y competencias en todo el territorio español encargado de gestionarlo.”
In fact, over 12.000 home owners in all of Spain have listed their properties for rent through the PNAG, a private initiative developed specifically by the Economic Arbitration Court of Equity and Law, a public interest arbitral tribunal with jurisdiction throughout the country and charged with its management.
(*) To read the full article (in Spanish) in EXPANSIÓN, click here.
We read further and find a striking government quote in response to the journalist's efforts to get their side of the story: "the Ministry of Housing is not supporting this initiative". Next, the journalist explains that "sources of the Ministry led by Minister María Antonia Trujillo admitted that Government is not participating in this project".
Royal Decree 801/2005 officially launched the Government's Housing Plan of 2005-2008, which we have examined. There is no mention at all of ADR in any form. On July 13, 2005, the Ministry publicly unveiled its Housing Plan. The 40-page document makes no reference at all to dispute resolution on landlord/tenant issues.
We have consulted the website of the Public Rental Society, the public organization established by the Ministry of Housing to run and manage the Housing Plan. We used four search criteria, "arbitration/conflict/dispute/out-of-court" (in Spanish, of course) and there isn't anything concrete. There is no ADR plan at all. There are references, but no ADR plan.
For example, the website makes a reference to the Public Rental Society (PRS) acting as an "intermediary" between landlords and tenants to peacefully resolve any conflict. It does not explain how. The PRS also states that it will act as a "mediator" in case of conflict, but it does not explain mediation. When it comes to "frequent questions by landlords" there isn't a reference to arbitration. However, in the section "frequent questions by tenants" we find the first and only reference to arbitration. This reference is to be examined because it states literally that "the Society [PRS] supports resorting to arbitral courts where they are available".
Las ventajas del alquiler desde el Programa SPAVIV: propietario
6. La Sociedad Pública de Alquiler actuará como intermediario entre propietario e inquilino ante cualquier problemática entre ambas partes. Abriéndose así la posibilidad de resolver los conflictos de manera amistosa evitando las molestias de tener que acudir a los Tribunales.
Ventajas del alquiler desde el punto de vista del programa SPAVIV: inquilino
2. Mientras dure su contrato con la Sociedad Pública de Alquiler se contará con el respaldo de un equipo de profesionales que velará por el bienestar del inquilino y el buen estado de la vivienda:
La Sociedad actuará como mediadora en caso de conflicto con el propietario.
Preguntas frecuentes sobre el programa SPAVIV: propietario
23. En caso de conflicto ¿cuál es la jurisdicción aplicable?
La jurisdicción aplicable queda determinada en el contrato entre el propietario y la Sociedad Pública de Alquiler. Al ser un contrato de alquiler entre propietario e inquilino, la legislación a aplicar será la Legislación Civil y Mercantil.
En principio, el Programa SPAVIV aboga por la resolución amistosa de los problemas entre el propietario y el inquilino. Si no fuera posible, las partes acuerdan con la firma del contrato que la solución a todas las cuestiones litigiosas surgidas o que puedan surgir con motivo de la interpretación o el cumplimiento del presente contrato a los Jueces y Tribunales del lugar donde está ubicada la vivienda objeto del contrato.
Preguntas frecuentes sobre el programa SPAVIV: inquilino
43. En caso de conflicto ¿cuál es la jurisdicción aplicable?
El contrato firmado por el propietario y el inquilino es un contrato de arrendamiento regulado por la Ley de Arrendamientos Urbanos (Ley 29/1994 de 24 de noviembre).
La Sociedad aboga por la utilización de tribunales de arbitraje, allí donde estén disponibles. En el resto de casos, las partes acuerdan con la firma del contrato que la solución a todas las cuestiones litigiosas surgidas o que puedan surgir con motivo de la interpretación o el cumplimiento del presente contrato a los Jueces y Tribunales del lugar donde está ubicada la vivienda objeto del contrato.
Tareas a llevar a cabo por los miembros seleccionados como Agentes Colaboradores de la Red de la Sociedad Pública de Alquiler
Los agentes colaboradores, entre otras actuaciones, deberán mediar entre inquilino y propietario para buscar acuerdos en caso de conflicto, tendrán que gestionar las incidencias cuando no estén cubiertas por el seguro, y tendrán que dar servicio de atención tanto al inquilino como al propietario en aras de conseguir y mantener una sana relación contractual entre ellos.
It is plainly clear that no specific ADR services provider has the express support of Government. If this had been the case, we would have certainly seen institutional press releases posted everywhere and dozens of press articles written on the matter. However, this is not really notable. What is notable is the absolute lack of an ADR strategy on the part of the Public Rental Society to deal with landlord/tenant conflict beyond mentioning that it "supports resorting to arbitral courts wherever they are available".
If this is so, if the Public Rental Society supports arbitral courts "wherever they are available", then don't they support the ADR scheme of an available court, the Economic Arbitration Court of Equity and Law? To begin to explain this issue we must give the reader a bit of background regarding how arbitral institutions establish themselves as such under Spain's Arbitration Act of 2003.
It takes very little to establish an arbitration court in Spain. Under the Arbitration Act in effect in Spain today, anyone can go to the not-for-profit national registrar, come up with a catchy name, file whatever by-laws it pleases and that is that. The only pre-requisite is not to have profit in mind, as if acting as a not-for-profit concern were in and of itself a sufficient guarantee of honesty, transparency and professionalism. It is bizarre, but this is what the law says in a nutshell regarding arbitral institutions. There is nothing more in terms of legal requirements but, obviously, this is not enough for Government to bless existing arbitral institutions, or turn to them for help in developing an ADR program for its Housing Plan 2005-2008.
Why isn't it enough to be a legally established arbitration court under the law to be blessed by Government in the landlord/tenant ADR area? To answer this question we have to continue with a bit more of background.
Government has recently decided to change arbitration under the Consumer Protection Act to provide that binding arbitration can only take place when the consumer, aware of what private arbitration entails, freely chooses to arbitrate after the dispute arises, not before. Why?, because with no regard for consumers' rights, some ADR outfits (not-for-profit, of course) have been operating in the country selling their arbitration services shamelessly to businesses offering goods/services to consumers. The schemes were designed to have consumers pay hundreds of dollars in fees and, of course, favor the claimants in arbitration, the businesses with unpaid invoices resulting from customer dissatisfaction. Collecting was an almost sure thing. But there is more...as a part of this "one-stop-takes-care-of-things" approach, ADR institutions offered to enforce awards in court to collect, as an added "convenient service" for businesses. As we said, shameless and, we dare say, unconscionable. The same thing is happening with landlord/tenant ADR and it would appear that Government does not want to be fooled again.
"Evict the bum", "get your money", "have your home repaired on your tenant's nickel". Some ADR institutions really know the tune landlords like to hear and it is the tune they are playing because it is the landlord or its agent --not the tenant-- who presents the rental agreement for signature and the one who can include an arbitration clause to protect his/her rights from difficult tenants. The only tune the tenant hears is a lugubrious requiem. As incredible as it is, this is the present state of affairs.
As a consequence, Government is not sticking its neck out for any ADR services provider as we have seen in the newspaper article. As a matter of fact, the sheer abuse --or its unchecked potential--when it comes to binding arbitration where consumers--or just plain, ordinary people--are concerned, is likely to cause the Government to protect people from arbitration. As we mentioned before, this was the case with consumer arbitration where Government had to step in to protect consumers from arbitration. There is a better-than-average chance that it will also happen in the landlord/tenant area with regards to ADR.
ADR institutions turn to government to do their work. "Help us promote arbitration", they demand on occasions. Government does not seem to like what it sees, and when asked for help it says to them either (i) nothing, (ii) no, or (iii) be very careful.
We may be on the verge of seeing tough new laws regulating institutional arbitration in Spain and not very many ADR services providers --including good, reputable ADR providers--may live up to them. We'll just have to wait and see how far reaching the wrath of Government turns out to be.
