Nobody Pays the Last Month’s Rent

Posted on 03. Jun, 2016 by in peru

Alternate Title: Not-So-Accidental Corruption

Alternate Title 2: My First Legal Action in Latin America

I recently moved apartments, thus ending the business relationship with my old landlord, the subject of Accidental Corruption.

At the time of that story, I truly thought she simply had no idea how apartment rentals should work, no idea about the owner’s and renter’s obligations. I still think that might be the case.

But after completing the lease my general impression was that corruption is not so accidental in her case. She refused to return any of the $1,600 security deposit, citing damages which amounted to a litany of exaggerations and of course fraud.

There certainly were damages. We have a two-year-old boy who the wife gave crayons to for decorating the white walls. Certain fixtures were ruined or lost. But $1,600? Not so much.

When I realized I’d have to gear up for a legal battle, I asked around among Peruvian friends. The first thing many of them said is, “You paid the last month’s rent?”

They say the last month’s rent should be discounted from the deposit.

Apparently nobody pays the last month rent, and nobody expects any money back after the end of the lease. Given the standard security deposit is two months’ rent upfront, you can assume the real price of renting in Peru is 8.3% higher than the stated price.

But I hadn’t assumed that, and I paid the last month’s rent. I wanted something back. In fact I wanted at least $800.

I had completed rental contracts in both Peru and Colombia since moving to South America in 2008. I never had this problem, including after lease in Bogota which required a four-digit deposit denominated in dollars.

But I guess it only takes once. I must have been getting lucky all this time.

I have a lawyer friend here in Lima. She does not specialize in contract law, but she rents an apartment out so she knows the territory. She guided me through the process.

Fortunately it seems this was the landlord’s first time stealing somebody’s deposit because she didn’t cover the bases well. According to Peruvian law, only “legal” receipts are admissible in the court of law. A legal receipt should have the company’s registration number and be declared to SUNAT, Peru’s tax authority.

The problem is that three out of four workers in Peru are not registered with the tax authority, or “extralegal” as Hernando de Soto would say. The vast majority of Peruvians, and especially in manual labor, work for what we in the States call “cash under the table.”

So for the biggest expense in fixing the apartment, the paint job, the landlord had produced a handwritten piece of shit totaling 1,450 soles ($500). I could have had the 1,000-square-foot apartment painted in the United States for $500. All of the other big receipts were similarly informal, and completely inadmissible in a court of law.

I don’t deny that the paint job cost about that much. She hired a rather thorough repair. But it doesn’t matter what she paid because she can’t legally prove it cost even one sol.

The lack of legal receipts was enough to win the case. My friend explained that, in these cases, the judge would review the receipts and determine what seems fair and what doesn’t. But he wouldn’t even get that far. The receipts are inadmissible. I could ask for all my deposit back if I wanted to.

But we had more. My friend asked if the landlord had ever given me my SUNAT receipts for each rent payment. No, I replied, I didn’t even know landlords were legally required to give legal receipts for rent. That’s because, like the labor market, the vast majority of the rental market in Peru is also off the books.

While the landlord’s hiding her rental income from the taxman would not bolster my case that I was owed my security deposit, the threat of reporting her to SUNAT would provide leverage to get the money back without going to court.

If I went to SUNAT saying I had paid this person so much money in rent every month for this span of time, it immediately opens the equivalent of an IRS audit into that person. She would have had to pay 5% on her rental income, equivalent to $480 over the duration of the lease, plus any fines. Avoiding the SUNAT case alone would justify giving some money back. Because if she had to pay SUNAT and me, the ordeal would easily get more expensive than just paying me.

So the first step in taking action is to send a “carta notarial,” which is the equivalent of a service of process in the United States legal system. Basically the local notary serves your target with a notarized legal letter. See mine here: page 1, page 2 and page 3.

The idea with the carta notarial is similar to the closest I came to a lawsuit in the United States. I’m trying to scare the landlord. I want to show her I’m serious and make her realize she doesn’t want to go to court. I want her to see I have a lawyer who wrote the letter.

(I invited a proper spread for my lawyer friend and our families in gratitude).

The closest I came to a lawsuit in the States was when I left an apartment before the end of the lease. But in that case, I was trying to scare the company out of suing me. So I wrote a letter threatening to sue them over the beef I had with their service, which could have been deemed breach of contract in a court of law. The letter served its function. They let me go with no problems. It helped I also cleaned the place up before splitting.

In that case, I was trying to discourage action, to scare them into doing nothing. With the landlord, it was a little more difficult because I needed her to take action in returning cash. That’s why I included the bank account number at the end, so she could end it all painlessly without going any further.

But she didn’t. So it went to the next step.

Peruvian law requires parties with a civil dispute to first attend a “conciliación extrajudicial,” an informal arbitration with a local lawyer mediating. Except it is formal and legally binding. What is said in negotiation is confidential, it won’t be brought up in case of a court trial.

I read up on the process here and here. The idea is to prevent overwhelming the courts with trivial disagreements which can be resolved simply. Like this case.

Going to the conciliation requires the carta notarial first. So once the carta notarial has been sent and ignored, the next step was to invite the landlord to a conciliación extrajudicial.

If somebody doesn’t show up to a conciliation in Peru, then they’re fucked when it goes to court. If a judge sees a defendant didn’t show up to the conciliation, they throw the book. That’s how it was explained to me. The defendant can show up and refuse to agree on anything, but they have to show up to avoid getting killed in court.

So I spent 200 soles ($60) to invite the landlord to the extrajudicial conciliation. The invitee has two opportunities to attend. If they miss the first, another is scheduled. If they miss the second, they’re fucked.

My lawyer friend told me nobody goes to the first conciliation. They always skip and hope you’ll drop the issue. Or maybe they do it to punish you, just to be uncivil wherever possible.

Nonetheless, I went to the lawyer’s office who would serve as mediator. The mediator also said nobody goes to the first conciliation appointment. But they always go to the second. They almost never skip both, or they’re fucked.

Another quirk about the conciliation is that the parties’ lawyers are not allowed to speak. In keeping with the “good faith” and “friendly citizenship” line which underscores the conciliation process, the lawyers can attend but must keep quiet. Only the plaintiff, defendant and mediator may speak.

Given that, my lawyer friend didn’t even want to go, especially to the first appointment. I went alone.

I went alone, but I was prepared. I had a thick folder of documents, including copies of all the absurd receipts the landlord had sent.

Peru’s conciliation law gives a 10-minute grace period after the start time before the mediator declares the invitee absent. I assumed I would show up 15 minutes earlier, read a newspaper for 25 minutes and leave 10 minutes after the start time.

Before the start time, the landlord’s lawyer showed up. This worried me a little. I had nobody.

I was also angry over the drama, the lies, the corruption. I stared daggers at him. He didn’t take his eyes off his phone. Probably Facebook or Whatsapp, maybe Angry Birds. But completely aloof.

As we got to the seventh and eighth minute past the start time, I grew angrier. I thought this was a ploy to scare me. Send the lawyer so I’d see I’m up against a pro when the landlord wasn’t coming anyway. And maybe I wouldn’t attend the second meeting. Then the tenth minute passed.

The mediator asked the lawyer where the landlord was. He said she had texted him 10 minutes ago saying she was en route. The lawyer’s office was less than 10 blocks from her apartment. I thought it was a lie, that this was a show and a waste of my time.

The mediator asked if I wanted to give it five more minutes. The lawyer’s politeness and indifference made me angrier. I may have said somewhat aggressively, “Where is she? She lives less than 10 blocks away! Is she coming or what?”

He nodded that she was coming and said it was up to me if I’d like to wait. Completely polite and indifferent. I agreed to five more minutes.

Low and behold, the landlord arrived … with her rental agent who finds her tenants. She wrote my contract.

The landlord had a team of three Peruvians against me, the lone gringo. But her entourage couldn’t talk according to the law.

The fact that the lawyer and agent couldn’t speak seemed like news to the landlord, an older woman who is not exactly an intellectual powerhouse. I didn’t expect her to be sharp in the negotiation. But she had moral support anyway.

She opened her book of documents and I got spooked. There was a thick wad of receipts. They must be legal if the lawyer’s here. My friend had warned that some people will forge legal receipts in case of legal action. Maybe that’s what they did. Maybe they’ll have forged enough receipts to reach 2,500 soles, maybe more. Maybe I won’t get anything back. Maybe they’ll ask me for more money for repairs.

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Then I got even more spooked when they opened the negotiation up with the SUNAT receipts. Apparently the landlord had declared all her rental income to the tax authority and gave me my receipts.

The first thing I looked for was the date. All 12 receipts had the same date, just a few days after the carta notarial was sent. My letter said I would go to SUNAT if she didn’t give me the receipts and return the deposit within a week, but it was a bluff. I couldn’t care less if she paid taxes. I just wanted to hold it over her head. So when she ignored the carta notarial, I decided to keep the threat for the conciliation.

But apparently she was worried enough that she beat me to SUNAT. She reported and paid and gave me my receipts. So no SUNAT leverage.

She said I should have been patient for the SUNAT receipts because these things take time, she had told me the legal receipts were being processed. My anger got the best of me again and I said in a raised voice, “All on March 24???”

Maybe an uncomfortable douche chill. But it passed.

Then she passed out her pictures. She had taken pictures of damage left done to the apartment, some of which was caused by us and some of which was normal wear and tear and some of which looked like it was from the painters. Either way, no way it added up to $800.

We got into a back and forth. She said there was damage. I said the apartment wasn’t new to begin with. I said there was no way the damage amounted to $1,600, and I was willing to bet a court date on it.

I dropped some of the buzzwords I heard my lawyer friend repeat, either from Peruvian law or the contract. Terms like “uso común” and “antigüedad y vicios de construcción.” I noticed the lawyer’s eyes, still glued to his phone, shot up to make eye contact each time I dropped a buzzword. Not a poker player.

I had been pissed for well over a month by now. I went on about how I’m not Peruvian so maybe I am not an old hand to corruption, to “viveza” (Creole cunning) and zero-sum game business. But that I was willing to bet that Peru is reforming for the better and I’d pay for the privilege to see if a court of law would award me with what’s mine, if it got that far.

I grew more confident. I realized that they had eagerly produced the SUNAT receipts and pictures, but the landlord was almost guarding the receipts like a poker hand. I realized they probably weren’t legal. They just printed them on legal-looking paper and stacked them up to brandish from the other side of the desk. I felt the case was just as I had assumed, albeit without the SUNAT leverage.

The back and forth went on.

My position evolved into acknowledging the paint and some minor damages to the furnishings. The landlord’s position did not evolve. It got to the point where the mediator asked her pointedly if there was any ground she was willing to concede in order to move forward. She was on the verge of saying no when her lawyer signaled a request to speak with her outside the conciliation.

They stepped out, and after a few minutes came back in.

The mediator repeated his question, but this time he also asked how much money she would be willing to return in good faith. She said something absurd like $300.

I refused. Getting angry again, I said that if we go to court then I’m going for all $1,600. The lawyer’s eyes shot up from his phone again to make eye contact.

I said I would have been happy with $800, but now that I’ve spent $200 just to get anything back, I want $1,000.

The $200 expense wasn’t an exaggeration. In addition to the fees for the carta notarial and conciliación, the proper spread I invited for my lawyer friend and our spouses was a very fucking proper spread in addition to Camparis afterward.

We met at $800. The mediator produced a draft of the legal decision he is empowered to give, which was just missing the settlement amount, for the lawyer to look over.

At this point the landlord had some cognitive dissonance and started talking nonsense. She offered $600. Getting angry again, I said if she wanted to keep arguing then I want $1,000 to recover my legal costs.

Then the landlord’s lawyer spoke up. I don’t know if that was allowed at this point or not, but he made eye contact with me and said, “Ochocientos, ¿no?”

And the lawyer had completely redeemed himself in my eyes. It was as if he said to the landlord and her agent, “Quiet, children.”

Yes, I replied.

The lawyer and mediator went back to the fine print and the table went quiet.

As the mediator’s secretary began drafting the final copy for print, the lawyer went back to his phone. I had a newfound respect for the guy. I felt bad for hating him at first. I knew he was just doing his job. But now it was so clear how well he was doing his job.

The landlord never would have relented. He probably took her outside the conciliation to remind her that, if the case goes to court, it was possible that I would get everything back. Imagine how a judge would see this case: the stupid-looking gringo paying the last month’s rent, the Peruvian landlord not giving him back one sol. Clear-cut case of viveza. He would punish her to make a point.

I imagine the lawyer took the landlord outside to remind her of whatever price range they had decided to settle on, and to strike a deal anywhere in that range in order to avoid a trial. It was just another day at the office for him.

The final draft not only included the amount and bank account information for the landlord to deposit the money, but also the exact date. When that day came, I checked the account balance and, sure enough, it had grown by $800.

So I spent $200 to get the $800 I wanted from the security deposit. I equate that to a $200 lesson in Peruvian civility: nobody pays the last month’s rent.

It’s a shame however. As I said, most landlords returned my deposit fairly. But you get one bad apple and you don’t pay the last month’s rent to anybody.

One of my Lima friends is from Uruguay. He gets pissed when we talk about Peruvian business practices. He said he would have asked for all of it and taken her to court. Before everything played out, he said he would have reported her to SUNAT after she paid out the settlement. Just to teach her a lesson. The Uruguayan gets pissed at some Peruvian traditions.

This was my first legal action in Latin America. I lost my virginity. Do you have any adventures renting in Latin America? Share in the comments!

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3 Responses to “Nobody Pays the Last Month’s Rent”

  1. Chris

    06. Jun, 2016

    Hey Colin this is Chris from Lima.

    When I left Lima, I was worried I wouldn’t get my security deposit back, because they knew I was leaving the city. But fortunately I did get it back- a couple hours before I had to leave for the airport.

    I hope it’s going well at your new place.

  2. Steve

    11. Jun, 2016

    The same sh!t happens in the USA. I rented an office from a POS rich boy and when the lease was over he never gave me back my deposit; he never claimed any damage, just ignored my requests. I took him to small claims and won by default, but he never paid and I didn’t know how to collect effectively so I just dropped it. I think it was only about $200 (it was a small office), but at that time $200 mattered to me. Fortunately now it does not.

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