One of the main fears when leasing real estate, especially when this is done without the intermediary of a real estate agency, is the risk of falling into the hands of a defaulting lessee, which can become an affectation to the lessor’s finances, especially when it comes to obligations such as administration fees and other similar amounts that in the end become expenses for the owner of the property.

One of the solutions for this is to base the legal relationship on a contract sufficiently complete to foresee this type of events. Usually, this would be found in accelerating clauses that allow the termination of the lease contract unilaterally and immediately, as well as the mention that the same lease contract can be claimed judicially in a simple way, so that, in the eventual case in which the owner of the property wishes to present his claims before a judge, he can present such case as a simple judicial process for the collection, which in essence, has greater agility than to be facing a declaratory process, which in many occasions tends to be more delayed.

Let us remember that one of the guarantees provided by the Colombian law in favor of lessees in this type of scenarios in which the respective executive lawsuit is filed for the restitution of a real estate property, lies in Article No. 384 of the General Code of Procedure, which, in its second paragraph of numeral 4º states the following:

“Whatever the cause invoked, the defendant must also timely deposit in the court’s judicial deposit account, the fees that are caused during the process in both instances, and if he does not do so, he will not be heard until he presents the respective deposit title, the receipt of the payment made directly to the lessor, or the receipt of the deposit made  in the executive process.

It is then much more effective for the lessee to be able to file a simple legal resolution before a competent court to enforce the respective acceleration clauses that the contract may have.

However, if it happens that the contract that a lessee has with its respective lessor does not have any clauses of this nature and it has even been omitted to indicate that the same contractual document could also provide simple legal intermediation, in the first instance, it is a great inconvenience to the owner, since it would be much more costly to prove the respective claims before a judge in a declaratory proceeding, which, as emphasized above, can be slower before reaching a judgement by the competent judge.

Therefore, another solution enabled by law is the use of alternative dispute resolution mechanisms (also known as ADRM), which, among their provisions, include conciliation, which can  take place both judicially and extra-judicially. This will allow the presentation of the case before a  conciliator who, if a solution is reached between both parties, may issue a conciliation act that within the legal provisions, will be taken as a judicial decision, so it will be taken as res judicata (so it will not be possible to present the same case again before another conciliator or before a judge) and will provide a simple process of legal resolution (executive merit) (which may be required before a judge in an executive process).

It is then that this mechanism can be a great resource to reach a point of agreement with the defaulting lessor, to establish new parameters, such as new times for the payment of lease fee, adjustments, commitments, inclusion of compromissory clauses, etc. As long as they do not oppose the law and are not disproportionate against any of the parties. However, it is important to remember that, although an agreement may be reached, it may not find that middle ground, and the conciliator may issue a conciliation report stating that an agreement was not reached, thus, indicating that the conciliation failed. Therefore, if greater caution is required for this procedure, a lawyer is recommended, who, although he cannot participate in the conciliation,    since those who have to reach that middle ground are the parties, can assist by offering the best solutions to reach that conciliation.

Once the conciliation is successful, it can be placed as a simple legal resolution, so that, in case the lessee breaches again, it can be executed, in order to enforce the content of such act. For this purpose, it is advisable to agree on acceleration clauses in the conciliation that include the immediate return of the property to its owner. In the event that the lessee fails to comply with  the conciliation agreement, the same may be executed in order to enforce it.

It is important, by way of conclusion, to mention that the law provides that, in the event of default by the lessee, the lessor with a fulfilled part of the conciliation agreement may file before the conciliation center, the request to advance before the competent judge the process of immediate restitution of the property to the lessor, this appealing to Article 69 of Law 446 of 1996, which  cites:

“The Conciliation Centers may request the judicial authority to commission the Police Inspectors to carry out the diligence of delivery of a leased property, when there is non-compliance of a conciliation act with a record in this regard. “

However, it should be noted that this rule is only applicable to conciliation centers. This emphasis is important, since it is plausible that whoever attends before the conciliation to reach this type of agreements, comes to appear before the conciliators of equity who, even when they have all the attributions to carry out a conciliation hearing, this norm is not applicable to them, making the lessor to resort to present the respective executive lawsuit before the competent judge, losing the possibility of enjoying greater agility at the time of recovering his property. Therefore, it is more advisable to reach these conciliatory agreements with conciliation centers.

Remember, Gestiones Empresariales López & James through its Advisory and Consulting Services in Legal matters, especially in Civil Law, can solve all your concerns in this regard. Likewise, we can provide specialized advice in the areas of Corporate Law, Labor Law, Immigration Law, Tax Law, Intellectual Property Law and Family Law. We have professionals around the world, mainly in Latin America and Asia, but also in countries such as England and the United States, which allows us to support you in any location through all the services we can offer to you or your company.

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About the author:

Samuel Fuentes, is a lawyer from Universidad Jorge Tadeo Lozano and is part of the legal team of Gestiones Empresariales López & James Colombia and specializes in the areas of Criminal Law, Human Rights and labor settlements.