How does the bail bond for property lease work?
The letter of guarantee is a guarantee contract in which the bank (banking institution) becomes a guarantor in a particular contract. It is provided for in the Law on Tax Enforcement, which can guarantee the payment of tax debts, can be used to guarantee judicial foreclosures, such as in the execution of a conviction in civil liability and may be contracted for other contracts in which a modality of Warranty.
Bail is the contract whereby a person guarantees the creditor the payment of the debt (ie, the performance of the contract) if the debtor defaults. It has legal provision in arts. 818 et seq. Of the Civil Code. The letter of guarantee is the document that, in the form of art. 819 of the Civil Code, proves the guarantee.
The surety bond is an insurance contract, whereby, through a premium paid, the insurer assumes responsibility for the payment of a debt (common in real estate leases) in the event of the occurrence of the anticipated loss in the contract (usually default, loss of employment relationship and other such circumstances).
Although they have different names and fundamentals, the operation is very similar, and they are often called by the same name of letter of guarantee. In both cases the lessee who does not have a guarantor to present can lease the property with a bank guarantee for his contract, whose name will depend on the contracted institution.
Regarding the validity, provided that the legal requirements of the contracts (capable agent, licit object, prescribed form or not defense in law) are met, both are valid.
As for the duration of the contract, it depends on what is admitted by the financial institution, which usually works for such contracts, with pre-established rules characterizing the contract of adhesion. The intended bank must be consulted in order to verify the validity of the contract, and the possibility of coinciding with the term of validity of the lease.
The payment, in case of default, is made directly by the bank, which is subrogated to the rights of the lessor and charges the lessee the amount disbursed to pay the debt to the lessor.
The liquidity is total for the lender who receives the payment.