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Real estate rental issues
14/12 2022 Karel Mráz Copy URLShare

Real estate rental issues

Your inquiries and requests for rental properties are multiplying.

We have helped you rent hundreds of apartments and houses and we also manage several of them on a long-term basis as part of our MAHOON care service. Clients who have entrusted their properties to our care do not want to return to managing them again. Rent increases, annual service bills, dealing with non-payers and regular home inspections are things of the past for them. For those who like to deal with everything themselves, we send you some basic advice and a summary of the rental market.

Rental housing is on the rise in the Czech Republic for several reasons. Several reasons are involved in the increased interest in rental housing, the most recent ones being the high cost of owning a home, high interest rates, the influx of refugees from war-affected areas and the general uncertainty in the property market. An upward trend is expected in the long term. In Western countries, rental housing is the absolute standard and around 40% of the population lives in it. Berlin, for example, is an extreme example, where almost 80% of the population lives in rental housing. In the Czech Republic, the figures are reversed, with almost 80% of the population living in their own property and only 20% in rented accommodation.

What to look out for when negotiating a rental property contract? We will try to summarise the most important things for you here. After all, both the landlord and the tenant want their relationship to be healthy in the long term and without unnecessary disputes.

Whether you own a property and want to rent it out, or are currently looking for rental accommodation, at the very least, stick to these principles for a long-term and trouble-free operation:

1. The lease is the foundation
To avoid potential disputes and to make sure that you have a proper relationship with each other, it is important to have a properly drafted tenancy agreement. A clear recommendation for the landlord/tenant is to have a professional (ideally a lawyer or real estate agency) draw up the agreement. A proper lease agreement should include:

- A clear specification of the parties and the property being leased. A basic list of fixtures and fittings should not be missing.
- The amount of rent and its due date.
- The amount of the security deposit.
- The amount of the deposit and the payment of utility bills.
- The duration of the lease and the conditions for extending the lease.

2. Focus on the quality of the information in the handover report
In the case where a lease agreement is reached, a perfectly drafted handover protocol should not be missing. This is a document that captures in writing the condition of the property at the time it is handed over to the tenant. It should be signed by both parties and serve as protection against later disputes over the refundable security deposit. At a minimum, the handover report should carry the following information:

- Identification details of both parties.
- Identification of the property (exact address, area and ideally also a list of rooms).
- A list of furniture and furnishings, indicating the condition of the furnishings and individual rooms.
- A list of any defects.

In the context of setting up the landlord vs. tenant relationship, the following points are often addressed, around which many ambiguities arise. Let's briefly clarify them.

What about the refundable security deposit

The maximum a landlord can ask for as a refundable security deposit is three times the monthly rent. If it is the maximum amount that is set, no penalty can be negotiated. If there is no damage to the property or no claims, the landlord is obliged to return the security deposit to the tenant. The tenant is entitled to interest on the security deposit for the entire period from payment to return. It is advisable to negotiate the interest rules in the contract, as the statutory rate is awkwardly defined and very difficult to work from.

Declaration of permanent residence in the lease.

If the tenant wishes to establish a permanent residence in the property, the landlord cannot prevent him from doing so. The landlord can cancel the permanent residence, but only in the following cases: the lease has expired, the permanent residence has been set up fraudulently, the property has been removed, or it can no longer be occupied for technical reasons.

Increasing the rent

There are no restrictions on fixed-term contracts and it is up to the landlord at the end of the contract to decide what amount to propose for the new period. Under an open-ended lease, increases are usually agreed in the contract or by way of an amendment. The amount by which the landlord intends to increase the rent should not exceed 20% of the current rent. Any increase that has occurred in the last 3 years also counts towards the 20%. Further increases are only possible after 12 months. The resulting amount must not exceed the normal rent, which is the average rent for a similar apartment in the area.

What about rent controls?

A landlord has the right to inspect their property. However, they must not abuse this right and carry out excessive inspections of the flat. Here, however, there is no specification of what number of inspections is adequate and what is already unnecessary and a nuisance for the tenant.

Landlord's regulations (pets, smoking, visitors...)

Basically, nothing can be prohibited to the tenant. This would be a restriction of rights and the tenant would not be obliged to respect this, even if everything is stated within the lease.

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Termination of the lease agreement by the landlord

It is important whether the contract is for a fixed term or an indefinite term.
If the termination is for a fixed term, the following rule applies. The termination must only be for lawful reasons, for example, where the tenant has grossly breached the obligations of the tenancy, has been convicted of a criminal offence committed against the landlord, a member of the household or a third party's property located in the property.

In the case of open-ended contracts, the above applies and the landlord may terminate the contract if he needs the property for his relative or if he or his spouse wants to use the apartment. In the latter case, it must apply that he/she is leaving the shared household and a divorce petition has been filed.
In both cases, a three-month notice period applies.

Termination of the tenancy by the tenant

It applies here that an open-ended contract can be terminated by the tenant at any time without any problems, provided that the notice period is observed. In the case of termination of a fixed-term contract, there should be a compelling reason, for example, the tenant has obtained a new job in a completely different location, has married and is setting up living together, or has acquired their own apartment. It could also be because the tenant is in a difficult social situation, e.g. has lost their job or has health problems.

Routine maintenance and repairs in a rented flat

The terms "routine maintenance of the apartment" and "minor repairs" are defined in Government Regulation No 308/2015 Coll. The text defines both terms very well and gives an idea of what the tenant's obligations are. The landlord should pay for major repairs and maintain the apartment in a rentable condition.

The MAHOON team will be happy to take care of your property and look after all the pitfalls associated with renting your property. With over 12 years of experience in hundreds of rental properties, we are your strong partner. Thanks to your trust and requirements, we bring you comprehensive management of your property in MAHOON CARES. Leave all the problems to us.

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