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Lease agreement: all about rent

Rent is one of the most important parts of the rental agreement. We will therefore focus on it in this article, primarily from the landlord’s point of view. Before signing a rental agreement, it is necessary to carefully consider how to negotiate the rent, at what amount, and whether and how to increase it in the future. If you have already concluded the agreement but the tenant refuses to pay, we can advise you on how to proceed.

Noví nájemníci uzavírají s majitelkou bytu smlouvu o nájmu
9 minutes of reading

Chapters of the article

Negotiating rent in the contract: yes or no?

Contrary to some assumptions, rent is not a legally mandatory part of a rental agreement. Nevertheless, we consider it to be a key part of the contract and recommend that you include it in the agreement. This will save you a lot of complications and confusion in the future. If the rent amount if not specified in the agreement, the landlord can claim a rent amount usual for a similar apartment or house in that location. However, this must be proven.

How to determine the optimal rent?

Finding the ideal rent amount is not easy. If you do not use the services of a real estate agent, various real estate websites can be a good guide. However, it is important to compare the same types of apartments. Therefore, find apartments of similar layout, size and condition (it depends on whether the apartment has been renovated, how it is heated, the condition of the windows, etc.). Of course, the location, the floor of the building in which the apartment is located, whether there is an elevator, basement or balconies in the building also influence the price. It is also important whether the apartment rented is furnished or not.

Finding several apartments with similar parameters will help determine the price range. It is a legitimate aim of landlords to make as much money as possible from the rent. However, it is true that if you set the price above the normal range in the area, it will take much longer to find a tenant. Unless the apartment has something quite special that other apartments in the area don’t have, it is possible that the tenant will be tempted by cheaper competition and will soon move out, or not move in at all.

Each month that the apartment is empty then not only brings in no money, but is additionally associated with utility and energy costs that the owner has to pay. Therefore, it pays to find the right price level for the rent.

What is included in the rent?

The rent itself is characterized as a payment to the owner for the use of his/her flat (or e.g. non-residential space). However, the landlord and the tenant can agree that the rent will also include payments for services related to the use of the apartment, or charge these services as a lump sum in addition to the rent. This includes, for example, utilities, energy, or water charges. All of these payments can also be listed in a “record sheet”, which can be an attachment to the tenancy agreement, for ease of reference.

In the case of long-term leases, it is usually worth transferring the utilities to the tenant. This gives the tenant the freedom to choose the service providers and a better overview of their expenses. A bit of administration at the beginning can save both parties the hassle of settling overpayments or underpayments.

An often-discussed payment is the payment to the so-called repair fund. According to many legal interpretations, this is a payment that does not directly benefit the tenant and should not be charged. But if it is billed covertly, i.e. as part of the total rent, unfortunately the tenant has little recourse.

In addition to the rent, a sum of money can also be agreed in the contract, which the tenant pays to the landlord before the tenancy begins and which can be used in the future, for example, to pay rent arrears or to compensate for damage caused by the tenant.

Help with the tenancy agreement

Drawing up a good tenancy agreement will save you most of the hassle, whether as a landlord or a tenant.  We will draw up or check the lease agreement, or advise you on drawing up an amendment or terminating the lease. We will handle everything quickly and flawlessly.

Can regular rent payments be guaranteed?

A hit in recent years has been the services of companies that rent the apartment from the owner and then rent it out for a commission. This way they guarantee the owner to pay the rent for the entire agreed period, saving the hassle of finding a tenant and administration. For the owner, this can be a very convenient service that saves him a lot of time and trouble.

However, when approaching such a company, we recommend that you compare the market offer thoroughly and check reviews. According to some customers, not all companies in this area act in a completely fair way and sometimes treat tenants in a way that is contrary to what they have agreed with the landlord. It is essential to know the contract you are entering into beforehand and to be aware of its contents.

Starší manželský pár je znepokojen ze zvýšení nájemného
Rent increases don't have to catch you by surprise

Raising the rent

Rent increases can be approached in several ways. A popular one is to enter into a fixed-term contract repeatedly (e.g. for one year), where the landlord presents a new contract with an increased rent each time the term expires. It is then up to the tenant whether they accept the new price and want to stay in the apartment. In such a case, the landlord is not limited by law in the possible price increase.

However, we recommend entering into fixed-term contracts if the intention of the lease is really short-term. If the landlord intends to rent out the apartment for a long term, but takes the tactic of entering into shorter-term, fixed-term contracts, such tactics may backfire precisely because the tenants leave after a short period of time and the landlord is busy continuously looking for new tenants. 

Rent indexation to inflation

Another option for increasing the rent is to negotiate an inflation clause. This allows for an automatic increase in rent depending on inflation, usually on January 1st or on the anniversary of the lease agreement. However, it is not possible to increase rent more frequently than once a year using an inflation clause.

The clause itself should refer to a specific inflation index (such as the Consumer Price Index). Of course, the rent does not have to be increased by the full value of inflation, but an increase can be negotiated, for example, only if inflation rises by more than 2%, with the rent only being increased by the increase in inflation above this threshold. At the same time, it is usually agreed that a negative increase in inflation will not affect the rent.

Agree on a higher price

The two parties can also agree on a rent increase together and write an addendum to the lease agreement, for example.

The landlord can also decide to increase the rent himself. As a rule, he or she will then communicate his or her intention in the form of a proposal for an increase, which he or she sends to the tenant. According to the rules laid down in the Civil Code, an increase can be proposed no earlier than one year after the last increase. At the same time, there is a rule that the rent may be increased by a maximum of 20% over three years. If your rent is CZK 15,000, it can be increased by a maximum of CZK 3,000 within three years.

At the same time, there is a condition that the resulting rent does not exceed the aforementioned normal rent in the area. The locally customary rent can be ascertained, for example, by consulting real estate agencies operating in the area or by means of an expert’s report. For your own orientation, the web calculator will also help you.

However, the tenant does not have to agree to the proposed increase. They can consider the proposal for two months and if they do not agree, the landlord can apply to the court within three months to have the increase approved. The court may determine in the proceedings that the rent will be lower (or higher) than the landlord’s proposal. In case of disagreement, the tenant may exercise the right to terminate the contract by giving the appropriate length of notice.

Can the state regulate rents?

After the revolution, the state also imposed certain restrictions on rent increases in the form of rent regulation. Regulation was in place in the Czech Republic until 2011. Some politicians are still considering the possibility of regulation as an exceptional and temporary step to prevent a sharp increase in rent prices, but no such measure has yet taken concrete form. More recently, rent regulation has also failed in Berlin.

What is the risk of non-payment of rent?

Non-payment of rent can lead to termination of tenancy. The landlord has the right to terminate the lease either with a traditional notice period, but if the rent and utility costs have not been paid for at least three months, the lease can be terminated without notice and the tenant can be required to hand back the apartment without undue delay. In addition, non-payers of rent may also have to worry about interest on late payments and court costs if legal proceedings are brought.

However, it is ideal not to let the situation go that far and to contact the tenant at the first delay in paying the rent with a notice of non-payment and a demand for payment of the rent due, warning of the possible consequences later (i.e. payment of interest or later termination of the lease). Some situations may be quite trivial, such as a misplaced or omitted standing order, and simply giving a warning will help resolve them quickly.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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