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From law practice: The Civil Code and penalties in an open-ended contract
Years ago, Mr. František concluded a lease agreement for his apartment, which he inherited in Prague. The contract was embellished with many obligations of the tenant – from the prohibition of smoking, to the exclusion of pets, to the prohibition of even temporary accommodation of anyone else – and he had a contractual penalty for each tenant’s misconduct. He therefore felt safe, even though he had entered into a contract for an indefinite period. After all, he had also negotiated the option to cancel the contract if the terms were breached, so what should he fear?
However, a few years ago a change in the lease regulation came and the apartment lease contract was suddenly stapled by the so-called new Civil Code. This applies retrospectively to contracts that have already been concluded.
When Mr. František presented us with his yellowed contract, we unfortunately had to inform him that he pays almost none of its penalties, he cannot withdraw and the tenant is not bound by the obligations under the contract. Moreover, there is no easy way to get a possibly unreliable tenant out of the apartment. The basic mistake in this case was that the contract with the tenant was concluded for an indefinite period of time.
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Prohibition of contractual penalties and other arrangements
An agreement establishing the right to claim a contractual penalty for facts not prohibited by law shall be disregarded. It is therefore null and void. In practice, this means that even if a contractual penalty is included in the contract, the arrangement is without legal relevance and the court will take this fact into account ex officio and will not award the penalty.
This does not mean that penalties are prohibited across the board. From 2020, fines are again allowed, but only on facts that can be prohibited. Therefore, since you cannot prohibit a tenant from, for example, declaring their permanent residence, you cannot fine them in this case. On the other hand, you have the right to require the tenant to return the apartment to you in its original condition, and therefore you can fine the tenant for failing to do so.
Tip: Renting an apartment is not easy. You need to handle all the details of the lease and protect your rights and your property. No landlord probably wants to recover a damaged apartment after a few months or years or deal with unpaid rent payments forever. So what to look out for and how to rent an apartment as safely as possible? Find out in our next article on how to rent an apartment safely from a landlord’s perspective.
What the landlord must not prohibit
There are a number of things and activities that a landlord may not prohibit. Let’s look at the main ones:
A landlord can prohibit traditional subletting, or make it subject to their permission. However, when it cannot prohibit it is when the tenant sublets only part of the apartment (e.g. one bedroom) and continues to live in the apartment himself. The exception to this is where the tenancy agreement clearly states that the landlord’s consent is required. The prohibition is also not possible if the tenancy is sublet to close persons. A person is a close relative if he or she is the tenant’s direct first-degree relative, spouse or registered partner. They may also be married or cohabiting.
In this case, it is therefore a good idea to include the conditions for subletting to another person in the tenancy agreement. For example, the need for your consent (in case you have the right to refuse the sublet) and other conditions, such as an increase in rent due to increased wear and tear, etc.
Unlike subletting, you cannot prohibit visits to a tenant. Therefore, if you have this prohibition in your tenancy agreement, it is considered invalid. Similarly, the tenant does not have to give you advance notice of visits, etc. It’s simply none of your business who they bring into the apartment.
However, there may be situations where a person’s visits are so frequent that they are more likely to be another occupant of the flat. A typical example of this might be when a new relationship starts and the girlfriend initially only spends some weekends with her boyfriend (and your tenant). However, as their relationship develops, the amount of time the girlfriend spends with her boyfriend increases. In this case, the two months of stay become decisive – then the visit is already considered as an additional member of the household and you may have the right to approve (or not) the cohabitation.
The prohibition of doing business in the apartment or house under penalty of a contractual fine is also excluded. However, it is possible to prohibit a business if the tenant does not have a registered place of residence in the flat. He will also need consent if he plans to set up a business in the flat. In this case, it does not matter whether or not the tenant has a registered permanent residence in the flat.
Keeping a pet in a dwelling cannot be prohibited, provided that the keeping of the pet does not cause a hardship to the landlord or other occupants of the dwelling that is unreasonable in relation to the conditions of the house or dwelling. It will therefore probably not be possible to ban a dog in most cases, but it will be possible to ban a dangerous exotic animal. What you can do, however, is to make the keeping of the animal conditional. For example, you can require the tenant to pay a higher rent.
You can’t ban smoking in the apartment either. The exceptions are situations where the smoke coming from the flat would unreasonably disturb, for example, neighbours who live on the floor above the tenant. They can then ask the tenant to refrain from smoking on the balcony, for example.
However, it is a well-known fact that the smell from cigarettes gets everywhere – into plaster, carpets and even walls. Fortunately, the law protects you in this case. The tenant is obliged to put the flat back in its original condition at the end of the tenancy, which includes removing any lingering smell. It’s worth putting this obligation in your contract so that your tenant is aware of it. And for all you know, they might change their mind about smoking in the flat.
Generally speaking, it is not acceptable to impose an obligation that is manifestly disproportionate in the circumstances.
How to protect yourself?
Just because you cannot ban many things does not mean that you have no way of protecting yourself. In addition to a well-drafted tenancy agreement, a good guide is a handover protocol. This should include all the furnishings in the flat and a description of the condition in which the flat is being handed over. The best way to document everything is also by means of photographs or video. This way, at the end of the tenancy, you will have evidence in hand in case the tenant returns the apartment in a condition that does not match the condition before handover.
As we mentioned above, you can also include penalties in the contract. However, their nature and amount is limited. In the first place, the sum of all fines and the refundable deposit cannot exceed three times the monthly rent. Furthermore, you cannot fine things that the law does not allow (e.g. the facts we mentioned above). However, what you can fine is things like damage to the apartment or furnishings or failure to return the apartment to its original condition.
Tip: Having problems with your tenant? We will conduct a careful analysis of the case and take care of the preparation of a pre-suit notice, lawsuit, appeal or straight to court representation where we will assert your rights.
Last but not least, we do not recommend you to conclude a lease agreement for an indefinite period of time. It is very difficult to get rid of an unsuitable tenant in this case.
We will be happy to prepare a bulletproof contract for you with an underlining or, on the contrary, a limitation of the tenant’s rights. We are also happy to advise you on your existing contract.