Want a watertight apartment lease agreement? We know how to do it

Quick Overview

• In the lease agreement, clearly describe the apartment, the lease term, the rent, and utility payments.
• The security deposit and any contractual penalties combined may not exceed three times the monthly rent excluding utilities.
• The lease agreement cannot deprive the tenant of the rights protected by the Civil Code.
• Document the condition of the apartment, its furnishings, and utility meters in a handover report and photographs.
• When returning the apartment, you must take normal wear and tear into account.

Not sure if the agreed-upon terms actually protect you? We’ll draft or review your lease agreement and point out any invalid prohibitions or missing provisions.

From Legal Practice: The Civil Code and Penalties in an Indefinite-Term Lease Agreement

Years ago, Mr. František entered into a lease agreement for his apartment, which he had inherited in Prague. The contract was laden with numerous obligations for the tenant —ranging from a smoking ban and a prohibition on pets to a ban on even temporary lodging for anyone else—and it included a contractual penalty for every breach by the tenant. He therefore felt secure, even though he had entered into the lease for an indefinite term. After all, he had even included a provision allowing him to terminate the lease in the event of a breach of the terms—so what was there to worry about?

A few years ago, however, changes were made to rental regulations, and apartment lease agreements are now suddenly bound by the Civil Code. This code applies retroactively even to contracts that have already been signed.

When Mr. František presented us with his yellowed lease, we unfortunately had to inform him that almost none of his penalties were enforceable, he could not terminate the lease, and the tenant was not bound by the obligations under the lease. Furthermore, it’s not easy to evict a potentially unreliable tenant from the apartment. The fundamental mistake in this case was that the lease agreement with the tenant was entered into for an indefinite term.

Contractual Penalties: What Can Be Agreed Upon and What Are the Limits

Contractual penalties may be agreed upon for apartment leases effective July 1, 2020. However, they must pertain to a specific, validly agreed-upon obligation, and their terms must not unduly restrict the tenant’s rights. Therefore, a penalty cannot be used, for example, to enforce a ban on ordinary visits.

According to the Civil Code, the security deposit and the right to collect contractual penalties may not, in total, exceed three times the monthly rent. Advance payments for utilities are not included in this limit. For a rent of 20,000 CZK and a security deposit of 40,000 CZK, the maximum amount available for contractual penalties is 20,000 CZK.

Specify in the lease agreement which breaches of obligation trigger a penalty, how it is calculated, and what the total cap is.

What a Landlord Cannot Prohibit

There are a number of things and activities that a landlord does not have the right to prohibit. Let’s take a look at the main ones:

Subletting

If the tenant lives in the apartment permanently, they may generally sublet part of it without the landlord’s consent. However, the landlord may stipulate in the lease agreement that even such subletting requires written consent; statutory exceptions apply in cases involving close relatives and circumstances worthy of special consideration.

If the tenant does not permanently reside in the apartment alone, they need the landlord’s written consent to sublet the apartment or part of it. Therefore, set the terms according to the actual use of the apartment and distinguish between subletting and accepting a household member.

In this case, it is therefore a good idea to include provisions in the lease agreement regarding subletting to another person. For example, the requirement for your consent (in cases where you have the right to refuse the sublease) and other conditions, such as an increase in rent due to greater wear and tear on the apartment, etc.

Visitors

Unlike with a sublease, you cannot prohibit the tenant from having visitors. Therefore, if your lease agreement includes such a prohibition, it is considered invalid. Likewise, the tenant is not required to give you advance notice of visitors, etc. Simply put, it’s none of your business who they bring into the apartment.

A visitor does not automatically become a member of the household after two months. What matters is the actual nature of their cohabitation. If the tenant accepts a new household member, they must notify the landlord of the increase in the number of occupants without undue delay. If they fail to report the change within two months of it occurring, the law considers this a serious breach of duty.

The landlord may reserve the right in the lease agreement to approve the admission of a new household member. However, this reservation does not apply to close relatives or to cases deserving special consideration.

Business Activities

A prohibition on conducting business in an apartment or house under threat of a contractual penalty is also excluded. However, it is possible to prohibit business activities if the tenant does not have a registered permanent residence at the apartment. The tenant will also need consent if they plan to establish a business premises in the apartment. In this case, it does not matter whether or not the tenant has their permanent residence registered at that address.

Pets

The tenant has the right to keep a pet in the apartment, provided that doing so does not cause the landlord or other residents of the building any inconvenience that is unreasonable given local conditions. The specific circumstances—such as noise, odor, or safety—are decisive.

This right may not be subject to a special fee or a unilateral rent increase. However, if the pet causes damage or results in increased maintenance costs for the common areas of the building, the landlord may demand compensation for such costs.

Smoking

You also cannot prohibit smoking inside the apartment. Exceptions apply in situations where smoke coming from the apartment would unreasonably disturb, for example, neighbors living on the floor above the tenant. In such cases, they may request that the tenant refrain from smoking on the balcony, for instance.

However, it is a well-known fact that cigarette odor permeates everything—plaster, carpets, and even walls. Fortunately, the law protects you in this case. When the lease ends, the tenant is obligated to restore the apartment to its original condition, which includes removing any lingering odors. It’s a good idea to include this obligation in the lease agreement so that your tenant is aware of this requirement. And who knows—maybe they’ll eventually decide against smoking in the apartment.

In general, it can be said that it is not permissible to impose an obligation that is clearly disproportionate given the circumstances.

How to Draft a Lease Agreement That Truly Protects You

In addition to prohibitions, make sure the lease terms are clear and enforceable. Before signing, review these six areas:

• Contracting Parties and the Apartment: Include the identifying information of the landlord and tenant, and precisely describe the apartment and any included amenities.
• Lease Term: Specify the start date of the lease and determine whether it is for a fixed or indefinite term.
• Rent: Specify the amount, due date, payment method, and any rent increase mechanism.
• Utilities and Services: Distinguish between rent and advance payments, and specify who is responsible for providing each service.
• Security Deposit and Penalties: Define their purpose and amount within the limits set by law.
• Handover and Return: Agree on the procedure for handing over the apartment and include a reference to the handover report in the lease agreement.

When reviewing each obligation, ask yourself two questions: Is it permitted by law, and can you prove a violation? A general prohibition against “inappropriate behavior” is usually less useful than a precisely described obligation and a documented condition of the apartment.

How Can You Protect Yourself?

Just because you can’t prohibit a number of things doesn’t mean you have no way to protect yourself. In addition to a well-drafted lease agreement, the handover report will be a valuable tool. It should list all the apartment’s furnishings and describe the condition in which the apartment is being handed over. The best solution is to also document everything with photos or videos. That way, when the lease ends, you’ll have evidence in case the tenant returns the apartment in a condition that doesn’t match its condition at the time of handover.

As we mentioned above, you can also include penalties in the lease agreement. However, the nature and amount of these penalties are limited. First and foremost, the total of all penalties and the refundable security deposit must not exceed three times the monthly rent. Furthermore, you cannot impose penalties for matters not permitted by law (such as the circumstances we mentioned above). What you can penalize, however, includes damage to the apartment or its furnishings, or failure to restore the apartment to its original condition.

Last but not least, we do not recommend signing a lease agreement for an indefinite term. In such cases, it is very difficult to get rid of an unsuitable tenant.

We’d be happy to draft a watertight lease for you that either emphasizes or, conversely, limits the tenant’s rights. We’d also be happy to advise you on your existing lease.

Summary

A secure lease agreement is based on clear and enforceable terms. Specify payments, the lease term, utilities, and the handover of the apartment in detail. For security deposits and contractual penalties, adhere to the combined limit of three times the monthly rent. Prohibitions on visitors, unreasonable restrictions on business activities, or making pet ownership contingent on an additional fee will not protect you. In case of a dispute, keep the handover report, photographs, and written correspondence; when returning the apartment, always distinguish between damage and normal wear and tear.