Watch out for loopholes in the lease termination agreement

Chapters of the article

• From law practice: Omission of the All Claims Settlement Clause
• What to look out for when entering into an agreement to terminate an apartment lease?
• Don’t forget the handover report
• What if you don’t enter into any agreement?

From law practice: Omission of a clause to settle all claims

We were contacted by Ms. Saša with a problem concerning a seemingly small omission, which could have had far-reaching consequences. She had entered into a lease termination agreement and thought she could forget about the small old flat she had left and enjoy her new flat with its large terrace and herb beds.

However,when the agreement was concluded, she forgot to insist on a clause concerning possible further claims by the landlord, stating that all claims were settled. She almost got even when the crafty landlord suddenly demanded payment of the last rent twice. We stood up for Mrs Sasha and, thanks to circumstantial evidence, he was convicted of lying and withdrew his claim completely.

What to look out for when concluding an agreement to terminate a lease for an apartment?

1. Put the agreement in writing: First of all, the law requires this, as the apartment lease must be in writing. Secondly, a written agreement helps to avoid misunderstandings and provides a clear legal document in case of disputes. A written form ensures that all conditions, rights and obligations are explicitly set out and that both parties have a clear understanding of their obligations.

• Correctly identify the parties to the document: each contract should clearly identify the two parties involved in the agreement – usually as the “landlord” (or owner of the apartment) and the “tenant” (the person renting the apartment). It is important to include full names, addresses and other contact information where appropriate, so that it is clear who the legal parties to the agreement are.
• Correctly identify the apartment to which the agreement relates: The agreement should specify exactly the property being rented, including the address and description of the apartment (e.g., apartment number, location in the building, size, number of rooms, etc.). This will avoid any misunderstandings about the object of the lease.
• Include all the rights of both parties in the written agreement: the agreement should include all the rights and obligations of the owner and the tenant. This includes, but is not limited to, rules for use of the apartment, maintenance, repairs, rules for pets, options for terminating the lease, and other specific terms necessary for the particular situation. In doing so, delineate both rights that are ongoing and rights that have been settled by agreement.

• Settlement of finances: A very important part of the contract is the payment provisions, including the amount of rent, the terms of payment, the method of payment (e.g. bank transfer, cash), and the conditions for returning the security deposit. The security deposit serves as security for any damage caused to the rented apartment or in case the tenant fails to meet his/her obligations, such as paying the rent. The contract should clearly state under what conditions and within what timeframe the security deposit will be returned.

Don’t forget the handover report

At the end of the tenancy, the tenant must hand the flat back to the landlord. If this is not done on the day the tenancy ends, the landlord can claim compensation from the tenant equal to the agreed rent until the apartment is actually returned.

Although the law does not require a handover report to be drawn up for the return of the apartment, it is highly advisable to do so. This document should include a description of the condition of the apartment when it is handed over, information on the condition of the meters for electricity, water and gas, if present, and a list of the equipment of the apartment to be handed over, including a description of its condition.

Without limitation, both parties may also use photographic documentation to record in detail the condition of the apartment at the time of handover. As a landlord, you should remember to provide the tenant with a bill for services related to the tenancy and ensure that any rent deposit is returned.

The handover report was saved in this way for my client, Mrs Eva. She terminated the lease and handed over the flat in a satisfactory condition. Of course, she expected that this was all settled and she would get her deposit back from the landlord. One day, however, she received a registered letter from the former landlord who accused her of damaging the flat and informed her that he would not return her deposit because he had used it to cover the damage.

Fortunately, Ms Eva had a handover report, which had been signed by the landlord’s mother when she took over the flat, and which clearly showed that the flat had been handed over in a decent condition, apart from a few minor damages. This document saved her, and the landlord eventually returned the entire deposit to Mrs Eva.

What if you don’t make a deal?

If the tenant leaves the flat in such a way that the tenancy can be considered to have ended without any doubt, which in practice means that he or she moves out without prior agreement with the landlord, the flat is deemed to have been surrendered immediately. The Explanatory Memorandum does not elaborate on this provision and its application in practice will therefore depend on how the courts treat it. However, it is such a de facto termination.

Finally, we would like to remind landlords of an important caveat. In a situation where no agreement can be reached and the tenant refuses to leave the flat after a formal notice, it is unwise to opt for breaking down the door and forcibly evicting his property and the tenant himself. The correct course of action is to commence legal proceedings with a view to obtaining an eviction order. If the landlord were to act on his own, the former tenant could bring a criminal charge of trespass against him.

Are you dealing with problems relating to the tenancy agreement or its termination? We can help protect your rights too.