What to look out for when renting an apartment from the tenant’s point of view

Chapters of the article

• The difference between subletting and renting
• Don’t forget the handover protocol
• What should the lease agreement contain?
• what about declaring your permanent residence in the lease?
• The security deposit for an apartment and its requirements
• What can/cannot the landlord do?
• Termination of the lease by the landlord
• Termination of a fixed-term lease by the tenant?

Difference between subletting and renting

Many people confuse these terms or even consider them synonymous. Nevertheless, there is a difference between subletting and renting – and, especially with regard to the rights of the tenant and the subtenant, it is quite significant.

A lease arises where the landlord is the direct owner of the property who provides the property to the tenant. The contractual relationship is governed by the rules set out in the Civil Code. The individual rules differ depending on whether the lease is for a fixed or indefinite period. This is dealt with in the article below.

A sublease then arises between the tenant and the subtenant. The subject of the sublease can be the whole property or just part of it. The owner of the property does not have to be directly involved in this contractual relationship.

However, the subtenant has very limited rights compared to the tenant. If the lease expires, the sublease automatically expires. Some landlords also take advantage of this and formally rent out their flat to related parties who then enter into a contract with the actual tenant. It is then easy to terminate such a sublease.

Don’t forget the handover report

If a tenancy agreement is reached, a handover protocol should never be missing. This protects both parties against later disputes over the security deposit, which could bring a whole host of unpleasantries. This is a document that shows in writing the condition of the property at the time it is handed over for rent. The handover report must be in writing and signed by both parties.

The handover report must include the identification details of both parties (especially name and residence). At the same time, the property which is the subject of the lease agreement must be identified and its exact address, area or list of rooms must be given. Do not forget to list the furniture and other furnishings and provide information on the condition of each room. A list of any defects that could speak against you in the event of termination of the lease and payment of a refundable security deposit is key.

What should the lease agreement contain?

If there’s one thing you should pay particular attention to when renting a flat, it’s the tenancy agreement. Just like the handover protocol, this should clearly specify the parties and the apartment to be rented, as well as a basic list of accessories. However, it is sufficient to refer to the handover protocol, which will detail all the equipment with a description.

Each lease agreement must then include the amount of the rent and its due date, the arrangement of payments for services and the definition of the lease term.

The Civil Code always primarily prescribes the protection of the weaker party to the contract. This is the tenant in this case. Thus, in principle, the tenant’s rights must not be restricted in the lease agreement. If provisions restricting rights appear in the contract, they are automatically enforceable and the tenant does not have to comply with them. And what are such provisions? For example, it may be a ban on keeping animals or a ban on smoking. However, the tenant is obliged to keep the house tidy and behave in accordance with the usual rules. Thus, he must not damage the apartment in any way, nor harass the other residents of the house.

Interesting fact: In animal husbandry, it’s all about common pets. For example, if you were a keeper of an animal that could be a burden on the running of the house, such as a tiger or a crocodile, you can of course ban it.

Negotiating a contractual penalty for breach of obligations under the lease has long been considered a provision limiting the rights of the tenant. However, this is changing with a major amendment to the Civil Code, which came into force on 1 July 2020. The prohibition on contractual penalties is being abolished altogether. The landlord can include a penalty in the contract, but the penalty must not exceed three times the monthly rent when added to the principal (often referred to as a deposit).

What about declaring a permanent residence in a rental?

If you decide to declare your permanent residence, your landlord cannot prevent you from doing so. You will only need a tenancy agreement, a valid ID card and a completed permanent residence registration form. You just need to bring these documents to the municipal or district office, pay the administrative fee and your permanent residence will be changed.

The landlord can cancel the tenant’s permanent residence, but only if one of the following situations occurs:

• The lease has expired, the tenant no longer uses the apartment or house and has not yet checked out of the permanent residence.
• The permanent residence has been established fraudulently, for example by using forged or invalid documents.
• The property in which the permanent residence was declared has been removed or can no longer be occupied for technical reasons.

In practice, we encounter that landlords do not conclude written lease agreements precisely because of the prevention of permanent residence. However, this is disadvantageous for the tenant.

Apartment security deposit and its requirements

The Civil Code uses the term security deposit, but generally it is more common to see the term security deposit or refundable security deposit. Whatever we choose to call it, it is a financial guarantee to the landlord that the tenant will fulfil his obligations under the lease agreement. It is most often paid with the first rent and can be, for example, twice the monthly rent. All details should be covered in the lease.

The maximum a landlord can ask for is three times the monthly rent. However, if the maximum is agreed, no penalty can be agreed. If necessary, the security deposit can be used to cover damage to the property or to pay outstanding debts (e.g. for utilities). If no damages or debts are incurred, the landlord is obliged to return the security deposit to the tenant without undue delay at the end of the rental period. The return is conditional on the end of the tenancy, not on the apartment being vacated.

Along with the return of the security deposit, the tenant is also entitled to payment of interest on the security deposit for the entire period from its payment until its return. This value should be included in the lease agreement. If it is not stated, the statutory rates are used. However, therein lies the rub, as the statutory rate is awkwardly defined. It is the so-called normal interest rate required for loans granted by banks in the place where the borrower lives or is based at the time the contract is concluded. Although it may not seem so at first sight, finding out the interest rates charged by banks in the area of the landlord’s residence or registered office can be quite a difficult task. First of all, banks offer a fairly wide range of loan products, so simply determining which loan product the landlord should calculate the security interest on can be problematic. In addition, the amount is more dependent on the creditworthiness of the client than on his or her residence. Determining the specific interest rate will also be a problem. We therefore recommend that the rules are negotiated in the contract.

What can or cannot the landlord do?

Once again we encounter myths about what a landlord can do. Let’s break down the basic situations so you have a better understanding of your rights.

Rent increases

With an increase, it depends on whether you have a fixed-term or an open-ended lease. In the former case, you renew the contract every year and draw up a new one. It is then up to the landlord to decide how much rent to propose. In this case, the new rent is not subject to any restrictions.

In the case of open-ended contracts, rent increases can be agreed in advance in the contract or later by means of an amendment. It is not sufficient to state in the proposal that the increase will be increased annually according to the rate of inflation. The contract must state the specific rate of inflation.

In this case, the amount by which the landlord is going to increase the rent should never be more than 20% of the current rent. This 20% includes any further increases that have taken place in the last three years. Thereafter, no further increases may be made before 12 months have elapsed. At the same time, the resulting rent must not exceed the normal rent, i.e. the average rent for a similar apartment in the area.

Apartment inspections

The landlord has the right to inspect the apartment. However, the landlord must not abuse this right, for example, by excessively checking the condition of the apartment or by making alterations that are not necessary.

Termination of the lease by the landlord

It always depends on whether you have a fixed-term or an open-ended tenancy. Let’s break down each case.

Termination of a fixed-term tenancy

Of course, the landlord has the right to terminate the contract with three months’ notice, but must only do so for legal reasons. Such reasons include:

• The tenant has grossly breached his or her obligations under the tenancy (for example, failure to pay rent and utility bills for more than three months).
• The tenant has been convicted of committing a crime against the landlord, a household member, or against someone else’s property located in the house.
• The landlord may also terminate the tenancy if the apartment is to be vacated for public interest reasons. For example, it must be demolished to make way for a city ring road.

Another situation is the end of the lease. The landlord is not obliged to extend it further, even without giving a reason.

Termination of a lease for an indefinite period

The same reasons apply here as mentioned above for a fixed-term lease. However, they are extended by two more:

• The landlord can terminate the contract if he needs the apartment for his relative or a relative’s spouse.
• Termination can also be given if the landlord or his/her spouse wants to use the apartment, provided that he/she is leaving the joint household. However, the condition is that the marriage has already been dissolved or at least a divorce has been filed.

If you disagree with the notice and the reasons, you can appeal to the court within two months of the date of service.

No visitors, pets or smoking

Here we come to the section of rules that the landlord cannot impose. None of the above can be forbidden to the tenant. This would be a restriction of rights. The tenant is not obliged to respect these prohibitions, even if they are stated in the tenancy agreement.

Termination of a fixed-term lease by the tenant?

While an indefinite-term contract can be terminated by the tenant without any problems (of course, if the notice period is observed), a fixed-term contract requires a compelling reason for termination:

• The tenant has obtained a new job in a location from which it would be difficult to return to the rented property.
• The tenant has got married and is arranging to live together and has acquired his/her own flat.
• The tenant is in a bad social situation (e.g. due to loss of employment or health problems).

The tenancy agreement can be terminated immediately in special cases. These are usually situations where the landlord has seriously breached his obligations under the contract. If such a breach occurs, the termination is effective from the date of delivery to the landlord.

Whether you are dealing with a problem in your tenancy agreement and need a solution as soon as possible, or you are in a situation before signing an important contract, you can be in the clear within 48 hours. We will review the lease for you, alert you to any complications and explain everything during your consultation with an attorney.