What Should a Lease Agreement Include? Requirements and Rules

Quick Overview

The essential elements of a lease agreement should be clearly evident from the document. When drafting the agreement, be sure to check the following in particular:

• who the landlord is and who the tenant is,
• which specific apartment or house is being rented and what amenities it includes,
• the amount of rent, its due date, and the method of payment,
• how utilities will be paid and billed,
• whether the lease is for a fixed or indefinite term,
• whether a security deposit is required and, if applicable, whether a contractual penalty is agreed upon,
• how the apartment will be handed over and in what condition.

Not all of the above are legally required for the contract to be valid, but the more precisely the rights and obligations of the parties are described, the less room there is for future disputes.

In a lease agreement, every word matters. If you’re unsure whether the agreement sufficiently protects your rights or contains invalid or unfavorable provisions, have a lawyer review the lease agreement.

It is possible to deviate from certain provisions of the Civil Code by contract, while others cannot be “circumvented.” So what are the rights and obligations involved in rental housing? What is advantageous for the landlord, and what is advantageous for the tenant?

Residential tenancy is one of the most fundamental legal relationships. It fulfills a basic human need—housing. Although, by European standards, an above-average number of people in the Czech Republic own their own homes, rental housing is becoming increasingly attractive and, in some areas, is the only available option.

For example, Mr. Adam, a designer, wanted to live in the trendy Vršovice neighborhood of Prague. However, the landlord offered him a very unfavorable lease, which, on top of that, was strangely renewed every four months. This meant he would have no security. In the end, Adam opted for another offer where the lease clearly outlined everything it should.

So what are the most important elements of a lease agreement? First and foremost, the agreement should clearly identify the contracting parties and the apartment or house that is the subject of the lease. It’s also practical to describe the apartment’s fixtures and furnishings in detail—such as a refrigerator, washing machine, or dishwasher—ideally in a handover report. Clearly agree on the rent, its due date, and the method of payment for utilities.

However, when it comes to what a lease agreement should include, it’s not just about identifying the apartment and the rent amount. It’s also very important to specify how long the lease is to last.

For the landlord, it is essential whether the lease is for an indefinite or fixed term. This is the surest way to terminate the lease—it simply will not be renewed. Be aware, however, that the lease may automatically renew itself after three months if neither party takes action to terminate it.

Rent, Utilities, and Other Payments in the Lease Agreement

Since financial obligations under the contract are often the primary concern, be sure to clearly specify not only the amount of rent but also the due date in the contract. There are several options for handling utility payments: The rent may already include all additional costs, or utilities may be paid separately—either in the form of advance payments or additional payments made directly to the landlord or to individual service providers. It all depends on the agreement.

It may be slightly more advantageous for the landlord to have utility accounts—such as gas, water, and electricity—registered in their own name. The landlord then sets the amount the tenants will pay and uses that amount to pay for the utilities themselves. Tenants are then provided with a statement showing their actual consumption each year. However, this depends primarily on what is agreed upon in the lease agreement; for example, contributions to the so-called repair fund are primarily the landlord’s responsibility, not the tenant’s.

A lease agreement must be in writing. However, the landlord cannot argue that the agreement is invalid if they fail to comply with the required written form and instead reach an agreement verbally.

Another common question is whether the lease automatically terminates upon a transfer of ownership of the apartment. The answer is clear: it does not terminate and is automatically transferred to the new owner in accordance with the original agreement.

When entering into a lease agreement, the landlord is entitled to require the tenant to post a cash security deposit as a guarantee that the tenant will pay the rent and return the apartment in good condition at the end of the lease. However, the security deposit may not exceed three times the monthly rent (the latest amendment to the Civil Code thus reduced the limit from the original six times).

Upon termination of the lease, the landlord shall return the security deposit to the tenant, offsetting any amounts the tenant may owe from the lease or any compensation for damage to the apartment. The landlord should, however, properly itemize such damages at customary rates. Tenants are entitled not only to the return of the security deposit but also to interest —at least at the statutory rate. In such cases, the law considers the customary rates to be those based on bank loan interest rates in the landlord’s place of residence or registered office at the time the contract was concluded.

What a Landlord May Not Prohibit a Tenant from Doing in the Lease Agreement

As for other obligations, the law stipulates that provisions in a residential lease agreement that curtail the tenant’s rights are void. This provision cannot be excluded or deviated from.

In practice, for example, we have dealt with a landlord’s lease agreement that prohibited the tenant from keeping pets, having visitors, conducting business in the apartment, and engaging in other common activities, and imposed a contractual penalty for each violation. However, simply signing the contract does not mean that all such prohibitions can actually be enforced. In the case of apartment leases, the Civil Code protects tenants from provisions that disproportionately interfere with their legal rights. When reviewing a lease agreement, it is therefore always necessary to assess not only its text but also whether the landlord is even permitted to impose a specific obligation on the tenant.

Conversely, a lease agreement may now includea contractual penalty. Since July 2020, the Civil Code has explicitly permitted this in apartment leases. However, it cannot be set arbitrarily: together with any security deposit, the amount payable under the penalty clause must not exceed three times the monthly rent. Furthermore, a contractual penalty cannot be used to circumvent the tenant’s statutory protections or to penalize the tenant for conduct that is permitted by law.

Summary

A well-drafted lease agreement should, first and foremost, clearly identify the landlord, the tenant, and the apartment being rented; specify the amount and due date of the rent; address payments for utilities; and define the term of the lease. It is also advisable to address the security deposit, any contractual penalties, the apartment’s furnishings and condition, and the handover procedure. Apartment rentals are governed by the Civil Code, which provides significant protection for tenants; therefore, certain restrictions cannot be validly agreed upon even if the tenant consented to them at the time of signing. The lease agreement must be in writing, and in the case of disputed or non-standard provisions, it is advisable to have the text reviewed by a lawyer before signing.

We prepared this article for the Lidové noviny series “Law & Housing.” Be sure to check out other articles in the series:

1. What to Watch Out for When Buying Real Estate
2. How to Get a Mortgage
3. What to Check Before Buying Real Estate
4. Who Pays Real Estate Transfer Tax and How?
5. What a real estate purchase agreement should include
6. Common Mistakes When Drafting a Land Registry Application
7. Buying a Property from a Developer
8. Escrow of the Purchase Price When Buying Real Estate
9. The difference between a cooperative apartment and a privately owned apartment
10. What Is an Annuity?
11. How to Properly Donate Real Estate
12. What is the purpose of an easement?
13. Drafting a Will and Settling an Estate
14. What Is a Collation?
15. What Should Be Included in a Lease Agreement
16. When Can Rent Be Increased
17. Termination of a lease
18. Agreement to Terminate a Lease
19. How to Draft a Contract for Work with a Tradesperson
20. Hidden Defects and Withdrawal from a Contract for Work
21. When Do You Need a Building Permit to Renovate a Property?
22. House Rules
23. What Does a Position on an Apartment Building Committee Entail?
24. Why You Shouldn’t Underestimate the Bylaws of an Apartment Building
25. Common Areas in an Apartment Building
26. What Is Involved in Renovating an Apartment Building?
27. Can a homeowners’ association or housing cooperative go into debt?
28. How to Approach the Renovation of a House or Cottage
29. What to Watch Out for When Dealing with a Construction “Company”?
30. Building a house on a “greenfield site”
31. How to Remove Land from the Agricultural Land Fund