What shouldn’t be missing in the lease agreement

Some provisions of the Civil Code can be derogated from contractually, but some cannot be “circumvented”. What are the rights and obligations in rental housing? What is beneficial for the landlord and what is beneficial for the tenant?

A lease intended for housing is one of the most basic legal relationships. It fulfils an essential human need – housing. In European comparison, although an above-average number of people in the Czech Republic live “in their own”, rental housing is becoming increasingly attractive and in some locations is the only available option.

For example, Mr Adam, a designer, wanted to live in a trendy Prague neighbourhood in Vršovice. However, the landlord offered him a very unfavourable contract, which was strangely renewed every four months. So he would have no security. In the end, Adam preferred another offer, where the contract transparently contained everything he had.

The particulars of every lease agreement are the identification of the parties, the exact location of the apartment or house to be rented. Not to be forgotten is the list of accessories, i.e. equipment such as a refrigerator or dishwasher. And, of course, a clear amount of rent and the regulation of other payments for services.

It is important for the landlord whether the contract is for an indefinite or a fixed term. This is the surest way to end a contract, as it is simply not renewed. Beware, however, that the contract may automatically renew itself by further performance if the parties are passive after three months.

As the financial entitlements of the contract are often the main issue, be sure to clearly specify and add the due date in the contract in addition to the rent amount. The rent may already include all other costs, or the services may be paid separately – either in the form of advances or additional payments directly to the landlord or to individual suppliers. Everything is up to agreement. For the landlord, it may be slightly more advantageous to have the gas, water and electricity services, for example, in his own name. This way, the tenants determine the amount they will pay and pay for the services themselves. The tenants will then have to submit a bill each year showing the actual consumption. However, it primarily depends on what is agreed in the contract, for example, contributions to the so-called repair fund are primarily the landlord’s responsibility, not the tenant’s.

Thelease agreement requires a written form. However, the landlord cannot argue that the contract is invalid if he fails to comply with the mandatory written form and only agrees verbally.

A frequent question is also whether the lease automatically ends when the ownership of the flat is transferred. The answer is clear. It does not end and passes without further delay to the new owner according to the original agreement.

The landlord is entitled to require the tenant to deposit a cash security deposit as a guarantee that he will pay the rent and return the apartment in good order 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 has thus reduced the range from the original six times). At the end of the lease, the landlord will return the deposit to the tenant and will take into account what the tenant may owe him/her from the lease or any compensation for damages to the apartment. However, the landlord should properly account for such damages, at normal rates. Tenants are entitled not only to the return of the security deposit but also to interest – at least at the legal rate. In such a case, the law considers the normal rates to be those based on the interest rates for bank loans in the landlord’s place of residence or registered office at the time the contract was concluded.

With regard to other obligations, the law provides that arrangements which curtail the tenant’s rights shall not be taken into account in the apartment rental agreement. This provision cannot be excluded or derogated from.

For example, a civil servant, Mr. František, concluded a contract years ago for the lease of his flat which he inherited in Prague. The contract was embellished with many obligations of the tenant – from no smoking, no business, no pets to the prohibition of even temporary accommodation of anyone else. And he had a contractual penalty for every tenant’s misconduct. When Mr. Francis presented his contract to us, we had to tell him that many of the provisions were not enforceable. Although the contract was concluded before the new Civil Code came into force, it applies retroactively to contracts already concluded.

Provisions establishing the right to enforce contractual penalties are not taken into account. In practice, this means that even if a contractual penalty is included in the contract, the clause in question is without legal relevance and the court will take this fact into account ex officio and will not award the penalty. Nor can the keeping of an animal in an apartment be prohibited, provided that the keeping of the animal does not cause the landlord or the other occupants of the building a hardship disproportionate to the conditions in the house or apartment. 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. If the animal fouls the common areas, the tenant may be required to pay for these increased cleaning costs. Prohibiting a business from operating in an apartment or house under threat of a contractual penalty is also out of the question. Finally, the prohibition on smoking in the tenancy agreement is, like the previous prohibitions, problematic. A tenant may smoke, but may not unreasonably disturb neighbours or damage the apartment in any way.

A traditional sublet can be prohibited by the landlord or is subject to the landlord’s consent. An exception to this is if the tenant sublets part of the flat or house to a third party while living there permanently. It is not possible to prohibit visits.

We prepared this article for the Lidové noviny series “Law & Housing”. See also other articles from the series:

1. What to watch out for when buying a property
2. How to get a mortgage
3. What to check before buying a property
4. Who pays the property transfer tax and how?
5. What should be included in the property purchase contract
6. The most common mistakes when drafting a proposal to the Land Registry
7. Buying a property from a developer
8. Keeping the purchase price when buying a property
9. The difference between a condominium and a freehold
10. What is an annuity?
11. How to properly gift a property
12. What is the purpose of an easement or servitude?
13. Making a will and settling an estate
14. What is a collation
15. What shouldn’t be missing in a lease agreement
16. When rent increases can be made
17. Termination of the lease
18. Agreement to end the tenancy
19. How to draw up a work contract with a tradesman
20. Hidden defects and cancellation of a works contract
21. When do you need planning permission to renovate a property?
22. Home Rules
23. What does serving on a condominium board entail?
24. Why not underestimate the bylaws in a condominium
25. Common areas in a block of flats
26. What is involved in refurbishing a block of flats
27. Can a condominium or housing association go into debt?
28. How to renovate a house or cottage
29. What to watch out for when dealing with a construction “company”?
30. Building a house on a “green field”
31. How to remove land from the agricultural fund