Residential Lease Agreement

With lease agreement the lessor grants the use of a thing to the lessee and the lessee is obliged to pay a rent to the lessor. Although the parties are usually free to agree on the conditions of an agreement between themselves, in case of residential lease there are various mandatory provisions in the Law of Obligations Act which are meant for the protection of the lessee and the parties cannot deviate from these. Avokaado Residential Lease Agreement:

  • is suitable for both an apartment and a house
  • allows advance payment and security deposit clauses
  • can be used for specified lease term

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Frequently asked questions

Does the residential lease agreement have to be in writing?

The law does not provide mandatory format for residential lease agreement, however, it is recommended to enter into the agreement in writing in order to avoid possible disputes and vagueness in terms related to the renting of premises. In addition, if a residential lease contract with a term exceeding one year is not entered into in writing, the contract is deemed to have been entered into for an unspecified term, but the contract shall not be cancelled such that it terminates earlier than one year after the transfer of the dwelling to the lessee.

If the lessor is a company, then is it necessary to add VAT to the lease?

No, in case of residential lease no VAT is added to the rent. In the case of business premises adding VAT to the rent is voluntary and if a company wishes to add VAT to the rent of business premises, it has to be a VAT liable company and must notify the Tax and Customs Board in writing. But, as stated before, in case of residential premises, no VAT is added to the rent.

Does the tenant have to make an advanced payment?

There is no obligation to make an advanced payment by law. However the parties may agree in the agreement that the advanced payment has to be made. The amount of the advanced payment is not regulated by law. However it must be reasonable, taking into account the length of the lease period and the nature of the specific contract. The usual advanced payment is the amount of one month’s to three months’ rent.

Does the tenant have to pay a security deposit?

There is no obligation to pay a deposit by law. However the parties may agree in the agreement that the deposit has to be paid. In case of residential premises the deposit may amount up to three months' rent. The deposit must be kept by the lessor in a credit institution separately from the assets of the lessor and at least at the local average interest rate. The interest belongs to the lessee and increases the deposit.

What is the lessor’s right of security?

The lessor’s right of security is the right of security over movables located on the immovable and, upon the lease of a room, over movables which are part of furnishings or are used together with the room in order to secure claims arising from the lease contract. Claims for the rent of the current year and the previous year and claims for compensation shall be secured by a pledge. If a tenant wants to move out or to remove things from the premises, the lessor may withhold things to the extent which is necessary in order to secure the claims of the lessor.

Can the residential lease agreement include contractual penalties?

No, pursuant to Law of Obligations Act any agreement which requires the lessee of a dwelling to pay a contractual penalty upon violation of a contract is void.

Does the tenant always have to pay for all the utility costs and other cost relating to the use of residential property?

In addition to the payment of rent, a lessee shall bear other expenses related to the leased thing only if so agreed in the agreement. Charges for the services and acts of a lessor or a third party which are related to the use of a thing are accessory expenses.

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