When can a landlord increase the rent in an apartment? Inflation clauses are growing in importance, but are often invalid
High property prices and the unavailability of mortgages are increasing the interest in rental housing and market rents are rising. Landlords are often looking for ways to unilaterally increase the rent already agreed. There are only three options open to them – an inflation clause, tenant consent or a court decision. It is the inflation clause that has gradually gained the greatest importance, but two years ago no one paid much attention to it in contracts. According to attorney Pavel Strnad from AK Polverini Strnad, the huge growth of inflation has shown the importance of this instrument. Very often, however, inflation clauses in lease contracts are invalid because they are not formulated correctly.
In addition to the inflation clause, the landlord can unilaterally increase the rent on the basis of a written proposal to the tenant to increase the rent, up to the amount of the comparable rent customary in a given place (according to Government Regulation No. 453/2013 Coll.). If the tenant agrees to such an increase, he pays the increased rent from the third month after he received the proposal,” says attorney Pavel Strnad of the Polverini Strnad Law Firm.
Both sides must meet the deadlines – the tenant must agree to the increase within two months of receiving the proposal. And if he does not, the landlord can propose that the rent be determined by the court. The tenant has three months to file the motion.
“But currently the most common rent increase is based on an inflation clause. Due to the current inflation rate, tenants should pay attention to it when negotiating a contract. In a year’s time, they could be surprised by a rent increase,” says attorney Pavel Strnad of the Polverini Strnad Law Firm.
“When negotiating an inflation clause, the wording is key. We often encounter the fact that it is vague. In such a case, the clause is invalid. With the current rate of inflation, the landlord may lose significant sums and the relationship between the tenant and the landlord will be disrupted. The vagueness can be caused only by wording inaccuracies or errors,” says attorney Pavel Strnad of the Polverini Strnad Law Firm.
A proper inflation clause should include at least the following three points:
1. the date of the increase – for example, on 1 January or the anniversary of the agreement,
2. the process by which the increase occurs – for example, at the landlord’s request or automatically,
3. the specific inflation indicator by which the benefit is to be increased, as an increase only for ‘inflation’ is vague.
“One of the most commonly used consumer price indices published by the Czech Statistical Office or Eurostat may be used as a specific inflation indicator. However, care should be taken as there are several regularly published indices and they can easily be confused. A clear and comprehensible choice of these indexes is the most important thing for the validity of the entire inflation clause,” concludes attorney Pavel Strnad of the Polverini Strnad law firm.
Source: Polverini Strnad
