Renting a residence: A guide

01/09/2010 | Practice field: Real Estate and Condominium

A question was posed to me lately:

Hello Mr. Miller,

I'm planning to move into an apartment with a roommate, and to sign a renting agreement with the owner. What should I check within it and what should it look like?

Thank you,

Danny

I answered:

Dear Danny,

Before signing this renting agreement you should pay attention to the following:

1. Identifying the owner.

It is most important to make sure that the owner is the one who he/she claims to be and really owns the place or an authorized representative. In order to verify this you should ask for the cadaster extract or any updated document indicating his freehold title. Imagine that after you entered the apartment and paid the rent you discover that the owner is someone else and that your money is gone forever.

2. The price and the payment:

The prices are usually nominated in USD, and the payment is USD-linked and due to the rate of the date of payment. Before committing you should inspect other deals signed in the specific area of residence in order to find out the price is appropriate. You can also suggest that the rent would be index-linked (and not USD-linked) in order to prevent an unexpected rise of rent due to an increase in US currency value. If that didn't work out try to determine a range for the USD range: "not more than _____ and not less than _____."

Check out the dates of payment: do they apply to your income? Owners sometimes ask for 3 months payment. If the expense is quite overwhelming ask the owner for once a month payment.

3. Guarantees

Usually, the owner asks for a guarantee in order to insure his property and in order the agreement would be fulfilled.

4. Insurances

It is most wanted that the residence be insured with structure insurance (covering damages such as fire, water, third side damages, etc.). this way it would be easier to repair damages if occur. Anyway, it is most important to hold a third side insurance policy which covers, among other things, damages made by visitors, and a policy covering damages for your personal property and assets you moved in with.

5. Taxes and expenses

Usually, the tenant pays the municipal taxes and tenants' committee taxes. Make sure that in the agreement it is said that the tenant pays only these taxes mentioned imposed on tenant, and not taxes imposed on owner such as betterment tax or payments for the tenants' committee, that are not current expenses but investments (i.e. elevator reparation, painting the lobby, pitching the roof, etc.).

Another important issue is that in most cities the municipal taxes imposed on tenants who are undergraduates, soldiers and handicaps are reduced significantly, and you should check your entitlement for this term.

6. Wear and reparations:

Before signing the agreement it is important scrutinizing the residence more than once and inspect the property's systems – electricity, water pipes, etc. Make a list of reparations the owner should conduct. If the latter leaves any furniture and equipment of his/her own make sure they're in good shape, then attach an appendix to the agreement stating the list of these furniture and equipment.

Sometimes the tenant should act by a term stating he/she approves scrutinizing the residence and finding it suitable for living. But it is important restrict this term and write: "with the exception of wears and defects invisible and/or unknown to the owner and the tenant at time of signing." These defects are invisible to the tenant (decayed water pipes, for example) and the quote is stated in order that the owner could not escape repairing damages.

The agreement should state that the owner must repair any damage caused by the property's natural wear, any of its systems and any of owner's equipment (refrigerator, furniture) left in the property. Sate an exact period of time (up to 24 hours) for repairs to be done urgent.

7. The "option"

The "option" allows the possibility of the continuation of the agreement within a certain period. Assuring the option is cardinal, for one year period at least, with the same terms or as written within the agreement. It is probable that an increase of 5 to 10 per cent in rent within the period of the option should occur. The term of option should be written and formulated for the benefit of the tenant. This way the tenant will be the one to make the decision of the realization of the option and to assure that the owner made no future plans about the property.

8. shortening the period of rent

Make sure you hold the possibility of quitting the terms of the agreement and wish to leave before the period of renting is over with an early notice, or the possibility of finding a new tenant that will act according to the agreement you signed on. When the owner states a term in which he/she holds the possibility of evicting you before the period of renting ends it is important to state that there should be an early note of at least two months (sometimes you can plea for compensation) and also make sure this term is mutual.

In any case, while leaving ask from the owner for a document stating he has no further demands and all your obligations are fulfilled.

9. I recommend each roommate sign the agreement in order that every resident would undertake the obligations stated in the agreement, and another agreement should be signed between the roommates themselves stating who stays in the apartment and who leaves, in case this 'partnership' should be dissolved,

10. Breach of agreement

A violation of terms entitles the offended (usually the owner) to cancel the agreement, to evict the tenant and to other remedies such as compensation.

It is cardinal to examine if a term such as that is stated within the agreement, and the violation of which term indicates the cancellation. These terms should be first and foremost the ones that deal with payment, and you should try and include in it also terms regarding the property's condition, for example, for such terms act in the benefit of the tenant.

See if there's a term regarding agreed compensation (such that no damage should be proven in order to get it and such that indicates additional compensation)/ if such a term exists; you should try and cancel it or reduce the sums as much as possible.

Summary

- Inspect your environment of living.

- Get your point of view about the neighbors and their relations with each other.

- Find out the rate of tenants' committee taxes and do all residents pay them due date (no one wishes for an elevator that doesn't work only because no one paid tax).

- Does a parking lot attached to the building? Or: are there any problems of parking around the area?

- Any noises? Does the residence close to an autostrada, to a school?

- Does the line of phone is connected? If not, you'll have to pay for a new one.

- Take a photo of the residence and its defects – you can never know when you'll need it!

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