The wave of inflation has pushed many people into an essentially hopeless financial situation in which they cannot cover even the most basic costs, including housing. How can you avoid it?
The Rental Housing Association points out that this year has seen a marked increase in the number of people unable to pay the agreed rent. And thanks to double-digit inflation, rents may rise again this year, while the financial situation of those who set their energy advance payments too low may be made even worse by their annual statement. Landlords therefore very often ask how to prevent problems with non-paying tenants and how to deal with them if they arise. When it comes to the solvency of the future occupants of your flat, you really should make no compromises whatsoever. Reportedly, as many as one in six people who currently respond to adverts for vacant flats have a record in one of the Czech or Slovak registers of debtors. The Czech Republic: a land of foreclosures According to May statistics, the total number of foreclosures in the Czech Republic still remains above the magic threshold of 4 million, affecting almost 670,000 individuals. You can find the details on the government portal Otevřená data. The statistics also debunk a few entrenched myths: in Prague, for instance, one in every 12 residents is subject to foreclosure, with an average amount of nearly one million korunas. So it certainly isn't true that everything is rosy for landlords in the capital. The risk of letting a flat is therefore steadily growing for owners, which may ultimately be reflected in nominal rent increases. Given the international situation, there is also a growing number of applicants from third countries, who inherently carry a higher level of risk. That is often offset by the human dimension of such lettings, especially in the case of families fleeing the war in Ukraine. According to statistics, roughly 20% of all landlords deal with non-paying tenants. That is a significant share and you definitely don't want to be among them. Even if the situation is eventually resolved by agreement, you are left with the time and money involved in terminating the lease and finding a new tenant. You can be protected from this threat by an experienced property manager who will check solvency for you and guarantee your income for the entire term of the contract – for example our company, Flat Service. Subjective assessment of tenants Working out within a few dozen minutes whether the person sitting across from you will one day turn your life into a small “hell on earth” is not exactly easy. However, people who have spent years in the real estate business have a strong sense of intuition and can recognise a potential defaulter by certain subjective signs linked to their behaviour or communication. So what should the person you want in your flat meet as an absolute minimum?
- The applicant replies consistently to messages, answers the phone and has no major problems with grammar in written communication.
- The applicant doesn't dodge conversational questions about their life, job, family situation or reasons for moving, and doesn't let them trail off into vagueness.
- The applicant arrived for the viewing on time, presentably dressed and well groomed, and shows an appropriate level of interest in matters relating to their future home.
- The applicant has no problem introducing all the future occupants of the flat to the landlord (family members, flatmates in the case of students and so on).
- The applicant doesn't excessively haggle over the amount of rent or the refundable security deposit.
It is in everyone's interest to resolve unpaid rent as soon as possible and by agreement. Ideally, though, you never get into that situation at all. If an applicant gives the impression of “one pocket empty, the other one turned out” right at the door, you have every right to politely turn them down.
Objective assessment of tenants An excellent first impression is certainly priceless, yet history's most accomplished con artists had personal charisma to spare – just think of the famous film Catch Me If You Can with Leonardo DiCaprio. So it is no coincidence that when it comes to lettings the rule is “trust, but verify”. What steps can you take as a landlord?
- The basics certainly include checking the central register of foreclosures and insolvencies, where current defaulters can be traced.
- It also pays to check other public and commercial registers, not only Czech but also foreign ones. The
- banking register SOLUS will indicate whether a potential tenant has outstanding obligations towards banks.
- Most tenants have no problem confirming their solvency, for instance with a bank statement or documents proving their steady income from employment or business. If an applicant refuses to document their income in any way, that should certainly set off alarm bells.
- A suitable applicant also has all the paperwork in order, has the documents to hand and there are no obvious discrepancies in them. Their ID card is not registered as lost, their previous address is not the municipal authority, and so on.
Eviction is a long-distance run The already mentioned Rental Housing Association, which brings together the largest Czech owners of rental properties, points out that the most pressing problem in Czech housing today is the enforceability of the law. The current legislation sometimes protects tenants disproportionately, including outright defaulters. It is often very difficult to get them out of the flat even though the term of the contract has expired or they haven't paid a single koruna for several months in a row. Such situations then have to be dealt with by the courts and a bailiff, which costs landlords time, money and worry. The road to a definitive eviction often takes several months or a few years. What is the simplest thing you can do to make sure that, as a landlord, you never end up in such a situation? Entrust your flat to professionals with years of experience in vetting future tenants. With Flat Service you get a regular, guaranteed rental income. With our Flat Service Partner and Flat Service Garant services you can be sure that “defaulter” is a word we simply don't have in our vocabulary and that the “risk of letting” is reduced to an absolute minimum with us. If you are interested in long-term, trouble-free property letting services, don't hesitate to contact us and arrange a viewing of your flat together with the preparation of a non-binding draft contract.
