According to the development trend of society, capital and labor will be concentrated in large urban areas, which leads to the increasing demand for housing of individuals, households and businesses. However, when entering into a rental contract, the parties often do not anticipate possible risks and lacks of the important agreement and necessary provisions, leading to the parties’ interests not being guaranteed. In this article, TNTP will provide readers with some issues to keep in mind when drafting and reviewing rental contracts.
1. Determine the authority of the lessor
- One of the most important issues that the lessee needs to determine before entering into a tenancy agreement is who has the authority to perform the lease. In order to determine whether the lessor has the right to lease the house, the lessee should ask the lessor to provide documents proving the lessor’s right to lease such as the certificate of land use right, house ownership, residence and other properties attached to the land; Tenancy agreement with a third party; Certificate of business registration; Authorization letter; …
- For individuals, the lessor’s contract signatory can be the owner or an authorized representative. The lessee should note that in case the house is owned by more than one person, the signatures and personal information of all co-owners are required. For example, a house that is a common property of a husband and wife or a household must have full signatures and personal information of all members of the co-owner.
- For legal entities, the lessor can sign the contract of the lessor as the legal representative or the authorized representative. At the same time, the lessee needs to determine whether the leasing legal entity has the right to lease the house (in the business line). Because only when the business line has the real estate business, it has the right to rent houses, except for the case of small-scale and irregular real estate rental organizations, it is not necessary to have a business line of: real estate business. Cases considered as small-scale and irregular house rental specified in Article 5 of Decree 02/2022/ND-CP include:
i) House rental is a public property.
ii) Lease house, land use right under their lawful ownership.
iii) Renting out houses built by them but not real estate investment projects for business. In particular, construction investment activities are specifically explained in Clause 20, Article 3 of the Law on Construction 2014 as follows: “20. Construction investment activities means a process of conducting construction activities including construction, repair and renovation of a construction work”
2. Information about rental houses
The rental contract should clearly state information about the rental house such as address, usable area, etc as well as the condition of the house and accompanying equipment.
3. Purpose of renting
Because the purpose of renting a house is quite diverse, the parties need to specify a specific and clear rental purpose such as renting a house to live in, renting for business, renting as a warehouse, etc.
4. Rental contract period
The contract should clearly state how long the lease is, when the contract begins and when it terminates, when it is handed over and when to return the house. The parties should also clearly agree in the contract on the extension of the rental period (if any).
5. Rental price
The parties should stipulate the rental deposit level and the conditions for receiving the deposit back after the contract is terminated. The lease contract should clearly stipulate the rental price, the obligation to pay the rent and the payment of fees incurred during the use period, including taxes and fees as prescribed by law and electricity, water, environment, etc. Beside, the lessor also needs to stipulate the method of handling when the lessee does not pay the rent, taxes and fees in full and on time such as unilateral termination of the contract, and how to handle it. equipment of the lessee in case of unilateral termination of the contract, etc.
6. Cases of unilateral termination of the rental contract
The parties can refer to the provisions of law to stipulate in the contract the cases of unilateral termination of the contract. According to Article 132 of the Law on Housing 2014, during the lease term as agreed in the contract, the lessor may not unilaterally terminate the lease contract and withdraw the house being leased, except in the following cases:
- The lessor lease out the state-owned houses or social houses ultra vires and not satisfying requirements as prescribed in this Law;
- The lessee has not paid the rent for 3 months or more without reasonable explanation;
- The lessee uses the house for improper purposes as agreed in the agreement;;
- The lessee expands, renovates, or demolishes the house under lease agreement without the consent of the homeowner;
- The lessee exchanges, lends, sublets the house under lease agreement without consent of the lessor;
- The lessee still creates disorder or breaches hygiene an environment conditions causing negative effects on activities of the neighborhood although he/she is warned for the third time by the lessor or the chief of neighborhood, the chief of village;
- If the lessor renovates the house with consent of the lessee although the lease term does not expire, the lessor is entitled to adjust the housing rents. The new rent shall be agreed by contracting parties; if not, the lessor is entitled to unilaterally terminate the lease agreement and pay compensation to the lessee as prescribe
7. Obligations of the parties when unilaterally terminating the contract
The parties may consider stipulating the following contents in the contract:
- Penalties when one party unilaterally terminates the contract not according to the provisions of law and not according to the provisions of the contract.
- Time to notify the other party of the termination of the contract.
- Refund of rent.
Above are the tips of TNTP when drafting and reviewing the rental contract. Hope this article was useful to you.