High inflation is also affecting rents. What are the rules for increasing it?

The prices of virtually all commodities have been rising for several months. High inflation also affects tenants, who have to prepare for higher rents. However, the increase must only be governed by statutory conditions and procedures.

The vast majority of people in the Czech Republic live in their own homes, but about 1.4 million households still use rental housing. But some have recently had to cope with an increase, which, as experts from the consumer organization dTest point out, can occur based on a tenancy agreement or a written proposal from the landlord.

Modifications to the lease agreement

Section 2248 of the Civil Code gives both parties, the landlord and the tenant, the option to “agree on annual rent increases.” This may include, for example, an “inflation clause,” an agreement under which the landlord is entitled to increase the rent annually in line with inflation.

Of course, both parties can also agree on a more extended period than once a year.

“However, shortening the annual interval to the disadvantage of the tenant would be a clear infringement of the tenant’s rights, and such an agreement would not be taken into account,” warned Eduarda Hekšová, director of the consumer organization dTest.

The landlord’s written proposal

Suppose the rent increase is not reflected in the lease agreement. In that case, the landlord may send the tenant a written proposal for a higher rent, “up to the amount of the comparable rent customary in the place, provided that the proposed increase, together with that which has already occurred in the last three years, does not exceed twenty percent,” according to Section 2249 of the Civil Code.

As dTest points out, a landlord can change the monthly deposit during the year, but such an increase must be in line with the change in the price of the service or for other legitimate reasons. Therefore, the landlord must adequately justify the increase in the notice. Failure to do so will not result in a good rise in the deposit.

The court may also intervene

In the context of a rent increase, both parties—the landlord and the tenant—may find themselves in one of three situations.

First, there will be a mutual agreement, or the tenant will agree to the rent increase. The tenant will pay the new amount in the third calendar month after receiving the written proposal.

The second situation occurs if the tenant does not agree to the written proposal to increase the rent within two months of receipt. The landlord may then take his proposal to court, deciding on the rent and the amount customary in the place and time.

The third situation is when the tenant rejects the proposal for an increase. The landlord’s offer is extinguished, but he has the right to go to court again.

The statutory limit and the inflation clause

As dTest’s experts point out, it is controversial whether or not the statutory limit of a twenty percent rent increase over the last three years also applies to the inflation clause. If we look at the whole issue through the eyes of the tenant, it does not matter whether the rent increase is due to inflation or only a change in the average rent level.

The cap on increases is intended to protect the tenant from unreasonable rent increases in a short time. Under the average inflation that has prevailed in recent years, the limit has not been exceeded in most situations, but it may be due to the vast increases in recent months.

“Any inflation clause has to be reasonably high. In our view, a clause increasing rents by 7 percent or more each year is unreasonable, although opinions on this issue may differ in light of rising inflation,” Hekšová added.