Many have observed that the real estate market has been in somewhat of a slump as of late, but not everyone has noticed that this development has also had an effect upon the rental property market. Whether because of the increase in apartments purchased for the purpose of renting them out for residential tenancy lease income, or because of greater levels of difficulty for some to find financing to acquire freehold interests in real estate, the number of residential tenancies has been on the upswing over the past year.
The legal landscape may be relatively straightforward when it comes to office leases, but if you are involved in either leasing out or renting premises for residential purposes, there are a few things to be aware of.
While relative flexibility exists in the drafting of lease contracts, this is not entirely true where residential leases are concerned.
In other words, the law, whether one considers it to be helpful or not, sets out a number of mandatory features for residential tenancies that sets them apart from other types of lease agreements. This can be easily overlooked if you are just viewing the content of the Civil Law, as it deals at some length with lease agreements.
What needs to be considered is that there is additional special legislation applicable to residential lease agreements that is somewhat more restrictive in nature. We are speaking here of the law on Residential Tenancies, which sets out mandatory content for residential lease agreements.
One of the more noteworthy aspects of the Residential Tenancies Law concerns termination. Under the Civil Law, the parties may set any timeframe for termination notices, and the parties may stipulate any reason for termination of an agreement. If one is considering the Civil Law alone, it might seem as though lease agreements may include a clause providing for termination without any reason by serving notice upon the tenant within the time stipulated in the lease.
The Residential Tenancies Law, however, has something to say about this, setting out specific conditions as to when a landlord may terminate a lease agreement unilaterally and under what timeframes termination notice may be served upon a tenant.
Provisions that restrict the right of the tenant to terminate a residential lease unilaterally without cause are, strictly speaking, unenforceable. Despite this, a landlord may wish to insert such clause knowing that it is unenforceable but hoping that the tenant isn't aware of that or will not take up the question of enforceability of the termination provision. In such a case, the landlord is engaged more in "wishful thinking" than legal contract drafting, and the ensuing result is a matter of chance.
The legal protection of tenants referred to above is in place regardless of whether the tenancy involves a modest flat in a denationalized building, or a five bedroom penthouse suite in a brand new development. Contract drafters are wise to consider this when drafting their agreements.
Martin Mezinskis is an associate at Kronbergs & Cukste, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms which includes Glikman & Partnerid in Estonia and Jurevicius, Balciunas & Bartkus in Lithuania, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.
