A rental agreement for an apartment: clause by clause

A well drafted rental agreement for an apartment settles ten questions in writing: the parties, the property, the term, the rent, the deposit, the bills and repairs, the condition at handover, how the home may be used, termination, and the documents attached to it. The template gives you the frame; the decisions are yours.

Which clauses are missing from most rental agreement templates?

Free rental agreement templates usually handle the parties, the rent and the term well, but they skip the clauses that disputes start from: deductions from the deposit, how the bills are split, the condition at handover, and early termination. Check whether your template settles these four clauses before you fill it in.

There is a reason for the gap. A template is written to suit any two parties, which makes it precise where tenancies are alike and general where they differ. And these four clauses differ in every tenancy. Deposit deductions depend on the furnishings, the bills on the meters and charges of the particular building, the handover report on the actual condition of the home, and termination on what the two parties want.

What belongs in every agreement, whichever template you start from, is covered in our guide to the rental agreement. From here on we look at the clauses the template leaves to you.

Before you sign, go through four checks. If any of the following is true of your template, rewrite that clause using the sections below:

• the deposit clause states only the amount;
• the bills clause says the tenant pays "the utilities" without listing them;
• a handover report is not mentioned anywhere;
• the agreement can be terminated in only one way.

What details about the parties and the property must the agreement contain?

A rental agreement for an apartment names every owner who signs and every adult who will live in the home. Describe exactly what you are letting too: the apartment, the storage room and the parking space if they are included, and the furnishings you have listed.

For each party write the full name, the identity document details and the permanent address, and for a foreign tenant the details of the document they reside in the country with. Add a postal address and an email for notices for each of the two parties. Termination requires written notice, and notice sent to an address the agreement does not name is easy to dispute. Before you copy the tenant's ID card, check the guidance of the data protection authority on what you may record and keep from it.

If the apartment has more than one owner, decide before signing who signs: all the owners, or one of them with a written power of attorney from the rest. Attach the power of attorney to the agreement. Where the home is jointly owned by spouses or was inherited by several people, ask a lawyer whose signatures are needed and in what form before you set a signing date.

The agreement binds those who signed it. So if two people share the rent, name them both as tenants and state expressly that each of them is liable for the full rent. Name the other adult occupants in the use clause, and if you want them liable on the same terms, have a lawyer draft that wording.

Describe the property with the address, floor, apartment number, area and the cadastral identifier from the title deed. List separately everything let with it: storage room, parking space, garage. A storage room that is not written down later becomes an argument about whether the tenant may use it at all. The furnishings go into the inventory covered in the handover section.

Which term should you choose: fixed or open ended?

A fixed term gives the landlord a clear end date; an open ended one gives flexibility at the cost of certainty. In both cases the agreement has to say what happens if the term runs out and neither party does anything.

Each option has its downsides. A fixed term lets you plan a sale or a move back into the home, but it ties you as much as it ties the tenant unless the agreement allows early termination. With an open ended term either party can leave on notice: you gain flexibility but lose protection against a tenant who leaves when it suits them.

If you intend to sell the home or move into it after a while, choose a fixed term that ends before that date. If you have no such plan, start with a fixed term and an express renewal. That gives you certainty for the first period and a natural moment to renegotiate the terms.

Add one sentence on what happens on the end date. The agreement can simply end with the tenant handing the home back the same day, continue on an open ended basis, or renew for the same period. If the agreement does not settle this, you reach the familiar problem: the tenant keeps paying, the landlord keeps taking the money and nobody knows which rules still apply. Before you sign a long agreement, check with a lawyer what follows when the tenant stays past the end date and you do not object.

If a sale during the tenancy is possible, settle the form of the agreement in advance as well. A notary will tell you whether notarisation or registration is appropriate for your term and what it means for a future buyer. Do that before signing, not after.

What to include in the rent and payment clause

The rent clause has to set the amount in euro, the payment date, transfer to a named bank account, the consequences of late payment, and whether the rent can change during the term.

State the monthly amount in euro, the due date as a day of the month, and a bank account in your name. A bank transfer proves the payment by itself. If you accept cash, issue a receipt for every payment with your signature, the date, the amount and the month it covers.

Write down which month each payment is for. Rent is usually paid in advance for the current month. Without that detail, the argument at move out is whether the last transfer covered the final month or the one before it.

Set the consequences of late payment: a penalty for each day of delay, or a fixed sum from a stated date onwards. Discuss the amount with a lawyer before you write it in, so it does not turn out to be unenforceable exactly when you need it. The termination clause is where you decide when non payment becomes grounds for ending the agreement.

For a term over a year, and for an open ended term, decide whether the rent can change. There are three options: it stays unchanged for the whole term, it is reviewed every year by agreement, or it is adjusted against an official price index on a stated date. If you choose an index, write down which index it is, who publishes it and the date it is taken on, because otherwise the clause does not work. A fixed rent helps you keep a good tenant; indexation protects your income. Record every change in a signed annex.

How to write the deposit clause

Five things make a deposit clause useful to both parties: the amount, what the deposit secures, which deductions are allowed and how they are evidenced, the period for returning it, and a ban on the deposit covering the final month's rent.

The deposit is paid on signing by bank transfer and has to reach your account before you hand over the keys. Set the amount by the risk in the particular home, above all the furnishings and the appliances, rather than out of habit.

Set out what the deposit secures: unpaid rent, unpaid bills the agreement puts on the tenant, damage beyond fair wear and tear, and agreed costs at move out such as replacing lost keys. If the clause simply calls the deposit a "guarantee" and contains no list, every deduction stays open to dispute.

Separate damage from fair wear and tear with examples in the agreement itself. Paint faded over time and light marks around the light switches are wear. Holes in the walls, burn marks on the kitchen worktop and broken furniture are damage. Every deduction is evidenced against the handover report and with an invoice or a written quote.

Write down when and how the deposit comes back. The period runs from the day the keys are returned and the move out report is signed, and the money is transferred to the tenant's account. If the final electricity and water bills arrive later, provide for a stated part to be held back until they do. Have a lawyer judge whether the period you have written will be upheld in a dispute.

A common problem is the tenant who stops paying for the final month and suggests you keep the deposit instead of the rent. It happens when the agreement does not deal with set off. Write in that the deposit is not set off against rent without the landlord's written consent. That keeps unpaid rent for the last month a breach like any other.

Who pays the bills, the charges and the repairs?

Every running cost, including the building's maintenance charge, has to be assigned in the agreement to the landlord or to the tenant. Small repairs arising from everyday use are usually paid by the tenant, while the structure and the installations stay with the landlord.

List the costs by name: electricity, water, heating, gas, internet and television, the maintenance charge for the common parts and the other condominium costs. For property tax and the waste collection fee, check with the municipality who is on record as liable for your property, and only then write into the agreement who pays them.

Decide whose name the utility accounts stay in. If they stay in yours, require the tenant to pay by each due date and to send you proof every month, because unpaid bills build up in your name, not theirs. If the accounts move to the tenant, the meter readings in the handover report serve as the opening figures.

Separate the repairs with examples. Light bulbs, tap washers, traps blocked through use and small everyday fixes are for the tenant. The structure, the installations and appliances that fail with age are for you. A lawyer can explain how costs are split when the agreement says nothing, but it is easier to draw the line in the clause itself.

Provide for emergency repairs as well, such as a burst pipe or a broken lock. The tenant may commission the repair up to a stated amount, photographing the fault and keeping the invoice. They are then reimbursed or deduct it from the next rent, but only against that invoice. Anything that is not an emergency needs your written approval before it starts.

How to record the condition of the home at handover

The condition of the apartment is recorded in a report both parties sign on the day of handover. It covers a description room by room, the inventory of furnishings, the meter readings, the keys handed over, and dated photographs with their numbers.

Describe each room specifically: walls, floors, doors, windows, bathroom fittings, kitchen worktops. Record existing defects exactly, for example a scratch on the parquet next to the balcony door. A report that says only "in good condition" protects neither party, because it does not show what has changed.

Every piece of furniture and every appliance goes into the inventory with its quantity and condition. Every deduction for damage is later judged against that inventory, and how to compile one is shown in our article on the furniture inventory.

Record the readings of every meter, that is electricity, water, heat and gas, and photograph each one. Note how many keys of each type you hand over, along with fobs and remote controls.

Take dated photographs of every room, number them and put the numbers in the report. Both parties get a copy the same day. Photographs that sit only on the landlord's phone and are not tied to the report are easy for the tenant to dispute as taken at another time.

Name the report in the agreement as an appendix and have both parties sign every page on the day of handover. At move out use the same structure and compare the two reports line by line. How the inspection itself goes is described in our article on handing over the property.

What is the tenant allowed and not allowed to do?

The use clause answers five questions with a clear permission or a clear ban: who lives in the home, whether subletting and short term letting are allowed, what the rules on pets are, what may be changed in the home, and when the landlord has access.

Name who will live in the home and agree that any change needs your written consent. Say plainly whether subletting is allowed. If the agreement does not settle this, the reading stays open and the argument starts once a third person is already living there. If you do not want the home advertised on Airbnb or Booking, ban short term letting separately and expressly, because the general subletting clause leaves room for dispute. Check what the condominium has decided on this too, before you promise the tenant anything.

On pets, say whether they are allowed and which, and that damage and extra cleaning because of them are deducted from the deposit.

For painting, drilling, changing locks and installing appliances, require written consent. Agree as well whether the tenant restores the original condition at move out and who keeps any improvements.

Settle when you may enter the home as well. For inspections and non urgent repairs provide for advance written notice and an agreed time, while in an emergency such as a leak access is possible without warning. Without this clause you end up with one of two problems: either you walk in uninvited, or the tenant will not let you in for a repair you are responsible for.

How is a rental agreement terminated early?

A rental agreement for an apartment should describe all three routes to early termination: by mutual agreement, on written notice, and for a stated breach. All three are followed by a move out inspection and the return of the deposit.

For termination by mutual agreement, require a written document signed by both parties stating when the agreement ends and when the home is handed back.

For termination on notice, state the period for each party; the two periods may differ. Notice is given in writing to the addresses in the agreement, and email counts only if the agreement allows it. With a fixed term, decide whether early notice is permitted at all and whether the party leaving owes anything for it. Have a lawyer look at any such compensation before you write it in, so that it holds if it comes to a dispute.

For termination for breach, list the specific breaches:

• rent unpaid after a stated number of days, or two consecutive missed payments;
• damage to the home;
• subletting in breach of the agreement;
• use contrary to the use clause.

Decide as well whether termination takes effect from the written notice or after a period to put the breach right. Before you sign, clarify with a lawyer what you can do if the tenant refuses to leave. You will have time to weigh the options calmly then. Do not change the lock and do not move their belongings out yourself.

Include the move out sequence in the clause itself:

1. notice;
2. an agreed handover date;
3. the move out inspection;
4. final meter readings;
5. return of the keys;
6. return of the deposit, the period for which runs from that day on.

Which documents should you keep while the tenancy runs?

Every clause in the agreement is worth something only if a document backs it. Keep the signed agreement and the annexes, the handover report with the photographs, proof of every payment, every written notice and repair request with its date, and the move out report.

For each of these documents remember when it is created, which clause it supports and what you lose without it:

• the signed agreement and the annexes are created at signing and at every change of terms; they stand behind all the other clauses, and without them changes agreed verbally cannot be proved;
• the handover report with the photographs and readings is drawn up on the day of handover and supports the condition, deposit and bills clauses; without it damage cannot be shown against the opening condition;
• proof of every rent payment is collected as the payment is made and supports the rent, late payment and termination clauses; without it neither a missed nor a completed payment can be proved;
• the utility bills and proof that the tenant has paid them are collected every month and support the bills clause; without them the arrears surface only when the supplier comes to the owner;
• written notices and repair requests with their dates are kept from the day they are sent and support the repairs, access and termination clauses; without a date the notice period has no provable start;
• repair invoices and written approvals are kept after each repair and support the repairs clause and deposit deductions; without them the cost can neither be deducted nor reimbursed;
• the move out report with photographs and readings is drawn up when the keys come back and supports the return of the deposit; without it the return period has no definite start.

Create each document when the event happens, not when the dispute starts. A photograph from move out day does not prove the condition at move in, and a payment with no document behind it stays arguable. Collect everything for one property in one place: the agreement and the annexes first, then the rest by date.

Smarter Facility is a rental property management platform in Bulgaria. Owners manage a property themselves or hand it to a partner agency, and see the rent, the agreements, the repairs and the documents in one place. Rental agreement management drafts the agreement from a template, stores the signed documents in the cloud, tracks the terms and the start and end date of every agreement, and reminds you before one expires.

When is a rental agreement template not enough?

For a standard letting of one apartment between private individuals, a template is usually enough. A review by a lawyer is worth it when the property is jointly owned, when the tenant is a company, or when the term is long.

Each of those cases raises a question the template does not answer. With a jointly owned or inherited property the question is who signs. When a company is the tenant, the question is how the payments are documented and what each side carries on tax, so discuss it with an accountant before signing. With a long term the question is the form of the agreement. A review is also worth it when the home is furnished with valuable items, or when the arrangement is unusual, for example rent paid partly in repair work.

If you would rather not deal with the agreement, the documents and the notices yourself, hand the property to an agency. Agree in writing which of these tasks the agency takes on.

This article is general information, not individual legal advice. For a specific agreement or situation, consult a lawyer.