Property Owners: Navigating Challenges in the Rental Market
Property owners of apartments, houses, and commercial spaces face various situations when renting out their properties. Typically, owners set rental terms with tenants and consult with an agency. The agency’s role is to advise both parties on potential issues and how to handle them. Some of the most common and challenging situations include:
- Early Departure of the Tenant and Lease Termination
When a tenant exits prematurely, the most common solution is for the tenant to forfeit their deposit, which serves as a guarantee to fulfill all contractual obligations, unless otherwise stated in the contract. In such cases, property owners often first reach out to the agency for advice on the correct course of action or may even hold the agency responsible, which is not the solution. Agencies can’t always ensure that tenants stay longer or pay additional compensation for early departure. It’s important to know from the outset that if one party does not adhere to the contract terms, the agency has no jurisdiction over it. - Damage or Repairs to Property Inventory
Any damage to property inventory must be repaired promptly, not at the end of the lease term. This type of situation is generally clearly defined in the contract, along with deadlines for fulfilling obligations. Some repairs fall under tenant responsibility, while others are the owner’s. If the damage occurs due to normal wear and tear or something beyond the tenant’s control, the owner covers the costs. If the tenant caused the damage, they are responsible for the repairs. Arrangements are possible, for instance, if the water heater breaks, the tenant can buy a new one and report the expense to the owner, who then deducts that amount from the rent. The owner must be informed and agree to this type of repair solution. - Late Payment of Rent and Utilities
This is one of the more unpleasant situations property owners may face. Generally, there is no good reason for failing to pay rent on time. Occasionally, if a tenant’s salary is delayed, understanding from the owner can foster a trusting relationship, with neither party taking advantage of it. Still, it is the tenant’s responsibility to meet their obligations on time. If not, the owner has the right to terminate the contract early and withhold the deposit. The owner should monitor timely monthly payments of all bills. A good practice is to have the tenant send proof of paid bills to the owner once a month, minimizing potential negative effects. - Returning the Deposit at the End of the Lease
The tenant’s obligations, such as maintaining the property and inventory, paying bills and rent regularly, and fulfilling the lease term, are secured by the deposit. The deposit amount, usually equal to one month’s rent, is set by the property owner. This amount may not always cover all expenses left by the tenant. The deposit is not the owner’s money; it is the tenant’s money that guarantees all contract terms will be respected. If the tenant meets all obligations, the owner must return the deposit within 30 days after the lease ends. - Agency Responsibility in the Event of Incidents
Suppose a tenant moves out after three months, leaves bills unpaid, and breaks a chandelier. The agency is not responsible for the tenant’s decisions or the damage caused. The agency initially recommends the tenant, the owner makes the final choice, and the agency suggests the contract terms, with the owner having the last word. The agency can offer advice or financial assistance, but it is not responsible for unforeseen situations. The lease contract is what protects the owner, and agencies will always advise notarizing it so that responsible authorities (police, courts) can handle such incidents. At the same time, the agency should be available to support clients in challenging situations as an advisory partner who seeks to resolve issues calmly and amicably. - Unnotarized Contract
This is a common dilemma for many owners: Should the contract be notarized or not? Should the contract list a lower rental price for tax purposes? The agency strongly advises against any practices that do not comply with the law. By not notarizing the contract, you risk potential misuse of information by the tenant. When a contract is not notarized, the tenant is given leverage to disregard it without facing consequences. A notarized contract with an authorized notary ensures all parties will honor the terms agreed upon at the lease’s start. - Communication Difficulties with Tenants
Often, two parties simply don’t understand each other, sometimes literally, due to the increasing number of foreigners arriving in Montenegro. Minor misunderstandings or uncertainties can often be resolved by the agency as a mediator. This is, in essence, part of the agency’s role in the rental process: to facilitate communication and deliver messages from one side to the other smoothly.
If the agency has charged for its services and the tenant leaves soon afterward, the agency can offer solutions and discounts on future rentals but cannot bear financial responsibility for the actions of third parties. For more information on this topic, click HERE!
