How many property owners have agreed to rent their property to tenants at the end of the rental or even before they find that their property has suffered significant damage that is not covered by the amount the tenants deposit as collateral?
The agreements usually include all the necessary conditions to safeguard the owners' rights on paper but the most common problem is that the tenants cannot afford to pay for the damage they have caused. Sometimes not even the rents themselves. Any lawsuit for damages other than time consuming has no effect if the tenant has no money to pay.
What steps should homeowners take as a precaution and what should they know?
First of all, it is important to know that in order to rent a property to a third country national (ie non-European) he must have a valid residence permit in the Republic of Cyprus. If this document is not provided we do not have to rent. Renting to a person who does not have a relevant permit is a criminal offense under the Aliens and Immigration Act, Article 19 (5) which explicitly provides that the owner and / or the owner of a residence and / or other premises who knowingly and unknowingly fee and / or contract allows the said residence and / or premises to be used as a place of residence by a foreigner who is not legally present in the Republic is guilty of a criminal offense and, in case of conviction, is subject to imprisonment for up to eighteen months or a fine of up to four thousand euros and / or both. Every owner must take all reasonable steps to determine whether the foreigner is legally in the Republic by requesting a valid residence permit.
The other phenomenon that is observed is properties that are licensed as shops or offices rented as living spaces. And usually these places become places of residence of illegal aliens who live en masse in such estates without control and often in miserable health living conditions. The responsibility of the Municipal Authorities is important and recently some Municipalities have taken action against owners in order to reduce this phenomenon.
Real estate control for their client - due diligence.
While real estate agents have an obligation to control their clients in accordance with the Law on the Prevention and Combating of Money Laundering, my finding is that the control exercised by many is not sufficient. While this law is not intended to protect landlords, its observance would help to some extent, especially in the case of rent. In case of foreigners, the real estate agents themselves have the obligation to check if the clients are legal in Cyprus as mentioned above and to present relevant documents to the owners. At the same time, they must determine the source of their income and that it comes from legal work.
Further in the rentals in particular, the real estate agents had to ask for and receive from the intended tenants a letter of recommendation from a previous owner before recommending tenants to landlords. In the absence of prior rental or letter of recommendation the landlord had to be informed and either required to pay the rent each year in advance or the proposed tenant to put a guarantor who resides permanently in the Republic and is accepted by the Landlord after proving he has a permanent job and income.
It is also important that landlords, before accepting the payment of any amount to a real estate agent for a client referral, request and check that the real estate agent is registered, otherwise he is not entitled to payment.
In Cyprus until today we are not accustomed and it is not practical to prepare a list with the inventory of the condition of the property and its contents by approved inspectors (chartered surveyors) which can be used at the end of a rental as a tool for damage assessment. Such a list should include a description of the entire contents of a property, any existing damage or stains on furniture, carpets, curtains or walls, as well as the price of the materials / furniture in case it needs to be replaced so that the tenant how much will pay in case of damage.
This inventory is common practice in England for example, where with the signing of the contract the tenant receives the comprehensive inventory of the property for inspection and acceptance.
At the end of the rental the inspector inspects the property according to the initial inventory and in case of damage these are deducted from the guarantee.
In addition and as a condition in the rental contract, it must be provided and at the end of the rental the tenant must deliver the property to such a level of cleanliness that the next tenant can enter immediately.
The use of professional cleaning should be the rule.
Securing payments, unpaid rents, and bills is a big issue for homeowners and the return on a real estate investment depends. As mentioned above, going to court and issuing a court decision is of no use if it cannot be executed and if the tenant does not have the resources it will remain unenforced. The only solution offered is the provision of a personal guarantee by another natural person residing permanently in Cyprus or prepayment of rent at the beginning of the rental and payment of a guaranteed amount for any damages which must be proportional to 2 or 3 rents or more depending on the quality of the property.
It is also important to start asking for and receiving a letter of recommendation from a previous landlord from whom the proposed tenant is renting. Often the tenants who leave unpaid rents and property damage are themselves and the landlords have no way of knowing this, so they proceed to a rent which ends up being loss-making. We also find that rental documents that have not been prepared by lawyers do not cover all aspects of a rental, with the result that neither the landlord nor the tenant is protected. Use services of a lawyer in the drafting of documents is considered necessary to safeguard the interests of both the landlord and the tenant.
The above can be implemented if all involved - owners and real estate agents. There should be the rule in all rentals to ensure the return of real estate as the investment aspect of the sector.