The reason landlords value fixed-term leases is that they can easily replace the tenant at the end of the agreed period. It can also be advantageous for the tenant to agree in advance to end the tenancy on a specific date. However, they should take into account that if they want to stay in the apartment at a later date, the landlord may increase the rent at the same time as extending the lease.
If the landlord wants to give the tenant notice of termination of the lease of the apartment, he must prove that one of the grounds for such action set out in the Civil Code has been fulfilled. However, if the tenant defends the termination in court, the proceedings may drag on for several years. During these years, the tenant can still live in the apartment. A fixed-term lease allows the landlord to test the tenant within a certain period of time. If the tenant is not satisfied with the tenant, the tenant will not renew the lease, thus eliminating the above mentioned difficulties.
A fixed-term contract is usually for a year. Thereafter, the landlord signs a new contract with the tenant for what is known as an indefinite period, or again each time for another year. However, there are more and more cases in which leases are agreed for only six months,” says Eduarda Hekšová, director of the consumer organisation dTest, adding: “Six months is usually the shortest period of time for which a lease can be validly negotiated, according to court decisions.”
But a fixed-term lease has its pitfalls: if the tenant wants to stay in the apartment beyond the agreed-upon period, the landlord can raise the rent. This is because the landlord enters into a new contract with the tenant, which may have changed terms and conditions, including a higher rent. In addition, the limits for unilateral rent increases set out in the Civil Code apply only to a lease of indefinite duration.
People are often surprised to be presented by their landlord with a new contract with increased rent after the expiry of the agreed period. This is particularly unpleasant if they have invested in renovating the flat but have not agreed with the landlord on the reimbursement of the costs. If they don’t agree to the increased rent, they will have to leave the apartment and may not always be reimbursed for the renovation costs,” says Eduarda Hekšová from dTest’s consumer advisory service.
But it’s not just about raising rents. While an indefinite lease can be terminated by the tenant at any time and without giving any reason with three months’ notice, in the case of a fixed-term lease, the tenant does not automatically have that option by law. However, this can be agreed in the lease agreement. If the landlord and the tenant agree that they can terminate the lease at any time without giving any reason with three months’ notice, this is fine. However, if the contract only grants this right to the landlord, the tenant could successfully defend against such a termination in court.
A fixed-term lease can also be terminated for the same statutory reasons as an open-ended lease. Typically, this is for breach or failure to perform certain obligations, such as failure to pay rent or remedy defects. In addition to these statutory grounds, there is one more for a fixed-term tenancy. This is where, after the contract has been concluded, circumstances change to such an extent that the tenant cannot reasonably be required to continue the tenancy.
“In practice, this includes, for example, a change in the tenant’s place of employment requiring longer travel to work or a change in the tenant’s social situation, both for the worse and for the better,” Hekšová explains, adding, “Only the tenant can terminate the lease under the law due to a material change in circumstances. However, it is contractually possible to grant such a right to the landlord in the lease agreement or in an addendum to it. According to the law, the notice period is three months, but it can be shortened or extended by agreement. The notice must describe the specific material change in circumstances.”