The following information may be of interest to you.
It is a fact that the real estate market is one of the most complex sectors, particularly with regard to the leasing of real estate assets.
In that regard, before you, as the owner of the property, lease such asset, I would like to offer several recommendations.
Landlords’ usual concerns are mainly threefold: (a) payment of rent by the tenant; (b) destruction of and damage to the property; and (c) eviction of the tenant due to breach or non-payment, and ensuring that such eviction takes place as quickly as possible.
Before addressing these issues, it is necessary to divide the leasing sector into residential leases and commercial leases. The former are governed by the Tenancy Law. The latter are governed by the rules of the Civil Code and the Commercial Code, and that distinction is highly important.
With regard to rent payments, in both cases, in order to ensure effective payment, I suggest that you get to know your tenant well. To do so, you must become somewhat of an investigator, requesting employment certificates, personal references, proof of income, and, if possible, a credit history report through the form provided by Equifax (DICOM) in order to verify the tenant’s record and confirm that he or she is not in default. Too strict? I do not think so. If banks and service providers do it, why should we not request the same from the person who will be leasing our principal asset and source of income?
As to the destruction of and damage to the property, for residential leases, I suggest including in the lease agreement and in the promissory notes that are signed, all persons of legal age who will reside in the dwelling, in the capacity of guarantors and joint obligors, thereby creating, at least from a legal standpoint, the notion of shared responsibility for the care that must be taken of the property.
If the lease is for a commercial or business purpose, the tenant should be required to obtain property damage insurance. This risk is reduced if the premises are located within a shopping center or in an area subject to a condominium regime, since such locations have their own rules and stricter maintenance requirements. Even so, it is worth having such insurance in place, as well as theft insurance.
Finally, with regard to the eviction of the tenant, which is the most complicated aspect of this area, it necessarily involves going before the courts, since it is unlawful to dispossess the tenant, as doing so could amount to the criminal offenses of abuse of rights and violation of domicile. I advise that the lease agreement include an arbitration clause.
Arbitration is a dispute resolution mechanism in which authority is exercised not by a judge, but by a private arbitrator. In this case, I suggest that such arbitration be institutional, since this provides certainty as to the cost of the arbitration. The wording of the clause varies depending on the landlord’s needs. For these reasons, it is advisable to retain an attorney who is knowledgeable in this area in order to avoid future problems. It is better to incur a higher cost for arbitration than to spend two or three years in court without being able to lease the property.
Let us remember that the profitability of a property is measured by the payment of rent, and if the tenant remains in possession of the property without paying, this represents a loss that weighs on the assets of the lessor.
