14 Things To Consider Before You Sign A Lease In A Foreign Country
Dear Student,
As we discussed yesterday, you want to rent first (not buy) in your new home overseas, wherever that turns out to be.
Today, I want to walk you through points and issues you should know (and that you may not be prepared for) before you sign a lease in a foreign country. Renting a place to live is not as straightforward a process everywhere in the world as it is in the United States, for example.
Below, therefore, are 14 important things to consider before you acquire a foreign landlord…
1. What’s included in your monthly rent? Make sure the lease establishes clearly what’s included in your rent and what’s not—building or homeowners’ association fees, water, utilities, phone, internet, etc….
2. If you’re liable for utilities, find out the previous renter’s average costs. Sometimes these can be a shock. When we first moved into one of our office spaces in Panama City many years ago—a house that was the same number of square meters as the house where we were living at the time— we realized it had a monthly electric bill three times higher as that of the house that was then our home. This, thanks to the cathedral ceiling in the great room…
3. Understand what’s included with “furnished” versus “unfurnished.” In some places, “unfurnished” means no refrigerator, no stove, maybe even no lighting fixtures. Does “furnished” include air-conditioning units? Years ago, when we were shopping for a house to rent in Waterford, Ireland, I was confused by ads that indicated “all mod cons” (that is, “all modern conveniences”). Finally, I came to understand that this meant the house had central heating. Many in Ireland at the time still didn’t…
4. Understand how, where, and who you pay which bills to each month. Maybe you deposit the rent directly into the owner’s bank account. Maybe you pay a rental manager. Maybe you have to hand-deliver the check to your landlord. In Europe, rent is often paid by direct debit from your local bank account, which means you need a local bank account. And often, building and HOA fees are paid to a different person or organization and by a separate check, not as part of the rent…
5. Check for a sales clause in your lease. What protection do you have against the owner selling the apartment and giving you limited notice that you have to move out? The lease should include a compensation allowance in case the place is sold while you’re renting…
6. Understand who is responsible for setting up the utilities. Will they remain in the landlord’s name or will they be switched to your name? There are pluses and minuses either way. For example, what is your liability if the electric bill is transferred into your name?…
7. Ask what documentation you’ll have to produce to be able to rent. Depending on where you’re moving, the answer could be none. On the other hand, in some markets (France, for example), you’re going to have to prepare a complete dossier of paperwork (including, for example, recent bank statements, pay stubs, reference letters, letters of guaranty) to submit for approval before you’ll be able to sign a lease.
In Panama, you generally don’t need any documentation to rent. You find a place, sign a lease, pay your deposit, and move in. In Paris, on the other hand, again, you’ll need a folder full of paperwork—unless you rent on the black market. Renting long term on the black market can be more expensive, but it overcomes the dossier hurdle, which, depending on your situation, you may not be able to meet.
8. In France, you need to satisfy the landlord that you can afford to become his tenant, and, because it’s France, you do this by creating a thick dossier of financial documents, bank statements, pay stubs, reference letters, bank letters, guarantor letters, etc. It’s a serious effort that you can’t undertake lightly…
9. What repairs and maintenance are you responsible for? In some countries, as the renter, you can be responsible for structural repairs (cracks in the façade, for example, or a leaky roof)…
10. Document any existing damage and the current condition of used fixtures or appliances. Take photos…
11. Understand when the rental period begins. The start date of your rental (that is, the date from which you’re paying rent) doesn’t always coincide with the date when you take up occupancy. Here in Panama City, for example, we paid rent for two weeks in advance of our moving in. The market was so competitive at the time that we had to agree to pay half a month’s rent in advance of the first of the month we moved in…
12. Understand what deposit you will be required to make. The general rule is that you’ll have to pay the first month’s rent plus a deposit equal to one month’s rent. Sometimes, the deposit can be one-and-a-half or two months’ rent. Whatever the deposit, don’t expect to see it again. Friends in Paris joke that the best way to think about any security deposit you make in that market is to amortize it over the lifetime of your rental. In other words, consider it part of the rent. (I’m speaking about long-term rentals, not short-term tourist stays.)
In Panama, if your landlord is following the law, your deposit will be posted with MIVI (Panama’s department of housing). MIVI holds the funds and then releases them at the end of the rental term. If something is to be deducted for damages, the landlord informs MIVI, and the renter (you) are given a chance to sign off on the amount to be withheld for repairs. Unfortunately, not all landlords do this (many foreign landlords aren’t even aware that they’re supposed to do this). This means your deposit is at risk.
In the case of our first rental in this country, an apartment in a high-rise, the landlord returned our deposit within a couple of weeks of our moving out. He made no deductions, and we got our deposit back in full. In the case of the house we rented in Casco Viejo, the property manager refused to return our deposit, citing damages. However, he refused to tell us what the so-called damages were or to itemize the costs for repairs. He kept the full amount. As he hadn’t posted the amount with MIVI but kept it himself, we were out of luck.
13. Don’t sign anything until your lawyer reads it first. Yes, you want to use an attorney. You know to use an attorney when you buy property overseas, but you should also use one when signing a rental agreement in another country. Unless you are very familiar with tenants’ rights and the particulars of rental contracts in the country where you’re renting, it pays to have someone who is reviewing the documents before you sign. A good attorney will also inform you of any negotiable clauses—that is, any opportunities for you to adjust the terms of the agreement to your benefit.
14. On the other hand, don’t be surprised if you’re not asked to sign anything at all. Outside the main cities in countries like Panama and Nicaragua, for example, the protocol for renting a man’s house from him might be a handshake, not a written agreement. This shouldn’t necessarily make you nervous…
Kathleen Peddicord
Your New Life Overseas Coach
P.S. Tomorrow: How to find a rental in the place where you want to live…