Letting your flat to a friend may seem like a quick and practical solution:
„I will not have to deal with adverts, brokers, strangers or worry about them damaging my flat. I know my friend, I trust them, I will give them a better price and they will take good care of my flat.“
But what if, instead of doing someone a favour, you are making a huge mistake?
Letting to a friend may look like a win-win solution, but in the long run it is considerably riskier than it might seem. We asked our real estate brokers what they think about letting to friends. Let us look at the main pitfalls such an arrangement brings.
In the Czech Republic, an estimated one third of rentals are arranged through personal connections. A flat is handed over quickly and easily without an advert, sometimes even on the basis of a verbal agreement alone. The owner is pleased with how much time, energy and paperwork they have saved. Sometimes even tax, when they believe that, since it is a friend, the tax office will not find out. However, this saving is only short-term.
Many owners are under the illusion that a friend will look after their flat better than a stranger. However, this is completely mistaken. Under the Civil Code, every tenant has a legal obligation to carry out routine flat maintenance (including minor repairs) and promptly report any damage to the landlord. In other words, a friend offers you no added value. In practice, a tenant who is a friend often brings more disadvantages.
„Of course I will not charge my friend the full price.“ This is how many owners think. But it means only one thing: you are voluntarily subsidising your friend out of your own pocket. In practice, the discount is usually 10–20 %. In Prague, you can easily be losing CZK 2,000–4,000 per month, or up to CZK 48,000 a year. That is already enough to buy new appliances.
A real-life example:
Petr let his flat in Brno to a friend for CZK 2,000 less than the usual price. He saw it as a minor matter. But after three years, he realised that the difference amounted to CZK 72,000. „I could have had a new kitchen for that,“ he says today, but he did not dare ask his friend for an increase.
When dealing with unfamiliar tenants, owners routinely check their payment record. With a friend, it does not usually occur to anyone. Yet they too may have liabilities you know nothing about. Or they may run into financial difficulties, and then it can be very hard to evict them. After all, you would not let them down when they are having problems. We therefore recommend checking even an acquaintance against debtor registers, so that you can be certain.
Another complication is your negotiating position. While an unfamiliar tenant expects a formal relationship and respects the terms of the agreement, a friend expects a more accommodating approach.
Increasing the rent for an unfamiliar tenant? Perfectly normal. Increasing the rent for a friend? An awkward situation. That is why owners often keep the rent unchanged for several years, even as prices in the area rise.
A real-life example:
When Karel asked his friend for a rent increase of CZK 1,000 after two years, the offended response was: „I look after your flat, repair everything here, and this is how you treat me?“ The friendship cooled, and when the friend eventually moved out, they stopped speaking altogether.
Repairs can be similarly problematic. With an unfamiliar tenant, you clearly state what they are responsible for. With a friend, you often turn a blind eye and pay for it yourself.
A real-life example:
The friend promised to repair a broken shower enclosure. But the repair kept being postponed, the enclosure continued to fall apart, and eventually the owners had to call a plumber. The bill? CZK 8,500. The friend looked remorseful, but did not pay the money.
And what about the notice period? An unfamiliar tenant is more likely to observe it. But you will often allow a friend to leave straight away. The result? Three months with an empty flat and a loss of tens of thousands.
A real-life example:
The tenant, who was a friend, got a job abroad and announced: „Look, I am leaving next week already, hope that is all right.“ The owner agreed, after all, it was a friend. The result? Three months with an empty flat and a loss of CZK 45,000.
Some landlords believe that if they let to a friend, they do not need to declare the rental income for tax. However, that is a gamble. Checks are becoming increasingly frequent; in Prague alone, hundreds of reports are made each year by neighbours or owners' associations (SVJ) concerning illegal lettings. What initially appears to be a saving of a few thousand can therefore turn into a fine of tens of thousands of crowns. It is not worth the risk. If you want the assurance that everything is in order, simply enter into a standard lease agreement and declare your rental income in your tax return. These days, this can be arranged easily online.
The greatest risk, however, is probably damage to the relationship itself. As the saying goes: if you want to lose a friend, lend them money. Financial disputes are among the most common reasons why relationships within families and between friends break down. Letting a flat is also a sensitive matter, involving substantial sums and a long-term commitment. If you do decide to let your flat to a friend, one possible solution is to place a property management company between you, ensuring that all communication and payments are handled professionally and without personal emotions.
At first glance, letting a flat to a friend may seem appealing. In reality, however, you risk not only money, but above all the friendship itself.
To avoid problems:
always draw up a written agreement (lease agreement template),
declare your rental income properly (How to tax rental income),
stick to market rates (rent calculator),
and vet your tenant, even if you know them (hassle-free rental).
A flat is worth millions of crowns. It is certainly not worth taking risks simply because you want to save time and do a friend a favour.