Rental Agreement

It is determined for the entire housing unit and for a specific duration with a commitment from the tenant for that period. It is intentionally very protective for the owner. Many clauses are written in this sense. They allow us protection against late payments, damages, or early departures. However, we remain flexible where possible with tenants while still keeping protections for the owners.

 

Rent Evaluation

The amount of rent is always approved by the property owner. However, we advise on the amount to apply based on the current rental market and to ensure better profitability and avoid periods of vacancy (more details below on vacancy).

 

Rent Payment

Each of our tenants must pay their rent and charges at once and before the 5th of the month. This way, in case of delay, we can quickly notice it and contact the tenant to resolve the situation without waiting until the end of the month.

 

Late or Unpaid Rent

We do everything possible in situations of late or unpaid rent. In addition to selecting tenants with stable financial situations, the rental agreement and our management system provide the best protection against this situation. Payment problems are very rare, but we prefer to secure these situations. In this case, we quickly contact the tenant and do not wait until the end of the month to understand the reasons for the unpaid rent. If the situation is not resolved, the rent remains unpaid, and no agreement is reached with the tenant, the rental agreement provides for termination, allowing us to start eviction procedures. The security deposit is then used to pay the rent owed. Note that we have never had a situation of unpaid rent that led to eviction proceedings.

 

Security Deposit

It is required before the start of the rental, and its amount corresponds to two months' rent for each rental. The rental agreement is not validated until the security deposit is paid. This amount is deposited into our management account, allowing us to be responsive and manage all aspects of tenant relations. The security deposit covers unpaid rents and any damages caused during the rental.

 

Insurance

Home insurance is taken out by the owner, not the tenant. We take care of this task as part of our management mandate. The price of insurance varies depending on the size and location of the apartment. It covers you against fires, water damage, theft, etc. For information, in Hungary, there is no unpaid rent insurance due to a very low rate of unpaid rent and administrative simplicity for eviction.

 

Management of Supplier and Intermediary Contracts

We take care of paying all charges related to the apartment. To facilitate payment and management, the contracts for various suppliers (water, gas, electricity, internet, etc.) must be in the name of the apartment owner. Procedures in Hungary are very regulated and strict. Subscribing to a subscription with a supplier requires a lot of time and compliance with several strict conditions. That is why contracts are not in the tenants' names. We ask for a legal proxy from the owner in advance to allow us to subscribe and manage payments to various suppliers and intermediaries.

 

Owner Charges Payment

Charges that are the responsibility of the owner are paid, as much as possible, directly from the rents received to avoid multiplying management tasks by asking the owner to pay bills. Our management is designed to provide maximum comfort by entrusting us with responsibility for these aspects. You receive the balance due to you each month without having to pay additional amounts. However, we may call you for funds for renovations or unforeseen expenses, the amount of which may exceed the rent received. Charges due by the owner include insurance, charges related to structural repairs, plumbing, electricity and roof problems, consumption charges during periods of vacancy, any taxes, and our management fees (this non-exhaustive list represents the main current expenses).

 

Tenant Charges

The tenant is responsible for paying charges related to their consumption and condominium charges (excluding major structural work). At the beginning of each rental, we assess, based on the size of the apartment, previous consumption, and the number of tenants, the amount of charges to be paid in advance. This is a fixed and adjustable amount that the tenant must pay in addition to the rent to cover expenses related to their consumption during the occupancy period. The amount must be sufficient to pay the bills from the suppliers. Note that suppliers such as water, gas, or electricity also operate on a provision basis. That is, they estimate consumption based on previous bills and occasionally take meter readings to adjust the amount. Readings can take place once a year. The amount we ask tenants must then be as accurate as possible because it must not only pay the bills estimated by the suppliers but also their actual consumption. That is why we regularly ask tenants for meter readings to provide them to the suppliers before the end of the rental. This allows for adjusting provisions if necessary and, above all, avoiding the unpleasant surprise of significant charge regularization at the end of the rental.

 

Maintenance and Repair

In case of a problem, malfunction with an appliance, or damage, we take care of making the necessary repairs or restoring it by calling on our network of specialized partners. We have a dedicated page on our website that allows tenants to report any problems. This way, we can be reactive in repairing and maintaining each of the managed apartments while keeping precise records of each reported issue.

 

Condominium General Assembly

They take place every year. We can attend to represent you and defend your vote for important decisions. We attend upon the express request of the owner or in cases where there is an important agenda item that may involve significant exceptional charges. Generally, we keep you informed of notable events within the condominium. Note that in Budapest, the profession of condominium manager is professionalizing. AG invitations can be sent directly to the apartment mailbox without being accompanied by an email, and we may miss the information. We do our best to retrieve these invitations where possible.

 

Maintenance Operations

We take care of all the tasks necessary for the maintenance of your apartment. This work is included in our management fees. The management mandate allows us to act on your behalf for this purpose and to make payments. For safety, the mandate states that for all amounts exceeding 70,000 Forints, we must inform you and obtain your prior approval to make the expenditure (except in cases of emergency, which are generally covered by insurance).

 

Management Fee Charges

They are calculated on the amount of each rent received within the framework of managing the property subject to this mandate, excluding charges paid by tenants. The fee rate is applicable depending on the amount of rent indicated in the rental agreement and is:

- 10% VAT (Hungarian VAT if applicable) for rents totaling less than 300,000 HUF

- 8.5% VAT (Hungarian VAT if applicable) for rents totaling between 280,000 HUF and 570,000 HUF

- 7.5% VAT (Hungarian VAT if applicable) for rents totaling more than 570,000 HUF

These fees are applied for each lease established. In other words, for a legal lot that would be divided into several apartments, the management rate is calculated based on the rent of each apartment and not for the legal lot.

 

Vacancy Fees

The vast majority of agencies in Budapest charge a minimum flat management fee for vacant months and between two rentals (about 14,000 Ft). We do not apply any fees in order to be supportive of our client owners' goals, namely to avoid maximum periods of vacancy.

 

Avoiding Rental Vacancy

To achieve the best profitability for an apartment, it is not necessary to always seek the highest rental price. The rent should be consistent with market prices to attract long-term tenants, avoiding rental vacancies, and maintaining the apartment's condition. A poor tenant profile, a period without rent, and tenant search fees are factors that decrease your rental income and consequently the profitability of your investment. Therefore, we take measures to select the best tenant profiles for the apartments and ensure that rental prices are aligned with the market. Additionally, our lease contracts stipulate that the tenant must inform us of their intention to renew the lease one month before the end date. Otherwise, we may begin the search for new tenants and conduct visits in advance to ideally find a new tenant, minimizing or avoiding rental vacancy periods.

 

Situation Regularization Fees

In cases where the management takeover involves apartments where the payment management of utility bills such as water, electricity, gas, condominium fees, or internet is not up to date, our contract indicates that regularization fees may be applied if the regularization work is significant.

 

Banking Fees

For business accounts based in Hungary, banking fees can be significant for money transfers or currency conversions. To cover these fees, we deduct a percentage of 0.6% from each rent received. With the development of new banking applications facilitating payments in different currencies, these fees tend to decrease, and we will lower this amount whenever possible.

 

Improvement Works

We can undertake the renovation of an apartment (partially or fully), upgrade its equipment, or decorate it according to your wishes. For all these tasks that are outside the scope of regular management, we can perform them upon your request, and we charge an amount corresponding to 10% of the expenditure for these improvements as our fees.

 

Accounting Management

It is important to note that our accounting is always in Forint. We can collect rents in Euros and send you the balance in your chosen currency, but upon receiving the rent or before sending you the balance, we convert it to Forint. Since expenses must be paid in Forint (utilities, internet, insurance, taxes, etc.), we must account for the receipt and sending of balances in Forint. Requesting rents in Euros helps hedge against the depreciation of the Forint against the Euro, which has been the general trend in recent years but is not guaranteed for the future.

 

Balance Payment at the End of the Month

We collect rents at the beginning of the month and wait until the end of the month to pay you the balance due. Our management goal is to minimize your involvement and avoid asking you to pay any bills. Therefore, we wait until the end of the month to pay any charges that may be incurred during the month.

 

Sending an Accounting Report

For each managed apartment, we send you a monthly accounting report on the rental situation. It allows you to track and assess the rental situation for each of your apartments.

 

Payment and Declaration of Local Taxes

We can handle the declaration of your rental income in Hungary and the payment of taxes in Hungary if your only income in Hungary is from the apartments we manage. If you have other income in Hungary, it must be declared along with your rental income. The tax rate in Hungary is 15% for individuals on rental income. However, it is possible to deduct expenses paid from the amount of income received. Therefore, in practice, our clients pay an average income tax rate of 8%. For apartments owned by companies, the tax declaration and payment must be made as corporate tax, which is 9%. Additionally, there is a 2% tax. In this case, the declaration is more complex, and for clients who must go through this system, we engage a local accountant to handle the declaration.

 

Reserve Fund

For tax payments, we propose to establish a reserve fund from each rent received by keeping 15% of this amount. When declaring taxes, we can use this fund to pay them and subsequently reimburse any surplus to you. On average, our clients pay taxes of around 8%. Eventually, we can also adjust the reserve fund rate to avoid having too much surplus. Using our services for tax payment and establishing a reserve fund is not mandatory, and you can handle this aspect directly. In this case, we provide you with all the necessary elements for your income declaration related to the apartments you have entrusted to us for management.

 

End of Management Mandate

Our management mandate is valid for one year, renewable by tacit renewal. If you decide to terminate it, we will provide you with all the necessary documents and details on the accounting that has been kept throughout the mandate duration.