Sublease and rental guarantee agreements causing problems for first-time investors
Starting September 1, companies* offering sub-lease arrangements to investors and landlords will be obligated to include a clause in pre-contract documentation to warn the property owner that future rent may be subject to change.
The new rule has come after a recent spike in complaints from landlords who, at the advice of real estate brokerages and construction companies, built apartments under the expectation of leasing them for a guaranteed rent. After completion, however, the sub-leasing company would either cancel the rental agreement (a relatively easy task since rental law is strongly in favour of the tenant) or decrease the rent offered to the landlord. Some investors were promised that rents would continue to rise 3% annually, only to find out after purchase that the sublessor would only offer a rent of 10% below initial estimates.Read more