Terms to know when RENTING!!!

The whole system of paying rent needs to change in Sri Lanka. Firstly, the terms or rather definitions need to be learnt and understood properly and not assumed. The issue with assuming terms and conditions is that it would lead to an eventual cancellation of the deal, which is not what we want.

Property owners need to be educated and that is also one of the prime purposes of setting up this BLOG!

So what are the definitions which come into play? Let's take a look.

1. Advance

This is something that needs to be removed from the system but will take a long time to come into effect. Many property owners do not know the difference between this and the deposit (see below). Advance is the amount you pay at the point of signing the agreement. Of course, you can also pay a refundable advance (small amount) just to lock the property so the property owner will not show it to anyone else but that rarely happens in rentals. 

2. Deposit

This is the security refundable deposit and again a very tricky one. There are property owners who have varied terms and conditions, some expect you to pay a security refundable deposit of 6 months' (which is stupid and insane), some expect you to pay 3 months and some expect you to pay 1 month which is acceptable. 

There is no need to pay a high security refundable deposit if the property owner can visit once in two months and get the tenant to fix whatever he or she has broken or damaged. The security refundable deposit could be taken as the rent instead -why should you pay so much? I don't see a point in locking so much money and what if it's not returned. At times, clients forget to collect the retainer. It's a win-win situation for both if the owner has the right attitude towards the client. 01 month is acceptable and best to stick to it. 

3. Tax

This could mean a million things. Get your lawyers involved. Get the good lawyers in. You are paying them and they need to be impressive in what they do. It's sad to see some lawyers doing the realtor's job under the table. I am fine if it's done properly but doing the job under the table just to make a buck will only contribute towards the corruption of the profession. There is property tax, stamp duty, government tax and what not.

4. Legal Fees

This is the fee paid to the lawyer for drawing the agreement and looking after the interest of both parties and hence, it's always split.

The system requires a great deal of change and this will begin only when someone who knows the way shows the way to everyone in order to conclude a successful deal.

Rental Transactions - What is the paperwork procedure? How does it work?

This is one of the foremost requisites that needs to be checked / questioned / asked and inquired about when discussing and negotiating with the property owner.

Renting a property- Sri Lankan Context

A few years back, a rule was brought that if you are a non-sri lankan passport holder and you are renting out property, be it a house, land or apartment, you are liable to pay 15% tax of the total period you plan on staying as stated in the lease agreement. However, the good news is that this is being reviewed and chances are that this rule would be null and void in a few months, if not, it's a sorry scene for all the foreigners.

SO what's the solution if the rule remains so?

Where there is a will, there is always a way and I don't know whether this was something that was the brainchild of a lawyer or a property owner. In most cases, we have noticed that a mutual agreement is done and the papers are not sent for registration which in this instance, we are made to understand that neither party can seek recourse in court and that the money credited to the property owner's account is naturally unofficial as the transaction is not registered in order to avert the tax payment. 

Of course, the above is also done to save 1% stamp duty which is generally split into two. So, even if the rule is changed, there will be some naughty property owners lagging around just to save a minute fee. Lawyers on the other hand need to be well versed in explaining the consequences of such acts and keeping the clients well informed. I noticed that there are lawyers who are not aware of tax laws when it comes to foreigners and they are doing lease agreements and so on which is a shame. 

If you are renting any property, it's always best to go with an agent / agency, it gives you that extra bit of security and reliability. Once you have liked the place, ask the relevant agent what the next steps are how to sign up, do not confirm on the spot. Let your agent handle that for you and the best ones in town actually know how to seal the deal without too much hassle. 

Clauses in the agreement

This can be very tricky if you are looking to have it your way, some of the clauses in the agreement are inserted purely as security layers and have absolutely zero probability of happening for real. This applies to both the client and the property owner and the best advice I can give you is - DO NOT BANK ON THE CLAUSES IN THE AGREEMENT BUT INSTEAD BUILD THAT TRUST AND RELATIONSHIP OF RESPECT AND INTEGRITY where both the client and the property owner feel that they should be honourable and not lose their integrity. 

Die hard businessmen may laugh their hearts out what is mentioned above as it's always advisable to have everything clearly stated in black and white and hence what I have just mentioned above might be contradicting but let me tell you why - As far as I know, according to the Sri Lankan law, as a property owner, you cannot kick your tenant out!!! That is the bottom line. From a tenant's perspective, yes - you can stay for as long as you like and create as many problems as you like. This does make the property owners slightly vulnerable and hence it does not matter how the zero-probability clauses span out which is why I stress on the importance of the lines in capital letters above - please read them again.  

The paperwork process / procedure

This is quite simple, let me give it a shot in showing it baby steps:

Step 01 - A confirmation e-mail from the client or the client's agent/ agency. 

Step 02 - Vetting the draft of the agreement 

Step 03- Finalizing the final draft of the agreement if the deal is still on from both sides. (Yes, the deal can fall through when in step 02. I have observed this many times)

Step 04 - Arranging to meet up and sign the agreements.

Standard duration period of the above is generally between 4 - 7 working days while some deals happen on the day and some in a day or two as well. 

IMPORTANT TIPS

While the above steps take place, it's important for someone to take the leadership and to ensure that the deal happens. Often, it's the property owner and that's the best person to get the job done. The effective property owner will agree that this is the way to go.

Punctuality plays a big role, try to make it 15 minutes before the actual time and be on time. It makes a world of a difference and the impression it creates goes a long way.

Good luck and happy renting!!!

Please write to info@mrtgiant.com if you have any deals on the table or require any of our services. *Terms & Conditions Apply* 

10 THINGS TO KNOW ABOUT SECURITY IF YOU ARE AN EXPAT IN SRI LANKA

Frequently asked questions with regard to security in apartments.

Q: What are the most preferred locations by expats?
A: Colombo 02, 03, 04, 05, 07 & Rajagiriya


Q:Are security personnel trained?
A: In Luxury & Super Luxury Apartments - Yes
In Basic & Normal Apartments - Not Really


Q: Do all apartments have a camera in the lift?
A: No


Q:Is the security really super tight in apartments?
A: In Luxury & Super Luxury Apartments - Yes
In Basic & Normal Apartments - Not Really


Q: How trustworthy are maids and security personnel in Colombo?
A: Not one bit.


Q: Have there been any serious situations in apartment complexes in Colombo?
A: Yes


Q: It is safe to live in a house or an apartment?
A: It's safe to live in an apartment but a house with security is equally good.


Q: Are the security personnel nice to the residents?
A: Yes, they are especially if you are white skinned.


Q: Is Colombo generally considered to be safe to live in?
A: Of Course.


Q: How is the attitude of Sri Lankans towards expats/ foreigners?
A: Friendly. Sri Lankans are friendly people that like to win hearts. Treat them with respect and dignity and they will not fail reciprocating the same.

KEEP FAMILY AND CLOSE FRIENDS AWAY FROM YOUR REAL ESTATE AFFAIRS

This is one of the most important elements of any person's real estate portfolio. You cannot afford to get family and friends involved in real estate affairs unless you are extremely certain that their involvement is only going to boost the interest of all parties concerned and thereby get the job done.

Why should you keep family and friends away?

The answer is simple, because of who they are. Family politics is a subject that is known to the whole world but for some strange reason it's always buried under the carpet and people turn a blind towards it. Yes, there are times when you need their support and there are instances and situations where the above is null and void but for the most part of it, it's best advised that you do not get them involved.

It's okay to obtain advice and keep them informed etc. Sometimes you might also like to have them represent you as their POA (Power of Attorney) but ensure that you give them something back in return either in the form of some payment or some kind of compliment to mark a goodwill gesture and keep that family or friendship bond held high with respect and dignity. There is no such thing as a free lunch. So don't get caught to that trap.

Sometimes we are too nice

Yes, if you agree with the above and have been hurt by a number of people. You need to go on the professional lines with your real estate affairs. Have all dealings in black and white, nothing agreed or confirmed upon verbally. Everything should be based on a contract either via email or print. This gives both parties equal binding and the level seriousness is felt, understood and realized.

When you are too nice to people, in most cases, they take advantage of your humble quality and sometimes wriggle out of the problem they put you into without you noticing that it was them that created the whole fiasco. Our experts have seen and experiences how family interventions eat up a deal and drive the whole deal to a totally diverse direction.

Under the table matters are also done by such people. Always keep a distance with family and friends when it comes to business. It's best to keep them at arms length but yeah, there are certain exceptions and sometimes it's best to let be around you just so you know someone has your back and will punch if you make the wrong move.

Agent Culture in Colombo

How do Agents operate in Colombo? Are they cultured? Are they good, honest and trustworthy?

The above questions are some of the questions that come to your mind when you think of real estate agents and brokers that operate in Colombo and how you can hire the best. There are certain types of Agents which operate in Colombo. The main two categories are the full time professionals and the part time amateurs. The professionals are the ones that are advisable hiring but if they are not in a position to help you, then you are left with no choice but to seek refuge under the umbrella of the amateurs who are sometimes luckier than the pros. 

The Sri Lankan mindset when it comes to agents and brokers also need to change. It's sad to see some people who are fully occupied in their profession (not real estate) demand 50% from the agents and brokers just to mediate when the owner is abroad. Sometimes, these people are family and friends. Owners should never let family and 

friends get involved in their real estate affairs. There are very few trustworthy agents and you must do your homework before you figure out who or which agent is going to represent you, after all, agents and brokers always represent someone, it is either you or the client they bring in. 

Sri Lanka is going through a phase where there are too many agents in town and majority of them are there in the market purely to make a buck. There is animosity and hostility among agents too and it makes serious competition come to life. Unfortunately there is no government regulation or system of governance in the country where an agent is trained and polished before they brought into the market. Sri Lanka's only real estate agency that trains agents in Mr. T. There is so much that agents can learn just to maximise their earning potential and be better professionals in the market. 

It's not easy to become an agent and then to be a famous broker in Sri Lanka. People look at you condescending and they think you are a couple of notches below them. Some even judge you and put you in a very different circle. The truth is that the best agents in the country are sometimes treated like poop and that is when the industry experience either the exit of a good agent or a paradigm shift in the life of that particular agent. 

Agent / Agency Involvement in Rental / Sale transaction!!! Super Important!!

It is always advisable to keep the Agent / Agency aware and keep them bound to the deal purely because it is because of them that the deal is taking place and they are responsible if something goes wrong terribly. You may be the landlord / Potential Tenant / Buyer or Seller etc. It does not matter as long as you keep the Agent / Agency involved and properly updated, you have done your bit. The professionals love to get involved and learn more and more. It's amateurs who only want the money. 

Not only does it help to have the agent or agency involved but you could also use them as witnesses in the same transaction and that truly helps a great deal.  They are able to understand matters more clearly and advise if something goes wrong or is not done in the manner it should be done. There are very few people who have a not-so-great impression about agents in Sri Lanka, this mentality is surely going to change especially with the professional agents and agencies that are in town. There is a big difference in the experience you receive from the amateurs and the pros. 

Do not single out the agents or write them off, there is a good chance that you would come across a poor agent who gives you a hard time, try to work with as many as you can. You would know which agent fits into your matter with little difficulty. When it comes to sharing information with agent / agencies, it's best to have most of it in writing and thereby keep things professional. Some Agents hate to put matters in black and white while the pros simply love that aspect of communication. 

Have a pleasant experience with the agent/ agency you choose to work with.