Lease Agreement Records Risk Review
A risk review does not ask whether the seller has produced many documents; it asks whether those documents are reliable enough to support a purchase decision. A lease file can be large and still be high risk when versions conflict, the occupant is unidentified, payments do not match the written terms, or the transaction price assumes vacant possession that has not been proved. Lease records should therefore be assessed as an evidence chain affecting income, possession and the obligations the buyer will inherit after title transfer.
Risk 1: no single controlling contract version
An original lease plus addenda and later correspondence is not inherently problematic. The risk is being unable to determine which provisions still govern. Compare dates, signatures, parties and the exact clause each addendum changes. If rent, security deposit, duration or payment instructions differ between documents without a clear version history, treat the legal and financial position as unresolved until a version map is built.
Risk 2: the occupant does not match the recorded tenancy
When the person using the property is not the named tenant, establish the basis for that possession. Article 322 restricts subletting or transfer of use in residential and roofed workplace leases without the landlord’s written consent. The mismatch does not automatically establish a breach, but a buyer should not accept unexplained possession because the buyer may acquire a landlord relationship whose actual participants are unclear.
Risk 3: payment evidence contradicts the lease
Compare the written rent with actual transfers. Identify missing months, partial payments, unusual beneficiaries and unexplained changes in amount. Article 313 places the rent-payment obligation on the tenant, and Article 315 governs default in rent or due ancillary expenses. A seller’s claim that “there are arrears” should not be carried into the valuation unless a month-by-month ledger can show the amount and the periods concerned.
Risk 4: the security deposit cannot be traced
If the lease refers to a deposit but there is no reliable record of its amount, custody or settlement, a liability may surface when the tenancy ends. Article 342 limits contractual security for residential and roofed workplace leases and provides a bank mechanism where the security is money or negotiable instruments. Risk rises when the seller says the deposit was “used” without a ledger, consent, judgment or other clear settlement basis.
Risk 5: financial clauses may conflict with mandatory rules
Review clauses imposing additional payments or penalties. Article 346 states that, for residential and roofed workplace leases, the tenant cannot be burdened with payment obligations other than rent and ancillary expenses; in particular, penalty clauses for late rent or provisions making future rents immediately due because of default are invalid. A clause appearing in a signed contract is therefore not automatically an enforceable asset for the buyer.
Risk 6: the current rent is weakly documented
Trace how the rent moved from the original amount to the current figure: contract wording, later agreement, notice, court determination or a documented payment pattern. Do not use an unsupported rent figure in the investment yield. Rules on rent determination can change over time, so a disputed increase should be checked against the legal text applicable to the relevant period rather than an old article, social-media post or remembered percentage.
Risk 7: the seller assumes the lease ends automatically
For residential and roofed workplace leases, expiry of the written term alone is not enough to conclude that the tenancy ends. Article 347 contains special continuation and termination rules, and Article 348 requires a termination notice to be in writing. If the transaction depends on the new owner’s need or an evacuation undertaking, Articles 351 and 352 contain specific conditions and deadlines. Vacant-possession value should never be priced from an unsupported expectation.
Risk 8: notices exist but service cannot be proved
A notice that cannot be connected to dispatch or service evidence may not produce the procedural effect claimed by the seller. Check the notice copy, date, recipient, delivery channel and result. When a statutory deadline depends on notice, missing service evidence should be treated as a material legal-review point before payment.
Risk 9: mediation, litigation or enforcement is not fully disclosed
Request a representation about existing disputes and copies of the relevant files. Article 18/B of the Mediation Law has, since 1 September 2023, generally made rental disputes subject to mandatory mediation before litigation, with the statutory exception concerning eviction through non-judgment enforcement. A statement that “there is no lawsuit” is incomplete if a mediation file, enforcement track or advanced notice process is already active.
Risk 10: there is no transfer memorandum at sale
Article 310 makes the new owner a party to the lease when ownership changes. If closing does not allocate rent balances, the deposit, payment instructions, open notices and the document package between seller and buyer, the legal relationship may transfer while the operational knowledge remains with the seller. That is a financial and management risk even when title itself is clean.
Practical risk grading
- Low: one reconciled contract history, identified occupant, traceable payments and deposit, no undisclosed dispute.
- Moderate: defined documentation gaps that can be cured before payment, such as a missing addendum or deposit settlement.
- High: conflicting versions, unexplained occupant, unproved arrears or transaction value depending on uncertain vacancy.
- Legal hold: authenticity concerns, an active possession dispute, or litigation/enforcement whose effect cannot be understood without specialist review.
Conclusion: The value of the risk review is the distinction between “a file exists” and “the file can be relied on.” When the governing version, occupant, payments, deposit, notices and procedural status are consistent, the tenancy can be priced and administered. When they conflict, the conflict should become a closing condition, a repricing item or a reason to stop before funds are released.