What do you risk as a landlord if you do not make a lease agreement with the tenants. “The absence of a contract backfires hardest on the owner”

Real estate is considered a safe investment, given that prices will not fall, and in the case of renting the home, the investment can be recovered quite quickly. The specialists consulted by “Adevărul” explained how big the risks are in the case of “black” renting.

In the case of renting without a contract, the risk is that you will no longer be able to get rid of the tenants. Photo by Shutterstock

Renting “in the dark”, by not registering the contract or not declaring the income, attracts not negligible risks, explained for “Adevărul” the lawyer Elena Grecu, founder of Grecu Partners, explaining that the non-declaration constitutes a contravention and is sanctioned, according to art. 336 para. (2) lit. d) from Law no. 207/2015 on the Fiscal Procedure Code, with a fine between 500 and 1,000 lei for individuals.

“In addition to the contravention fines above, failure to declare income may result in recalculation of taxes (10% tax + CASS, as applicable), plus penalties and interest.

But the biggest risk is that the owner can be accused of tax evasion. Thus, failure to register the contract and failure to declare income constitutes tax evasion, punishable by imprisonment from 2 to 8 years or a criminal fine, depending on the damage.

From the perspective of the landlord-tenant relationship, the lack of a clear and recorded contract makes it difficult to prove the rent, the guarantee and the assumed obligations, it can prolong the eviction procedure and significantly increase the risk of litigation“, said the lawyer.

Without a contract, the landlord loses the advantage of being able to evict his tenants

Lawyers Dumitru Lazăr and Alexandru Alexandrescu, from the Buju Stanciu y Asociatii law firm, explained to “Adevărul” that the main risk of “black” renting is not only fiscal (taxes, interest, penalties), but also a very practical one. “Without a contract registered with the tax authorities, the owner loses the advantage of the enforceable title”, said Alexandru Alexandrescu for “Adevărul”.

According to him, without an enforceable title, on the one hand, the recovery of the outstanding rent and the eviction are more difficult, and on the other hand, the tenant remains in a fragile position – it is difficult to prove what he paid and, often, he cannot justify his residence in relation to various institutions.

“In other words, the initial 'economy' quickly turns into a high cost when the first problem arises for both parties”said Alexandrescu.

The absence of the contract backfires most harshly against the owner

Asked what you can do legally if you did not rent with a contract and you want to evict the tenants, and they don't want to leave, lawyer Dumitru Lazăr told “Adevărul” that this is the situation in which “the absence of the contract comes back most harshly against the owner”.

“Without a registered written contract, there is no enforceable title, so quick eviction is not possible. The owner is left with only one way: the court. Concretely, he will have to formulate an eviction action, in which he will prove the existence of the residential relationship through any means of evidence allowed by law: witnesses, messages, receipts, bank statements. The procedure is faster than a regular civil dispute, but it still takes months, not days. Courts are increasingly admitting digital evidence (screenshots, bank history) to prove the verbal housing relationship, but this does not shorten the procedure, it only increases the chances of winning”said Lazarus.

How is it in other European countries

In most European states, renting a home without a written contract does not mean that the relationship between owner and tenant is not regulated by law. Even in the absence of a signed document, many legal systems recognize the existence of a verbal agreement if it can be shown that the person lives in the property and pays rent regularly. Thus, the simple payment of rent, the existence of bank transfers, conversations, witnesses or the payment of utilities can constitute evidence of a residential relationship, and this situation generates rights and obligations for both parties.

Overall, the trend in Europe is to protect residential stability and prevent abuses, so the lack of a written contract does not invalidate the existence of a legal relationship. More often than not, the situation creates risks for both parties: the tenant may have difficulty proving the exact terms of the lease, and the landlord may encounter obstacles to eviction or be exposed to tax consequences. Therefore, even if verbal agreements can be recognised, European law clearly encourages the formalization of tenancy through written contracts.

In Romania, although the law states that rental contracts should be registered for tax purposes, a verbal agreement can produce legal effects if it can be proven. The tenant cannot be legally evicted without a court proceeding, and the landlord risks tax penalties if the rental income is not declared. In practice, the lack of a written contract creates uncertainty for both parties, as the exact terms of the lease are difficult to prove.

In Germanyverbal leases are fully legally binding and tenant protections are very strong. Even without a written document, the landlord must follow strict procedures for terminating the tenancy or eviction, and any eviction without a court order is illegal. The German legal system places particular emphasis on the stability of the tenant's home.

In Francethe law normally requires a written contract, but the courts may recognize the existence of a tenancy if occupancy and payment of rent are proven. The state provides important protections to tenants, and eviction involves clear legal procedures and sometimes limitations related to social protection for vulnerable people.

In Spainalthough written contracts are the standard, the existence of a tenancy can be recognized even in their absence if there is evidence of occupancy and payment of rent. Once the tenancy relationship is established, the owner cannot evict the occupant directly, as a legal procedure is required, which can take a significant period of time.

In United Kingdomverbal tenancy agreements are legally recognized and provide the tenant with essential rights, such as protection against illegal eviction and the landlord's obligation to provide notice before the tenancy ends. Even without a written contract, the law establishes minimum rules regarding the relationship between the parties.

In Italythe legislation is stricter regarding the formalization of the lease, as the lease agreement must be in written form and registered with the tax authority to produce full legal effects. However, if a person lives in a property and can demonstrate payment of rent, the courts may recognize the existence of a de facto landlord-occupant relationship. In such situations, the landlord cannot evict the tenant without due process, and failure to register the contract can attract significant tax penalties for the landlord. The Italian legal system is particularly aimed at combating undeclared tenancies ('affitto in nero'), and the consequences can include fines, additional tax obligations and, in certain cases, enhanced rights for the tenant if an unregistered tenancy is proven to exist. Thus, although the law clearly requires a written and recorded contract, housing protection and fiscal control lead the authorities to deal with these situations formally even in the absence of documents.