LegalGELegalGE
...

Rent Control Compliance

Is there a legal limit on how much rent can be increased in Georgia?

There is no statutory cap (rent control law) on rent increases for private commercial leases. Limits depend entirely on what is agreed in your lease contract.

Can my landlord increase rent due to inflation?

Only if the lease agreement contains an indexation clause allowing for adjustments based on inflation or CPI. Without such a clause, the rent is fixed for the lease term.

What if I cannot pay the increased rent due to currency exchange rates?

If the contract pegs rent to USD/EUR and the GEL devalues, you are liable for the higher amount unless the contract has a "cap" or you can prove "hardship" under Civil Code Article 398 (which is difficult).

Does Georgia have a rent control board?

No, disputes regarding rent amounts are resolved through negotiation, mediation, or in the civil courts based on the contract and the Civil Code.

Reading Time

4 min

Published

...

Rent control compliance in Georgia refers not to government-imposed strict price caps (as seen in some Western jurisdictions), but rather to adherence to contractual and legislative regulations that ensure the fairness and legality of lease pricing. Often, tenants and landlords face issues related to arbitrary rent increases, inflation indexation, and currency risks. Georgian legislation protects parties from bad faith actions and establishes rules on how lease payments should be adjusted when circumstances change. Ensuring proper application of rent control mechanisms and compliance is essential for maintaining financial stability and long-term partnerships.

What Does This Service Cover?

The Rent Control Compliance service focuses on the legal soundness of financial terms in lease relationships. Specialists on Legal.ge offer:

  • Developing Indexation Mechanisms: Drafting clauses that regulate rent increases based on objective criteria (e.g., official inflation rate, Consumer Price Index - CPI) to eliminate landlord arbitrariness.
  • Managing Currency Risks: Since payments must be made in GEL but prices are often pegged to foreign currency, lawyers establish "Exchange Rate Collars" to protect parties from sharp fluctuations.
  • Contract Compliance Audit: Reviewing existing agreements against Civil Code norms that prohibit unconscionably high (usurious) prices or the imposition of forced terms.
  • Negotiating Rent Reviews: Negotiating a fair adjustment of rent amount in cases of force majeure or substantial changes in market conditions (Article 398 of the Civil Code).
  • Tax Compliance: Ensuring declaration of the actual rent amount and avoiding "under-the-table" cash practices, which carry serious tax risks.

Common Scenarios and Real-World Examples

Disputes related to rent pricing are common. Here are a few examples:

  • Doubling the Rent: A landlord demanded a 100% rent increase citing market price hikes, even though the contract had not expired. A lawyer helps the tenant prove that the contract does not allow for unilateral price changes and protects them from eviction.
  • Exchange Rate Fluctuation: The contract price is pegged to USD. Due to a sharp drop in the GEL exchange rate, the rent in Lari increased by 20% for the tenant. The parties cannot agree. A lawyer steps in to negotiate a fixed rate or a discount based on "substantial change of circumstances."
  • Incorrect Inflation Calculation: The landlord uses the wrong index to increase rent. A specialist checks National Statistics Office data and ensures a correct recalculation.
  • Tax Dispute: Parties agreed on a low price in the contract to hide taxes, paying the real amount in cash. In a dispute, the court only recognizes the official document, harming one of the parties.

Georgian Legislation and Regulations

This area is regulated by the Civil Code of Georgia, specifically the principle of freedom of contract limited by the obligation of good faith. Article 398 of the Code ("Change of Circumstances") is the main instrument for rent review if performance has become manifestly inappropriate for a party. Also, the Law on the National Bank of Georgia prohibits setting prices in foreign currency (advertising and offering), although parties have the right to use a currency pegging clause. The Tax Code of Georgia strictly controls the taxation of lease income considering market price principles (between related parties).

Service Process

Working with a specialist on Legal.ge begins with an analysis of the existing lease agreement. The lawyer assesses how compliant the price change terms are with legislation and the client's interests. If the contract is new, protection mechanisms are developed (e.g., a "Cap" on increases). In case of a dispute, the lawyer prepares a formal letter (Legal Opinion) for the other party, justifying the groundlessness of the demand or the necessity of a compromise. If needed, the matter is taken to court or arbitration.

Why Choose Legal.ge?

Lawyers presented on Legal.ge are well-versed in the dynamics of the Georgian real estate market and court practice regarding lease disputes. They will help you avoid financial manipulations and ensure fair lease terms. Finding a specialist through our platform means you have a qualified advisor who will protect your budget from unforeseen costs. Find a trusted lawyer on Legal.ge today.

Updated: ...

Specialists for this service

Loading...