What is the market practice in Sri Lanka?
This is a very interesting matter mainly because of the rental potential in the market and the type of clients that come to this part of the world. When it comes to rental terms, payment terms and conditions, we can look at the following rental terms and gauge an idea of what’s best to resort to.
Rental Terms – Option 01 – Upfront Payment
This has been the standard market practice for all these years but it could be safely said that this is changing rapidly predominantly because of the working expats who pay the rent off their salary. Then we also have the local category which also breaks down to newly married couples that are working and need to pay in installments. However, this is how the upfront payment scheme works. Regardless of the period of stay whether it one year or five years, the first payment has to be for 01 year along with a month’s deposit (the deposit could be increased if it is a really valuable property). It’s best to stick to 01 month’s security refundable deposit.
Rental Terms – Option 02 – Two installments
For instance, if we are looking at a contract of 01 year, we are noticing that many local as well as foreign clients like to resort to a 06 months advance payment + 01 security refundable deposit. This is the most sought after resort that we have come across as it brings both the landlord and the occupant to a common ground. The second payment or rather the balance payment is made on or before the completion of the 5th month and then the process continues if the contract is renewed.
Rental Terms – Option 03 – Three/Four installments
This payment option is also acceptable but it’s not the most frequently used/proposed method. Here, the payment in advance is either 3/4 months rent + 01 month security refundable deposit.
Rental Terms – Option 04 – One to Three months Security Refundable Deposit + Monthly Rent
This is probably the most favoured option by all clients as they pay a very small amount when it comes to payment terms. The rent is paid on a monthly basis with a date mutually agreed upon but the security refundable deposit is generally on the higher side.
WHY SRI LANKAN OWNERS EXPECT A BULK PAYMENT IN ADVANCE?
One might think that Sri Lankan owners are crazy to demand for upfront payments but it has to be brought to light that there is a degree of fear and insecurity in the minds of these owners. The fear that the tenant would not pay up the rent or would not be in a position to pay the rent, they fear that the tenant may leave without completing the contract period and so, they are at a loss. On the other hand, it also gives the tenant some extra privacy as the owner does not visit the tenant frequently.
With time, I feel this trend will change and owners will understand and realize that the upfront payment schemes (Option 01 and Option 2) will be something that the owners will have to compromise upon purely because the market is expanding and there are so many expats and high end locals who have been expats abroad who will continue to come to Sri Lanka especially since the war is over and the development of this country being taken very seriously.
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