Startup seeks to eliminate deposits for renting a flat in Czechia

One obstacle that people trying to rent a flat face in Czechia is the high initial fees of rent and a deposit. Property owners want the deposit to protect against possible damage, but for many people seeking to rent, it poses an additional burden.

A startup called Flatform, which began operations last month, aims to help people rent a flat without paying a large deposit. It offers property owners a thorough screening of those interested in an apartment and guarantees higher coverage than in the case of a standard security deposit.

Flatform is a new concept on the Czech market, but similar models already exist in other countries.

"We see the cash deposit as a downright outdated system that unnecessarily adds to tenants' moving expenses. The equivalent of one or two rents can be used much more efficiently by tenants. The cash deposit is not an ideal solution for landlords either," founder Radek Musil said, adding that there were also “awkward situations” when tenants wanted to get their deposits back.

Musil was included in Forbes magazine's 30 under 30 list in 2018 and has already been involved in several other fintech ventures. Along with investor Michal Dědek from the financial holding SFG Group, he created the company Bydlení bez kauce, which operates Flatform. Musil and Dědek told the news site Czech Crunch that in the near future, they will have enough capital of their own, and as such they are not looking for other investors.

With Flatform, the tenant initially pays one-tenth of the monthly rent with the minimum set at CZK 3,500. They then pay 1 percent of the monthly rent, with a minimum of CZK 250, for the duration of the tenancy. People interested in staying in the same flat for the long term may want to consider if this plan works for them.

The tenant of course also has to pay the monthly rent to the landlord and is responsible for any damage. Right now, the service is only available to Czech citizens and contracts are in the Czech language.

Apartment owners can register their flats with the system free of charge. Potential tenants can apply for apartments through the system, and the owner can choose the most suitable candidate.

Dědek said Flatform guarantees the tenants and covers any unpaid rent and damages, up to three months of the value of the rent. “We then demand this money back from the tenant. This eliminates the problem of cash flow and enforcement concerns for the landlord," he added.

The new service can also be applied to existing leases. In that case, Flatform issues a guarantee, and the landlord returns the deposit to the tenant.

Due to the high cost of buying a house and high mortgage interest rates, an increasing number of people in Czechia have to rent a flat. "Rental housing is on the rise and we are here to ensure that it goes as well as possible for owners and tenants," Dědek said.