Rent in Foreign Currency: How to Write It and Model the Risks

Rent in foreign currency: the essentials 🏠💱

Charging rent in a foreign currency is common in tourist and international markets like Batumi. It offers stability to owners and familiarity to foreign tenants. Still, rental contracts in currency require precise clauses and risk-aware calculations to avoid disputes and protect real income.

Why precise wording matters 🔍

• Exchange rate changes affect the real value of payments for both sides.
• Vague terms lead to disagreements when rates shift.
• Without clear indexation or recalculation rules, one side may incur unexpected losses.

How to draft currency clauses — practical points ✅

1) Specify currency and amounts clearly

Name the currency explicitly (for example, euro or US dollar) and indicate amounts both in numerals and words. If you want flexibility, add a recalculation mechanism into the contract.

2) Define payment time and place

State when a payment is considered completed (date of credit to the account, date of cash payment) and which account/currency the tenant should use.

3) Exchange rate source and recalculation method

If payments may be made in the local currency (lari), specify the source of the exchange rate (official central bank rate or a named commercial bank) and the exact moment of rate fixation (payment date, invoice date, etc.). That reduces disputes.

4) Indexation and adjustment rules

Set a clear indexation mechanism: frequency (annual, semiannual) and triggers (inflation linkage, currency movement). Describe the formula in plain terms to avoid ambiguity.

5) Force majeure and extreme rate swings

Agree on how to proceed in case of strong rate movements: temporary adjustments, renegotiation rights, or an automatic review clause.

6) Penalties and rounding rules

Specify the currency for late fees and penalties, and set a rounding rule. Small disagreements often come from unclear rounding practices.

How to calculate and manage risks 📊

1) Decide who bears currency risk: landlord or tenant. If the tenant carries it, consider a threshold for automatic review.

2) Model scenarios: mild change, significant change, and shock. Estimate the rent effect in local currency under each.

3) Include bank fees and exchange margins. For recurring transfers, fees can reduce net income materially.

4) For investors: consider how currency dynamics may affect property valuations and rental yields over time.

Protection tools and examples 🛡️

• Indexation formula: base rent × (current exchange rate / base exchange rate).
• Threshold clause: review only if exchange moves beyond a set band.
• Dual-currency statement: rent stated in foreign currency but payable in lari at agreed rate.
• Escrow or deposits to cover short-term volatility.
• Clause to revisit pricing if regulatory or macroeconomic conditions change significantly.

Practical tips for each side ✍️

For landlords:

• Consider a foreign currency account in a bank you trust.
• Factor transfer and conversion fees into your net yield.
• Include a clear dispute resolution path.

For tenants:

• Ask for the exact exchange source and fixation time.
• Run payments through scenario analysis in your home currency.
• Negotiate the option to pay in lari if this lowers your risk.

Legal and tax notes ⚖️

Parties are usually free to choose contract currency, but check local tax and registration rules: taxes or official reporting may be conducted in the national currency, which affects net positions. Consult a local accountant or lawyer when in doubt.

Quick checklist ✅

• State currency, payment account, and timing.
• Fix exchange source and fixation moment.
• Add indexation and review thresholds.
• Account for fees and force majeure.

If you'd like practical help adapting a lease for Georgia or checking your contract, contact BuyHome. We can review terms and help you choose the right property: https://buyhome.ge/en/search