Legal Terms

Side Letter

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A 'side letter' is an informal agreement made alongside a lease, but it is a risky practice as its legal enforceability can be ambiguous.

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Eligibility Rules, Financial Consequences, and Contract Relevance: Continue from Side Letter (Lease)

The Side Letter (Lease) entry explains general usage; exceptions, costs, and Dutch context determine how far that explanation applies.

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An Informal and Risky Practice

A 'side letter' is an agreement made between a landlord and a tenant that is separate from the main rental contract. It is used to record terms, conditions, or understandings that the parties do not want to include in the official lease document. While side letters can be legally binding, they are a risky and non-transparent practice that should be approached with extreme caution by tenants. The primary purpose of a formal lease agreement is to provide a single, clear, and comprehensive record of the entire agreement. Using a separate, informal document creates ambiguity and increases the potential for future disputes.

Why Are Side Letters Used?

A landlord might propose a side letter for various reasons, none of which are typically beneficial for the tenant. They might use it to make a promise that they don't want to be legally tied to in the main contract (e.g., 'we will probably upgrade the kitchen next year'). They might use it to document a temporary rent discount, attempting to keep the higher 'official' rent on the main contract for mortgage or valuation purposes. Or they might use it to lay out rules they know are legally questionable, hoping the informal nature of the document will obscure this. For a tenant, there is almost no good reason to agree to a side letter. Any and all important agreements should be formally incorporated into the main lease or a signed addendum.

The Risk of Unenforceability

The biggest risk for a tenant is that the promises made in a side letter may be difficult to enforce. If a dispute arises, there may be arguments about the legal status of the side letter and whether it was intended to be a binding part of the overall agreement. A judge will have to interpret the intent of the parties, which is far less certain than enforcing the clear terms of a single, integrated rental contract. The skeptical advice is simple: if an agreement is important enough to be made, it is important enough to be included in the official lease.