Baku, August 18, 2025 – In Azerbaijan’s capital, much of the rental market operates in the shadows. Thousands of residents live in apartments without formal contracts, relying only on verbal agreements with landlords. While such arrangements are common, lawyers warn that they carry significant risks — legal, financial, and social.
What the Law Says
According to lawyer Vusal Jafarov, under Azerbaijani law landlords are primarily responsible for paying taxes on rental income unless the contract specifies otherwise. Article 406 of the Civil Code allows rental agreements to be concluded in written, oral, or even implied form – such as the handover of keys and start of rent payments. The Constitutional Court has reaffirmed this principle in rulings from 2023 and 2025, stressing that contractual freedom remains central to civil law.
This means that, strictly speaking, an oral rental deal is not invalid. But in practice, it leaves tenants and landlords vulnerable to disputes.
Why People Avoid Contracts
Jafarov notes that the main reason for skipping paperwork is simple: tax evasion. “Landlords are obliged to pay tax on income from rentals. Without a written contract, this obligation is often ignored,” he explained.
But tax avoidance comes at a price. A written contract is essential to clearly define rent amounts, payment schedules, utility responsibilities, and compensation for potential damages. Without such protection, tenants risk sudden eviction, arbitrary rent hikes, or being left without proof of their tenancy in case of conflict.
Risks for Both Sides
For tenants: no legal guarantee of occupancy, difficulties recovering deposits, risk of losing prepaid rent.
For landlords: inability to prove terms in disputes, exposure to unpaid utilities or damages, and potential liability for unpaid taxes.
A System Built on Informality
The widespread reliance on “off the books” rental agreements highlights deeper issues: weak enforcement of housing regulations, high demand for affordable housing, and reluctance of landlords to declare income. Experts argue that without stricter oversight and incentives for legal contracts, the shadow rental economy will continue to dominate Azerbaijan’s housing market.
