Legal Risks and Compliance for Luxury Goods Rental Businesses in 2026

Mgr. Marek Hučík
Mgr. Marek Hučík
24.3.2026 | ARROWS law firm

When managing a luxury goods rental business, you face complex legal obligations—from contracts to AML. Hidden risks, such as product authentication or liability for damage, can lead to major losses. The attorneys at ARROWS, a Prague-based law firm, understand the specifics of this sector and will help you set up your business to thrive safely in 2026.

The illustrative image depicts lawyers addressing the issue of the legal obligations of a luxury goods rental company.

Quick summary

  • Luxury goods rental businesses face complex legislation relating to safety, hygiene, consumer protection and asset protection.
  • A critical part of management is a properly drafted rental agreement with clear liability and insurance clauses.
  • Elements such as goods authentication and compliance with anti-money laundering rules represent hidden risks with the potential for significant fines.

The specific legal environment of luxury goods rentals

Renting luxury goods is not a standard rental relationship. Unlike a typical car rental business, you operate in an environment where intellectual property protection, authentication and anti-money laundering issues overlap. Each of these elements brings specific legal obligations and risks that are not always apparent at first glance.

The core issue is that luxury goods have a specific legal status from a trademark protection perspective. These items have significant financial potential, but also a high risk of counterfeits and suspicions of laundering proceeds of crime. If your company rents out goods of questionable origin or fails to verify authenticity, it may become involved in criminal activity.

The attorneys at ARROWS, a Prague-based law firm, understand these nuances. They work with clients in this sector and know how to build compliance systems that protect you from legal pitfalls. Let’s go through the individual areas you need to address.

Authenticity verification and protection against counterfeiting

Authenticity is a legal issue for you, not just a commercial one. If you rent out counterfeit luxury goods, you expose yourself to the risk of criminal prosecution for infringement of trademark rights and other designations.

Understanding legal liability for counterfeits

In the Czech Republic and worldwide, intellectual property is protected by several layers of legal protection. Infringement of these rights—whether through sale, rental or other placing on the market—may lead to civil and criminal proceedings. Trademark infringement may result in imprisonment and financial penalties or forfeiture of the item.

Renting a counterfeit is legally considered unauthorised use of a trademark in the course of trade. If your client rents an “Hermès handbag” to someone else and it ultimately ends up on the public market, you may be investigated as part of the distribution chain.

Luxury brands actively enforce their rights. They use various methods ranging from submissions to the customs administration, to civil lawsuits, to criminal complaints. If a luxury brand notices that you are renting suspicious products, it may initiate lengthy and costly legal proceedings against you.

How to set up an authenticity verification system

You must build your own protection through the principle of due diligence. First, make sure the goods come from a trustworthy source. All items should be purchased directly from manufacturers, authorised retailers, or vetted auction houses with a track record. Purchasing goods from unknown sellers without invoices and certificates presents an extreme legal risk.

Consider using a third-party authentication service such as Real Authentication or Entrupy. These services provide authenticity certification with a guarantee and use artificial intelligence for analysis. They are an investment in your company’s legal security and evidence in the event of a dispute.

The third important step is documentation. Every time you acquire a new item, ensure:

  • Detailed photographs showing all security features, serial numbers and holograms.
  • Archiving purchase documents, invoices and authenticity certificates.
  • For jewellery and watches, photographs of serial numbers and expert reports.

This documentation will serve as your primary evidence if you are accused of dealing in counterfeits. It is also essential for insurers when handling insurance claims.

Intellectual property protection legislation

In the Czech Republic, brand protection is governed by the Trademarks Act and the Act on the Enforcement of Intellectual Property Rights. At the international level, agreements such as TRIPS are relevant. Intellectual property rights are not automatically global, although world-famous brands enjoy enhanced protection.

Most luxury brands have their marks registered for the EU territory through the EUIPO or in the Czech Republic with the Industrial Property Office (ÚPV). Before adding goods to your offering, you should verify that there is no conflict with third-party rights, especially if you import goods from non-EU countries.

Related questions on protection against counterfeiting

1. Can I buy “second-hand” goods and rent them out without a certificate?
Technically yes, but legally you create enormous risk. If it is later found to be a counterfeit, you will be fully liable. Always obtain an additional authenticity certificate from a reputable specialist. Without it, in the event of a dispute you will hardly be able to prove your good faith and due diligence.

2. What if it is discovered during the rental that the handbag is a counterfeit?
Immediately withdraw the goods from your offering. Contact the company that issued the certificate (if any) and enforce the guarantee. If you purchased the goods as original, make a claim against the seller for legal defects.

3. How do I defend myself if a luxury brand takes action?
This is the moment when ARROWS, a Prague-based law firm, is essential. Our attorneys in Prague can provide legal representation in communications with the brand owner, during settlement negotiations, and, if necessary, defence in administrative offence or criminal proceedings. Passivity in these cases leads to worse outcomes.

Risk management through a rental agreement

Your most important legal document is the rental agreement. If it is drafted incorrectly, no other measures will fully protect you. The agreement must clearly define liability, the procedure in the event of damage, penalties and insurance.

The most important elements of a rental agreement

The first element is a clear specification of the предмет of the rental and its condition. The agreement must include a detailed description of the goods, photographic documentation confirmed by the client’s signature, and a declaration of the value of the goods.

The agreement must clearly distinguish between ordinary wear and tear, which is borne by the lessor, and damage for which the lessee is liable. Under Czech law, the lessor bears the costs of routine maintenance unless the parties agree otherwise. The lessee pays for damage caused by improper use, an accident, or loss.

This distinction is essential. The agreement should define what exactly falls under ordinary wear and tear to avoid disputes when the goods are returned. The agreement should specify the obligation to provide a security deposit and the conditions for drawing on it. It must also include contractual penalties for breach of obligations and liability for loss or theft of the item. It is advisable to agree on the lessee’s strict liability for the loss of an item entrusted for use.

The fourth element is dispute resolution. In B2B relationships, you can agree on the local jurisdiction of the court according to your registered office. In consumer contracts, jurisdiction is governed by law and cannot be changed to the detriment of the consumer; likewise, in B2C you cannot agree on a valid arbitration clause.

Liability clause and its limitation

Within a lease agreement, you must address liability limits. The Czech Civil Code prohibits waiving in advance the right to compensation for damage caused intentionally or by gross negligence. In consumer contracts, provisions limiting the lessor’s liability are often considered invalid.

Conversely, the lessee may be required to compensate damage in full (actual damage + lost profit) if the agreement defines this correctly. For cars, the principle of a deductible under comprehensive insurance is commonly used, but the lessee is liable for damage not covered by insurance.

How to draft an agreement for different types of goods

For cars, agreements are the strictest. They must address traffic regulations, deductibles, a ban on driving outside designated countries, and a ban on use on racetracks. The clauses must clearly state that the lessee pays for any damage not covered by the insurance policy.

For handbags and clothing, the situation is different. Minor scuffs may be considered ordinary wear and tear. The agreement should define what “ordinary wear and tear” is (e.g., slight creasing of leather) and what constitutes “damage” (stains, tears).

Related questions on lease agreements 

1. Can I require the lessee to sign a statement that they understand the terms?
Yes, this is advisable, but for consumers it will not cure any unlawful provisions in the agreement. The agreement must be clear and transparent in itself.

2. What if the lessee claims they did not understand the legal terms?
If you are dealing with a consumer, the court will interpret ambiguities in the consumer’s favour. That is why we recommend agreements written in plain language and highlighting key sanctions.

3. Can I limit my liability if I provide the lessee with defective goods?
For consumers, this option is very limited. You are responsible for ensuring that the item is free of defects upon handover and fit for the agreed use.

Insurance and asset protection

Without proper insurance, renting luxury goods is a gamble. Even if you have a perfectly drafted agreement, enforcing your claim against the lessee may be zero in the event of their insolvency.

What types of insurance cover you need

The first type is property insurance for inventory (all-risk). Standard business property insurance often excludes goods rented out to third parties or has low limits for valuables. You need special additional cover that includes theft, robbery, and damage even outside your premises.

Liability insurance for harm covers situations where your goods cause damage to someone else. Professional liability may be relevant if you also provide advice, such as styling.

The third type is vehicle insurance, i.e., compulsory third-party liability insurance and comprehensive insurance. For car rental companies, this is a specific product that is more expensive than standard insurance. If you use personal insurance for a commercial rental business, the insurer may reduce or refuse payment.

Insurance rights and obligations in the agreement

The agreement must clearly specify how the goods are insured and what the lessee’s deductible is. The client must be informed of the amount of the deductible and the conditions under which the insurance does not apply. The lessee undertakes to compensate the lessor for damage up to the amount of this deductible and any damage that the insurer refuses to pay. For handbags and jewellery, the insurance is often arranged by the lessor, who reflects the cost in the rental price.

It is possible to require the client to arrange short-term personal liability insurance, but enforceability is more complicated.

Related questions on insurance

1. If the insurer denies coverage, who pays?
If the insurer denies coverage due to the lessee’s breach of conditions (e.g., driving without a licence), the lessee is liable for the damage in full. You must have a so-called right of recourse in the agreement.

2. Do I need to insure the goods during the time they are in storage?
Yes. The risk of theft from storage or damage by water or fire is high for luxury goods. The insurance should cover the entire period during which the goods exist in your ownership.

Hygiene and safety regulations

The rental of clothing, footwear, and accessories is subject to hygiene regulations designed to protect public health.

Hygiene-related obligations

In the Czech Republic, hygiene-related obligations are governed by the Public Health Protection Act. Establishments that rent out clothing must, in certain cases, have operating rules approved by the public health authority (hygiene station). However, the general obligation to ensure safety and harmlessness always applies.

You must ensure cleaning and disinfection of the goods after each use and separate storage of clean and used goods. It is also important to inform the consumer about maintenance instructions. If you rent sports equipment or protective gear, you must ensure that they comply with safety standards and are not damaged. For helmets, it is recommended to retire the equipment after any impact.

Liability for personal injury

If a lessee suffers an allergic reaction from insufficiently cleaned clothing or if protective gear fails, you risk a claim for compensation for personal injury. Such damage may include pain and suffering and loss of earnings in amounts reaching hundreds of thousands of Czech crowns. Documentation of cleaning and maintenance serves as evidence that you have not neglected your duty of prevention. Without these records, it will be difficult to defend yourself against allegations of negligence.

Anti-money laundering (AML) protection

Luxury goods are often used to launder proceeds of crime. Although rental businesses are not automatically an “obliged entity” under the Czech AML Act in all cases, there are situations where you become one.

When the AML Act applies to you

Under the Czech AML Act, you become an obliged entity if, as a business, you accept a cash payment of EUR 10,000 or more. The Act also applies to you if you trade in cultural monuments or second-hand goods above this value.

Even if you do not fall directly under the Czech AML Act, the Criminal Code imposes an obligation to act if you learn about the preparation of the criminal offence of laundering proceeds. Ignoring suspicious circumstances may expose you to criminal prosecution.

Practical measures and identification (KYC)

We recommend implementing basic “Know Your Customer” (KYC) procedures even beyond the statutory obligation, especially for high-value rentals. At the start of the rental, you should require two identity documents and prefer cashless payments.

Suspicious activity includes attempts to pay large amounts in cash or a client’s lack of interest in the price and return conditions. If the client’s appearance does not match the presented documents, increase your vigilance.

Related AML questions

1. Do I have to report suspicious transactions to the Financial Analytical Office (FAÚ)?
If you are an obliged entity under the law, then yes. You are required to file a Suspicious Transaction Report. If you are not an obliged entity, you still have a general reporting duty towards law enforcement authorities if you suspect that a serious criminal offence has been committed.

2. What are the sanctions?
Breaches of obligations under the AML Act may result in fines of up to millions of CZK and, in serious cases, forfeiture of assets.

Cross-border rentals and jurisdiction

If you rent to foreigners or allow goods to be exported abroad, the situation becomes more complex.

Governing law and jurisdiction

Under EU regulations, the parties may choose the governing law; however, we recommend expressly agreeing on Czech law in the contract. Be careful with consumers, as the choice of law must not deprive the consumer of the protection provided by the rules of the country of their residence. If you rent a car to a tourist, you can agree on Czech law, but if the law of their country provides greater protection, they may invoke it. It is therefore necessary to understand the limits of choice of law in consumer contracts.

Sanctions regulations and export

In connection with the geopolitical situation, there are bans on exporting luxury goods to certain countries, such as Russia and Belarus. Renting a car that will be exported to a sanctioned country may be considered a breach of the EU sanctions regime. Always verify where the client plans to travel with the vehicle to avoid significant fines.

Tenant screening and GDPR

When assessing clients’ creditworthiness and reliability, you must comply with the GDPR Regulation.

What you may and may not check

You may request identity documents to verify identity and check creditworthiness in public registers, such as the Insolvency Register. “Blacklists” may be used only if they are operated lawfully. Do not engage in “detective work” on social media in a way that would infringe privacy.

Security deposit

The best security is a cash security deposit. It serves to cover any rental-related debts or compensation for damage. The contract must clearly specify when and how the deposit is returned.

Risks and sanctions

How ARROWS helps (office@arws.cz)

Renting counterfeit goods: Criminal prosecution, fines, seizure of goods, reputational damage.

Setting up due diligence processes, contractual allocation of supplier liability, defence in proceedings.

Poor contract: Inability to recover damages from the tenant, invalid penalties in consumer contracts.

Review and preparation of tailor-made rental agreements under the current Czech Civil Code and B2C rules.

Missing AML/Compliance: Fines in the millions of CZK, account freezes, criminal liability.

Assessment of whether you are an obliged entity, implementation of internal policies and training.

Insufficient insurance: Loss of asset value without compensation in the event of theft or an accident. 

Consultation on insurance terms, assistance with claims handling.

Hygiene regulations: Fines from the public health authority, claims for compensation for personal injury.

Preparation of operating rules, liability consultation.

Conclusion

Renting luxury goods is an attractive business, but in 2026 it requires professional legal support. Relying on downloaded contract templates or ignoring regulatory requirements is a path to serious problems. The lawyers at ARROWS advokátní kancelář have extensive experience in this area and are ready to set up your business so that it is safe and compliant with Czech and European law. ARROWS advokátní kancelář has high professional liability insurance coverage, which guarantees security for our clients.

Do you need advice on this matter? Contact us at office@arws.cz.

FAQ – Most common legal questions for luxury goods rental businesses

1. What mistakes do rental businesses make most often?
They underestimate the difference between B2B and B2C contracts. They use invalid contractual penalties or prohibited arbitration clauses in consumer contracts. Another mistake is insufficient photo documentation of the condition of the goods upon handover, which makes it impossible to prove that the damage was caused by the tenant.

2. How much does the legal setup of a rental business cost?
The price is individual. A basic package of contractual documentation usually ranges in the tens of thousands of CZK. It is a one-off investment that prevents losses in the millions. Email us at office@arws.cz for a quote.

3. What should I do if I find out that I unknowingly rented out a counterfeit item?
Immediately remove the item from your offer. Contact an attorney to assess the risk of criminal prosecution and to develop a strategy towards clients and the counterfeit supplier. Proactive action and cooperation minimise legal consequences.

4. I rent a car abroad—what law applies?
As a rule, Czech law applies if it is agreed in the contract. However, a consumer from another EU country may invoke the protective rules of their home state. It is also important to verify the territorial validity of insurance and assistance services.

5. Can I require the tenant to arrange their own insurance?
Yes, for expensive items this is possible, but in practice it is difficult for short-term rentals. More commonly, the lessor has insurance and re-invoices it in the rental price, or requires a deductible.

Notice: The information contained in this article is of a general informational nature only and is intended for basic guidance based on the legal status as of 2026. Although we take maximum care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client security we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damage arising from the independent use of the information in this article without prior individual legal consultation.

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