The balance between landlords and tenants Restrictions on contractual freedom in the three Nordic EU-members

Points of Discussion Nordic Group PER NORBERG JACOB JUUL-SANDBERG PG NYSTRÖM MARIE ÖHRSTRÖM HANS HENRIK EDLUND JAN ERIK HELENELUND NOTION OF TENANT OWNING A HOME - RENT REGULATION - PROPOSED AREAS FOR MINIMUM LEGISLATION - HUMAN RIGHTS- AND VULNERABLE GROUP PERSPECTIVE ON MINIMUM LEGISLATION IF PROPOSED

Different aspects of ownership - Tenancy Law in all three countries is n intermediate between renting and owning Market functional aspects - Economic freedooms Conservative right of use - Landlord needs apartment for personal use - sublocation - Transfer

Basic right of the tenant to keep Sweden the home Tenant will be protected even if a time limited constract expires Denmark A landlord need objective justification for a time limited contract to be effective Finland Contractual freedom with regard to time limited contracts

Landlord needs apartment for personal use Tenant friendly Landlord friendly Sweden Denmark Finland

Tenant needs money and want to sublet to a stranger Tenant friendly Landlord friendly Sweden Denmark Finland

Transfer the use of the apartment to a relative Tenant friendly Landlord friendly Sweden Denmark Finland

Rent regulation regimes in the private rental sector in the Nordic countries Sweden 700,000 dwellings in private sector. 800,000»social housing«. Almost all rented dwellings fall under the same rent regulation. Denmark 465,210 private rented dwellings (2010). In»social housing«sector approx. 595,000 dwellings. Rent regulation in private sector only. Rent in social housing on different principles (not market based). Finland Arava-system or market based rents. 786,000 dwellings are rented out for permanent living. Approx. 45 % of total amount of dwellings are subsidized through the Arava system or through rent subsidies. ---- Norway solely marked based rents in private sector since 2000 TENLAW Conference Budapest 2015/JJS

Rent regulation regimes in the private rental sector in the Nordic countries The legislation in the three countries (S, DK, FI) has been very similar and rent control were implemented at the same time for the same reasons. But the way rent control then has evolved has differed though. This can generally be explained from the countries different housing policies and use of financial policies and instruments due to national circumstances One common consequence of rent control today is that in the largest cities there is a surplus demand for private rented properties = housing shortage in Sweden and parts of Denmark and Finland (Helsinki) and the general aspect that rent regulation = protection of tenants and their right to find an affordable home TENLAW Conference Budapest 2015/JJS

Best practice? Finding a best practice at the detailed level is almost impossible because of the socio economic aspects defined by primarily by the legislature and on the national level (and not influenced directly by EU regulations) The overall and main conclusion is therefore that it is not possible to establish whether there is a»best practice«as the markets and political situations in the three countries on this specific area of tenancy law do not call for a common solution. = a solution that works well in one national system may not be appropriate for another TENLAW Conference Budapest 2015/JJS

Should the systems be changed or uniformed? Even though (some) economists recommend setting rents free to market mechanisms as the best solution this will not happen. WHY? The economists fail to develop a more nuanced comprehension of the aim of rent control and the much differentiated private rental sector (?). Rent control is»popular«. The politicians do not dare to suggest any changes to the systems. Deregulation on this area is not a political issue in S and DK. The role of EU? room for supra-national regulation? NO (but maybe supra-national regulation necessary if systems are to be more uniform?) TENLAW Conference Budapest 2015/JJS

Different systems in the countries Difficult to compare the systems in Nordic countries Comparative study in the Nordic countries Paradoxical differences on the rental market Why so different? 1. Socioeconomic factors and decisions since second world-war 2. Strong and nationwide unions/organizations influenced the legislation and market (Sweden)

Swedish rental legislation Many countries - two systems or rental markets 1. Social housing sector regulated rents and 2. Market based sector free rents Swedish system different The same legislation for all the whole market both private landlords and Municipal housing companies No real Social housing - sector

Rent control protection of tenancy A combination of two sets of rules in Sweden: 1. Rent law contains a rent ceiling Landlord cannot demand markedly higher (about 5 %) rent than similar negotiated dwellings Protection of tenancy 2. Rent negotiation law a right by law to be represented by union Landlords must by law negotiate rents with organization of tenants SUT negotiate rents yearly for 90 % of tenants - 1,4 million Negotiating system widely accepted both the political field, most landlords and vast majority of tenants

Best practice? Difficult find best practice systems very different Minimum standard i EU? Obviously a strong security of tenure for the weaker party Termination of contract - only by grounds in detail stipulated in law A possible good practice? Possibility for tenants to organize on company level and negotiate rents collectively

SWEDEN BEST PRACTICE? MARIE ÖHRSTRÖM, CHIEF COUNSEL STOCKHOLM PROPERTY FEDERATION TENLAW CONFERENCE, 17 SEPT 2015, BUDAPEST

SECURE TENANTS AND HIGH STANDARDS Security of tenure High housing standards No social housing Generous housing allowance Assistance from the social welfare committee

SEVERE HOUSING SHORTAGE 503,000 people are in the queue for a rented apt. From the Sthlm Housing Office. To get a rented apt. in central Sthlm you have to wait for more than 20 years. Severe problems with the black market. Sometimes you need to pay EUR 20,000 for a room. Between 2000 and 2010 approx. 110,000 rented apts were transformed into privately owned apts.

THE UTILITY VALUE SYSTEM Section 55 of the Tenancy Act If the tenant and landlord dispute the size of the rent, the rent shall be set at a reasonable amount. The rent is hereby considered unreasonable if it is substantially higher than the rent for apartments with a similar utility value. If put to trial, such a rent shall first and foremost be observed for apartments that have been determined by negotiation agreements according to the rent negotiation law. If a comparison cannot be made with other apartments in the area, rent for apartments in another location with comparable rent situations and overall similar conditions in the rental market will be considered.

REQUIERED IMPROVEMENTS No legally stipulated definition of reasonable rent. Today, in principle collectively negotiated rents are normative. More guidance if the utility value factors as such were defined in the Tenancy Act.

THE NEGOTIATION PROCESS IN STOCKHOLM Framework agreement Building Building Building Building Apt Apt Apt Apt Apt Apt Apt Apt Apt Apt Apt Apt

NO TRANSPARENCY AND INSUFFICIENT APPEAL The rents are not public difficult for tenants and landlords to assess whether the rent is reasonable. Furthermore, in court proceedings, the claimant must obtain a significant amount of information about rents for similar apartments and submit these to the court as comparision material.

THANK YOU! marie.ohrstrom@fastighetsagarna.se www.fastighetsagarna.se

PROTECTION OF TENANTS CONTRACTUAL RIGHTS HANS HENRIK EDLUND PROFESSOR SEPTEMBER 2015

CONFLICTING INTERESTS Tenants need for a home must be protected Premature termination of the contract must be reserved as an option for the landlord in case of the tenant s violation the contract Can these conflicting interests be combined in a balanced way and if so should the rules on this be harmonized? HANS HENRIK EDLUND PROFESSOR SEPTEMBER 2015 25

AREA POSSIBLY SUITABLE FOR HARMONIZING Immediate termination of a contract and subsequently eviction is only possible in case of the tenant breaching the contract fundamentally Regulation to set up an exhaustive and indispensable list of termination grounds Regarding contracts not limited in time the landlord may give notice (minimum 3 months) stating the grounds for termination. These grounds could be listed in indispensable regulation Fixed term-clauses in long term-contracts (> 6 to 12 months) can be set aside if not warranted by the landlords situation HANS HENRIK EDLUND PROFESSOR SEPTEMBER 2015 26

FINNISH RENTAL LAW LEGISLATION Two systems: 1. The Act on Residental Leases (481/1995), Based on Contractual Law Free rents. 2. The Social Rental Housing System (Arava) = 45 % of the entire stock of rental apartments in Finland: An intention to ensure housing (affordable) especially for low income households and homeless, Only municipalities and associations of public utility can be owners, Law based criteria for the selection of of tenants, Law based principles to calculate rent level = regulated rent level. Ph.D. Jan-Erik Helenelund, Budapest 17.9. 2015 www.helsinki.fi/sockom 27

THE FINNISH SOCIAL HOUSING SYSTEM AND HUMAN RIGHTS OBLIGATIONS ON HOUSING RIGHTS 1. The social rental housing legislation mainly meets the obligations of human rights on housing in: The right to adequate housing inluded in UN International Covenant on Economic, Social and Cultural Rights, Article 11, The Right to Housing of he European Revised Social Charter, Article 31. 2. In both treaties the right to housing is basically for everybody, but in both there is also a special target group who s rights especially should be ensured: the poor and the vulnerable. 3. The European Commissioner for Human Rights (2009) The allocation of rental social housing apartments should be targeted to the poor and vulnerable. 4. But: Problems in meeting the obligation based on the ERSC, Article 31, not to carry out evictions during the winter. Ph.D. Jan-Erik Helenelund, Budapest 17.9. 2015

EUROPEAN MINIMUM STANDARDS ON RENTAL HOUSING? If there is an intention to proceed to European minimum standards on Rental Housing legislation: Please: Pay attention to Housing Rights in the Human Rights system and make use of standards alreday created in that system! Ph.D. Jan-Erik Helenelund Budapest 17.9. 2015