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An overview of the amendments to the law on tenancy that will enter into force at the beginning of 2021
An overview of the amendments to the law on tenancy that will enter into force at the beginning of 2021
On 16 December 2020, Riigikogu accepted the Law of Obligations Act Amendment Act, which makes the regulation of tenancy relations of dwellings more flexible and enables the tenant to be assigned obligations that are more extensive than previously permitted.
In the case of lease agreements, the absolute prohibition on contractual penalties is abolished. Provision is made for the possibility of a contractual penalty agreement in the event of a breach of a non-monetary obligation. However, restrictions are also set on the amount of the contractual penalty. The amount of the contractual penalty agreed for one violation may not exceed 10% of the agreed rent for one month, as well as ancillary costs and maintenance and improvement costs of the building, if the latter must be borne by the tenant according to the agreement.
In the case of residential lease agreements, the regulation of default interest is specified. It is provided that the parties may agree on a higher interest rate than the statutory interest rate. At the same time, a maximum rate of default interest is set to protect the tenant of the dwelling. Interest on arrears may not exceed the statutory rate of interest on arrears more than three times.
More extensive agreements are allowed for the transfer of the maintenance and improvement costs of the entire building to the tenant.
In the case of tenancies of dwellings, it is possible to agree on the tenant's obligation to return the thing in such a condition that the wear and tear or deterioration caused by normal use under the contract has been eliminated, or on the tenant's obligation to bear reasonable and necessary costs.
A clearer regulation for raising the rent in the case of a fixed-term dwelling lease agreement will be created and the bases for unilateral rent increase by the landlord will be specified. In order to protect the tenant, the right of extraordinary cancellation is provided in case the rent unilaterally raised by the landlord is not subjectively acceptable to the tenant, in which case the rent increase is excluded until the termination of the contract.
Provides for more effective protection of the deposit in the event of enforcement or bankruptcy proceedings against the landlord. According to the amendment, the deposit and the interest collected from it do not belong to the bankruptcy estate of the landlord and cannot be recovered in enforcement proceedings against the landlord.
The regulation on cancellation of a lease due to late payment is made more favorable for the landlord. Namely, the landlord has the right to cancel the contract due to late payment in case of lower debt (two months' rent or two months' incidental expenses instead of the previous three months' debt) or shorter delays (delay on two consecutive due dates instead of three consecutive due dates). The landlord also has the right to cancel the contract in case of delay in the payment of the deposit and the maintenance and improvement costs of the building.
The regulation on cancellation of a lease agreement in the event of a change of ownership is amended. In the event of a sale in bankruptcy or enforcement proceedings, the new owner will be given the opportunity to terminate the lease transferred to him more easily than before. As a result, in a sale under enforcement and bankruptcy proceedings, the new landlord can cancel the lease with 3 months' notice (in the case of immovable property) if the lease cannot be terminated earlier.
The review was compiled by Marina Lapidus, RASK's Attorney-at-Law.
The act enters into force in the usual manner, on the tenth day after its publication in the Riigi Teataja.
The main amendments to the law:
In the case of lease agreements, the absolute prohibition on contractual penalties is abolished. Provision is made for the possibility of a contractual penalty agreement in the event of a breach of a non-monetary obligation. However, restrictions are also set on the amount of the contractual penalty. The amount of the contractual penalty agreed for one violation may not exceed 10% of the agreed rent for one month, as well as ancillary costs and maintenance and improvement costs of the building, if the latter must be borne by the tenant according to the agreement.
In the case of residential lease agreements, the regulation of default interest is specified. It is provided that the parties may agree on a higher interest rate than the statutory interest rate. At the same time, a maximum rate of default interest is set to protect the tenant of the dwelling. Interest on arrears may not exceed the statutory rate of interest on arrears more than three times.
More extensive agreements are allowed for the transfer of the maintenance and improvement costs of the entire building to the tenant.
In the case of tenancies of dwellings, it is possible to agree on the tenant's obligation to return the thing in such a condition that the wear and tear or deterioration caused by normal use under the contract has been eliminated, or on the tenant's obligation to bear reasonable and necessary costs.
A clearer regulation for raising the rent in the case of a fixed-term dwelling lease agreement will be created and the bases for unilateral rent increase by the landlord will be specified. In order to protect the tenant, the right of extraordinary cancellation is provided in case the rent unilaterally raised by the landlord is not subjectively acceptable to the tenant, in which case the rent increase is excluded until the termination of the contract.
Provides for more effective protection of the deposit in the event of enforcement or bankruptcy proceedings against the landlord. According to the amendment, the deposit and the interest collected from it do not belong to the bankruptcy estate of the landlord and cannot be recovered in enforcement proceedings against the landlord.
The regulation on cancellation of a lease due to late payment is made more favorable for the landlord. Namely, the landlord has the right to cancel the contract due to late payment in case of lower debt (two months' rent or two months' incidental expenses instead of the previous three months' debt) or shorter delays (delay on two consecutive due dates instead of three consecutive due dates). The landlord also has the right to cancel the contract in case of delay in the payment of the deposit and the maintenance and improvement costs of the building.
The regulation on cancellation of a lease agreement in the event of a change of ownership is amended. In the event of a sale in bankruptcy or enforcement proceedings, the new owner will be given the opportunity to terminate the lease transferred to him more easily than before. As a result, in a sale under enforcement and bankruptcy proceedings, the new landlord can cancel the lease with 3 months' notice (in the case of immovable property) if the lease cannot be terminated earlier.
The review was compiled by Marina Lapidus, RASK's Attorney-at-Law.
The act enters into force in the usual manner, on the tenth day after its publication in the Riigi Teataja.