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Eversheds Global Estate Management

Sweden

Real Estate Guide

Principles of ownership

Principles of ownership

Freehold/Ownership - ownership of property (covering both the land and the building(s) on the land) can be transferred, by sale or otherwise, to natural persons or companies. The owner can occupy the property himself or lease or rent it to someone else. Leasehold - there are different types of leaseholds depending on the purpose, eg agricultural or housing. A leasehold can be for a fixed term or indefinite and can be terminated on specific grounds. Rent for commercial property leaseholds is set on free market conditions and leaseholds can be sold by tenants after approval from the owner of the property. Housing is subject to rent control and detailed rights for the tenant.

Site leasehold right - the real property is owned by the public, such as a municipality, whilst the enjoyment is granted to natural persons or companies indefinite in time (the owner of the property may however terminate the sight leasehold agreement within certain time periods, the first one being 60 years). Both the ownership of the property and the site leasehold right is registered in the property registration extract compiled by the Swedish Land Registry. The site leasehold right can be transferred in the same way as ownership of property. The law upholds specific conditions on site leasehold rights.

Cooperative flat/house - ‘Bostadsrätt’ is a right of disposal to a flat or a house that is indefinite in time. The real property itself is owned by an occupiers’ association. Bostadsrätt is typically used for residential flats and smaller houses but also to a lesser extent for commercial premises. A bostadsrätt can be transferred freely, however most occupiers’ associations’ statutes reserve membership for natural persons due to tax reasons. Any new holder of a bostadsrätt needs to be a member of the occupiers’ association.

Commonhold/usufruct - not applicable.

Condominium ownership - not applicable.

Utilisation right - not applicable.

Joint/Co-ownership - properties may be owned collectively and the owners are subject to certain detailed provisions regulating their joint ownership, such as provisions on sale, management and division of costs.

Registration - ownership of property and holders of site leaseholds are being registered at the property registration compiled by the Swedish Land Registry. Any mortgages and mortgage certificates taken out over the property/site leasehold are noted in the register. Ownership of property must be registered within three months of purchase.

 

Restrictions on foreign ownership

Restrictions on foreign ownership

There are no restrictions on foreign ownership of Swedish property in general. For agricultural properties, however, there are restrictions, but not based on nationality.

 

Title to real estate

Title to real estate

Investigation of title - not applicable.

Transfer of title - must, under Swedish law, be made by a written agreement signed by the seller and the buyer. If the buyer is married and the property is used as the family home, the seller’s husband/wife must approve of the transfer. The same provisions apply for site leaseholds.

Registration - ownership of property and holders of site leaseholds are being registered at the property registration compiled by the Swedish Land Registry. Any mortgages and mortgage certificates taken out over the property/site leasehold are noted in the register. Ownership of property must be registered within three months of purchase.

Information on register - see "registration".

Commercial leases - a leaseholder does not have title to the property but will be protected by way of indirect security of tenure, meaning that the leaseholder under certain conditions has a right to damages in case the lease agreement is terminated by the landlord.

 

Structure of a real estate transaction

Structure of a real estate transaction

Negotiation of terms/Agreement - commercial terms are usually negotiated between the parties together with their respective legal counsels. The preliminary terms and conditions for sale are set out in a letter of intent, if applicable, and are usually conditional upon findings in the due diligence.

Heads of terms – not applicable.

Investigation of title - not applicable.

Purchase deed - not applicable.

Contracts - under Swedish law, any property transfer must be made by way of signing a written agreement. Once the transaction is completed, the parties generally sign a bill of sale where the seller confirms payment. This bill of sale is filed with the Swedish Land Registry for tax and registration purposes.

Completion/closing - completion takes place when the parties have executed the transfer/lease and the balance of any monies due have been paid. At this point the buyer/tenant is entitled to take possession. At the completion the seller confirms the payment of the real property on a bill of sale.

Post completion - after the completion any stamp duty (if the transfer is not completed through a share transfer) must be paid and the buyer’s interest must be registered at the Land Registry within a period of three months. Other documents (such as notification of voluntary VAT in case of a commercial lease agreement) must be sent to the relevant authority.

Leases - once the parties sign and ‘exchange’ a formal contract/agreement for lease they are committed to complete at a specific future date. Completion may sometimes be conditional on other events such as the obtaining of a landlord’s consent, obtaining of planning permissions, inter-contract conditions between the parties, obtaining of satisfactory financing or the completion of building works.

Transfer of ownership of leased property (alienation) - any assignment of lease agreements and/or subletting of premises needs to be approved by the landlord. Assignment of lease agreements in connection to business transfers is generally accepted. Disagreements in connection to assignments may be filed with the competent regional rent and tenancies tribunal.

Language requirement – not applicable.

Governance of lease signature/administration – not applicable.

 

Usual commercial lease terms

Usual commercial lease terms

Summary of available lease types - lease agreements may be entered into for housing purposes, commercial purposes, leasing of agricultural land and the leasing of plants. In addition, lease agreements may cover the whole or part of an apartment/building or only a parking spot.

Alterations/modifications - the landlord has a limited responsibility for the condition of the premises but the parties may agree otherwise. Usually the parties agree that the tenant is responsible for the decoration of the premises. The landlord is responsible for common parts in the building. Any compensation for improvements made by the tenant should be agreed in writing.

Assignment and sub/under letting - any assignment of lease agreements and/or subletting of premises needs to be approved by the landlord. Assignment of lease agreements in connection to business transfers is generally accepted. Disagreements in connection to assignments may be filed with the competent regional rent and tenancies tribunal.

Destruction/reinstatement - it is common for a tenant to be obliged to reinstate any alterations at the end of the term and to deliver the premises back to the landlord in accordance with its repairing covenants. A tenant is not normally compensated for improvements, unless otherwise agreed.

Disposal/return of the premises - see above.

Duration of lease - in general, lease contracts are indefinite in time unless otherwise agreed. The term of notice for termination is dependent on the duration of the contract. The length of the commercial lease contract further governs other regulations such as the ability to add indexation to the rent and the so-called indirect protection of tenancy right. In commercial lease contracts the lease is limited with a specific time period for giving notice.

Forfeiture/irritancy - a lease agreement may be forfeited in case of the tenant’s material breach of contract. Such material breaches are inter alia: late rent payment; assignment of the premises without the approval of the landlord; the use of the premises for other purposes than agreed; the causing of vermin; the neglect of the premises.

Insurance - arrangements concerning insurance will usually depend on the agreement between the parties.

Rent review - not applicable.

Repair/decoration/furnishing - the landlord has a limited responsibility for the condition of the premises but the parties may agree otherwise. Usually the parties agree that the tenant is responsible for the decoration of the premises. The landlord is responsible for common parts in the building.

Service charges - not applicable.

Tenant’s duties - the tenant’s duties comprise of paying the rent, using the premises in accordance with the agreed purpose, taking due care of the premises, complying with order and condition provisions and obligation to provide the landlord access to the premises.

Termination/break clauses - the lease agreement is automatically renewed unless the lease agreement is terminated in accordance with the provisions in the agreement. Break clause: not applicable.

 

Increasing covenant strength

Increasing covenant strength

Lease deposit - security can be provided by rent deposit, bank guarantee or surety, usually to the equivalent of six months’ rent.

Surety - not applicable.

Warranty - not applicable.

Rent deposit/bank guarantee - to be agreed between the parties.

 

Security of tenure

Security of tenure

A business tenant has a basic statutory right to renewal of his lease, unless the landlord can show grounds why an extension would not be reasonable. The renewal right can be excluded in the lease. Should the lease agreement be terminated by the landlord without cause, the tenant has a right to claim damages (up to amount equivalent to one year’s rent).

 

Taxes

Taxes

On sale/acquisition of real estate - following acquisition the buyer must make a one off payment of stamp duty (currently 4.2% for commercial real estate and 1.5% for private homes) to the Swedish Land Registry. Note that if the real estate is transferred through a share sale, no stamp duty is payable. Capital gains tax is payable on profits from real estate sales. Losses are deductible.

Immovable property tax - not applicable. However, a property fee based on the tax value of the property is payable.

Income tax - income tax is payable on rental income. VAT is payable on rental income from commercial properties, subsequent to voluntary registration.

Land tax - please refer to the section on immovable property tax above.

Lease tax - please refer to the section on income tax above.

Local tax - not applicable.

Mortgage - stamp duty, currently 2% on the mortgage amount, is payable to the Swedish Land Registry. Once payment is registered mortgage certificates (electronic or physical) are issued.

Other taxes - advice should be sought in each individual case.

Property lease tax - please refer to the section on income tax above.

Value added tax - please refer to the section on income tax above.