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ACQUISITION PROCESS:
KEY STAGES
• Foreign investors wishing to carry out real estate transactions
do not need any prior authorisation.
Due diligence and LoI
• As a preliminary step, it is common in commercial real estate
transactions that the parties enter into a Letter of Intent,
containing a binding non-disclosure clause and non-binding
clauses on e.g. ean indicative purchase price, due diligence
and negotiation process.
• Discussions are usually pursued within the frame of a
preliminary agreement providing for an exclusivity period
during which the due diligence exercise is carried out and at
the expiry of which the purchaser is expected to confirm its
initial offer.
Structuring
• It is relatively rare that commercial real property transactions
are carried out without any kind of structuring. Due to the
Swedish rules on participation exemptions, and as it is still
(early 2014) possible to carry out intra-group transfers of real
estate to a wholly owned subsidiary at a price below market
price, most real estate transactions are carried out as share
deals (please see below). A share transfer does not trigger
stamp duty, even if the real property is the only asset of the
transferred company.
* if a real property in question is not already owned by a special
purpose vehicle (and it is relatively common that SPVs are in
place) it is sold into a newly formed limited liability company.
Share purchase agreement/real property transfer
agreement
• As set forth above, real properties are generally based on a
share purchase agreement regarding a SPV that owns the
property. The SPA is normally negotiated, beginning at the
end of the due diligence process. The SPA usually contains
warranties regarding the company as such, including financial
representations – and warranties, as well as warranties
regarding the real property as such, and regarding leases on
the real property etc.
• At completion of a share sale, the buyer will need to appoint
a new board of directors. Other than that, very few measures
involving governmental body will need to be involved.
• In case the sale is a direct sale of a real property (and not a
share sale), there is a wide spread use of two documents for
the sale, one purchase contract and one deed of sale. The
purchase contract is entered into on signing and contains all
the warranties and limitations and, if applicable, conditions
precedent that the parties have agreed. On closing, a deed
of sale (Sw. köpebrev) is issued, containing only the formal
requirements for a transfer of a real property under
Swedish law.
• In a direct sale of a real property, the buyer must register title
of the real estate following the purchase.
• No notarisation is required in Sweden.
COMMERCIAL LEASES
• Chapter 12 of the Swedish Land Code is regularly referred to
as the Swedish Lease Act as it covers leases of premises for
both commercial and residential purposes. The Lease Act is
mandatory insofar that any provisions in a lease agreement
that are less favourable for the tenant than what is stipulated
in the Lease Act are unenforceable (with a few exceptions
explicitly set forth in the Lease Act). Certain provisions of the
commercial leases may be freely agreed by the parties, such as:
–– the initial rent (which can be fixed or variable);
–– the term of the lease (however limited by certain other
rules (to a maximum of 25 years within areas subject to a
zoning plan);
–– service charges.
• However, commercial leases must comply with some
mandatory rules.
Duration: initial term of the lease
• Perpetual leases are not enforceable.
• The parties to a short term lease (less than nine months)
may agree that the lease terminates without notice. For lease
with an indefinite term or a fixed term of at least nine months,
the lease always has to be actively terminated to expire.
Otherwise, it will be automatically extended. It is market
practice to agree on a fixed term both for the initial period and
for any extension periods. Usually, due to certain limitations
on how the rent may be described, the fixed term will be at
least three years.
Transfer of business
• The tenant is generally entitled to transfer a lease along with
a transfer of the business carried out on the premises in
question.
• Validity of restrictive clauses:
–– transfer of the lease without prior written consent from
the landlord or a related business transfer is prohibited
unless otherwise agreed;
–– clauses limiting the transfer to various conditions such
as prior information of the transfer by the landlord, prior
payment of any unpaid balance, drafting of the transfer
agreement as a deed to which the landlord is a signatory,
etc., are deemed valid;
–– in the case of assignment of the lease, it may be provided
that the tenant remains jointly and severally liable with
the assignee (for example in intra-group assignments) for
the tenant’s obligations under the lease, in particular, the
payment of rent and charges.
Evolution of the rent during the initial lease
• Rent is usually yearly adjusted in accordance with an
indexation clause providing for an adjustment of the rent on
the basis of changes in the Consumer Price Index, published
by the Swedish Board for Statistics. This is one of the
adjustments that requires that the term of the lease is fixed
and at least three years.
110 Investors Guide to Europe 2015