28 | Investor Guide to Europe 2014
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Purchase agreements
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The majority of real estate transactions involving professional
investors are arranged by real estate brokers and carried out
as auction processes. In such processes, purchase agreements
and process-related documentation follow international stan-
dards.
•
In real estate transactions involving domestic parties, more
simple purchase agreements and process-related documenta-
tion are used.
•
In a direct purchase of a real estate or a land lease, the
purchase agreement must comply with the formalities of the
Finnish Real Estate Code. With respect to real estate purchases,
the purchase agreement, as well as the possible preliminary
purchase agreement, must also be notarised.
•
The purchaser is responsible for registering the title to the real
estate with the Finnish Title and Mortgage Register.
CoMMERCIaL LEaSES
Leases of premises used for commercial purposes are governed
by the Finnish Act on Renting of Business Premises.
The Finnish Act on Renting of Business Premises is mostly non-
mandatory and, therefore, the terms of the lease agreement may,
in most parts, be freely negotiated.
However, the Finnish Act on Renting of Business Premises
includes certain provisions that are mandatory and may not be
agreed upon to the detriment of the tenant.
The mandatory provisions of the Finnish Act on Renting of Busi-
ness Premises also limit the usability of a pure triple net lease or a
bondable lease in Finland.
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Duration of the lease
•
Commercial leases are, in general, entered into either for a
fixed period or are in force until further notice.
•
The term of a commercial lease may also be agreed to be a
mix of both elements (i.e. fixed for a certain period of time
after which the lease agreement will continue until further
notice).
•
Tenants are covered by certain mandatory provisions of the
Finnish Act on Renting of Business Premises, which grant the
right for the tenant to terminate the lease agreement with
immediate effect, inter alia, if :
- the use of the premises evidently endangers the health
of the tenant,
- the premises or a part of the premises are no longer in
the possession of the tenant, or
- the landlord has materially breached the lease agree-
ment.
•
It may be agreed that the tenant has a right to terminate also
on other grounds. The landlord may terminate the lease agree-
ment with immediate effect only as provided in the Finnish Act
on Renting of Business Premises.
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Rent
•
Rent can be freely negotiated.
•
The market practice is to agree on a fixed rent that is payable
monthly. Rent is usually agreed to be increased (but often not
decreased) in accordance with the Finnish cost-of-living index.
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Transfer of lease agreements and subletting
•
As a general rule, the tenant may not transfer its lease without
the landlord’s approval or unless the parties have agreed
otherwise.
•
The tenant may sublet less than half of the leased premises
without the landlord’s consent unless otherwise agreed. The
tenant may not re-let more than half of the leased premises,
unless the parties have agreed otherwise or the landlord has
given its consent to it.
•
The original tenant that has sublet or re-let the real estate will,
however, remain responsible for the fulfilment of its obligations
under the lease agreement.
TaX
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Transfer tax
•
Both direct purchases of real estate and purchases of real
estate companies are subject to transfer tax. Transfer tax is
payable by the purchaser, unless otherwise agreed.
•
Direct acquisitions of real estate are subject to transfer tax in
the amount of 4 % of the purchase price, i.e. including land
and buildings. Direct acquisitions are also subject to a notary
fee and a fee for the registration of the title. A leasehold is also
regarded as a real estate for transfer tax purposes.
•
Acquisitions of shares in an OREC, an MREC and a housing
company, but also in a company whose assets directly or
indirectly consist mainly of real estate in Finland, are subject to
transfer tax in the amount of 2 % of the purchase price of the
shares.
•
In addition to the purchase price of the shares, with respect to
ORECs and MRECs, the transfer tax base also includes share-
holder loans on a pro rata basis. In addition, with respect to
MRECs and housing companies the transfer tax base includes
also debt share on a pro rata basis.
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Real estate tax
•
Real estate holdings (land and buildings) are subject to real
estate tax, which generally varies between approximately 0.6
% and 1.35 % between municipalities. The tax base is the value
of the real estate as determined by the Tax Administration.
•
Municipalities may determine the real estate tax rate within the
said range annually.
