New Year Brings Changes to the Nearly 20-Year-Old Tenancy Law, Aimed at Making Rental Contracts Even More Reliable and Secure for Both Parties. But Is This Really the Case? The Details of the Change and the Rights of the Parties Were Explained by HUGO Lawyer Merike Roosileht.
What Should the Tenant Consider?
The new law gives property owners the possibility to demand payment from tenants for both the mortgage loan and the repair fund. The payment for the repair fund must be agreed upon in writing by both parties beforehand and must be made in a reasonable and proportional amount. “Proportionality means that the tenant does not have to pay for the full renovation of the building in a very short period – the costs should be clearly defined so the tenant can anticipate a certain amount, and the costs should not increase abruptly,” explains Roosileht. The repair fund agreement applies only when the initial rental contract is signed and cannot be demanded during the contract period.
The new law also allows for the imposition of penalties, which must also be agreed upon in writing beforehand and can cover non-monetary obligations, such as disturbing neighbors, smoking, or keeping pets. However, a penalty cannot exceed 10% of the total rent and other apartment-related expenses, and all penalties demanded in a month must stay within the 20% limit.
For example, with a 400-euro rent and 100-euro additional costs, where the tenant’s total expenses are 500 euros, a penalty can be up to 50 euros per violation, and the total penalty sum for all violations in a month cannot exceed 100 euros.
When demanding a penalty, the landlord must prove the violation of the contract. Furthermore, the landlord cannot offset the penalty with the deposit; separate agreements need to be made for that.
When signing a new rental contract, the property owner can demand a deposit of up to three months’ rent or up to the average gross salary in Estonia. The tenant has the right to pay the deposit in equal installments over three months.
Tenant Rights
In case of changes to the rental contract terms, the tenant currently has 14 days to accept the changes or terminate the agreement. According to the new law, the notice period is 30 days, during which the tenant can make a decision and, if desired, find a new solution.
Previously, the landlord had the right to increase the rent every 6 months in an open-ended contract. According to the new law, the rent may be raised annually. In the case of a fixed-term contract, the conditions for raising rent must be agreed upon in writing in advance, and the circumstances under which a rent increase is justified must also be clearly defined. For example, this could be due to changes in market rents or the modernization of the building’s insulation.
The landlord cannot simultaneously apply both a rent increase and pass all the costs onto the tenant. This means that if the parties agree that the tenant will now pay for the repair fund, the landlord cannot simultaneously increase the rent, and vice versa.
Landlord Protection
In addition to the possibility of penalty agreements, the new law provides landlords with more certainty regarding tenant debts. Specifically, if the tenant is two months late in paying bills, the property owner has the right to terminate the contract. However, before terminating the contract, the tenant must be given an additional 14 days to pay the debt. The owner also has the right to charge interest of up to 0.066% per day on outstanding debts.
