Articles

Renting Out a House

Real Estate Law

December 29, 2015

This article has been published in the Omakoti Magazine

Usually residential rental properties are apartments rather than entire houses. A property owner however, is free to rent out an entire single family home as they please. One must remember that renting out single family houses are governed by the Act on Residential Leases.

A Rental Agreement must be made in writing as a rule. An oral agreement is valid as well but such agreements are considered non-fixed-term agreements ex oficio. It is highly recommendable to make a written agreement between the landlord and tenant, and to include the details of the agreement such as the object of the agreement, the amount of rent to be paid, rental term, security deposit and other terms and conditions of rental agreement. The amount of security deposit may be equal to three month’s rent at maximum. The amount of a rent may be agreed freely but the amount must be reasonable. Either landlord or tenant may contest the reasonableness of a rent at a court of justice. The court of justice is authorized to raise or reduce the rent. Disputes on the reasonableness of the rent are quite rare. Usually disputes revolve around the terms of ending a rental agreement.

A house that is to be rented out should be inspected thoroughly by the tenant before any agreements are made. The unit or house condition must be in accordance to the fair expectations of the tenant, taking in account the age of the house, other similar properties and other similar local conditions, unless other condition is specifically agreed. The tenant may be entitled to a reduction of the rent if the house is in worse condition than they agreed. The tenant might also be entitled to repair a defect at the expense of the landlord in certain conditions (such as when the landlord does not take action to repair it themselves). To avoid disputes an inspection at the property should be carried out and all the major defects should be included in the rental agreement.

Documenting and photographing major defects and deficiencies are in both parties’ best interest. As the rental term ends it can be regarded whether the tenant has caused such damage to the rented property that they bear a liability to pay damages. The tenant is not liable of regular wear and tear of the property but the tenant must maintain the property with care. A fixed term rental agreement ends when specified period has passed. A non-fixed-term agreement is ended by terminating the contract. The notice period at the termination, when the tenant terminates the agreement, is one month beginning on the last day of month during which the termination notice is given. The notice period when the landlord terminates the contract is six months if the agreement has been in force for at least 12 months and three months if the agreement has been in force less than 12 months. An agreement cannot bypass these restrictions, thus the tenant’s notice period may not be lengthened nor the landlord’s notice period shortened. Terminating a fixed-term rental agreement is possible in special situations only. These include an illness of the tenant which makes the need for the property to cease or the tenant moves to another city to study or work.

Canceling a rental agreement is possible with both fixed and non-fixed-term agreements. However, a highly specific justification is required to cancel an agreement. An agreement may be canceled by the landlord e.g. if the tenant leads a disruptive lifestyle in the unit, neglects the maintenance of the property or does not pay the rent. The tenant on the other hand, may cancel the agreement if the rented property is in particularly bad condition or if residential use of the property would cause physical harm to the tenant.

Cancellation of a rental agreement sometimes takes surprisingly long at the courts and in recovery proceedings if the tenant does not move out of the property willingly. It is highly advised that reconciliation is used in rental agreement cases if possible to avoid such problems.

Translated by Lasse Jelekäinen