The Legal 500

Unclear tax rules deter real estate investors and in the worst case may impact on new construction in Sweden. Today there is a risk that the Swedish real estate market will be drained of billions of kronor. The reason lies in the unpredictable application of a complex regulatory framework for taxation of real estate. In recent years, the law and its application has become more and more unpredictable and difficult to interpret.

On June 9, 2009 the European Court of Justice (the ECJ) handed down its judgment in Commission v Germany (C-480/06).1 The case, the facts of which are described below (see section 3), concerns the scope for co-operation between local authorities without the need for a tendering procedure in accordance with the detailed rules of Directive 92/50 (which in all aspects relevant to this article are the same as in the new Directive 2004/18).2 At first glance the judgment may appear to the reader to be contradictory to the ECJ’s settled case law on what the Court itself refers to as in-house providing (the so called Teckal doctrine, described in further detail below in section 2).3 Consequently the judgment has, in Sweden as well as in other Member States, given rise to discussions among those active within the field of public procurement. Some commentators have even expressed the view that the judgment in Commission v Germany represents a new approach on in-house providing.

When a contract for the sale of goods is terminated due for example to non-conformity of the goods, the purchase price shall be restituted with a deduction corresponding to the benefit which the buyer has derived from the goods. This is to address the risk that a buyer might otherwise find himself in a better position following termination than if he had never entered into the contract at all – by benefiting from the goods for a certain period of time before the non-conformity was discovered, and then receiving the entire purchase price refunded.

A good question, raised – but not answered – by a decision of the Göta Court of Appeal from April 2008 in case Ö 799-08, where a housing company was prevented from registering title to property it had acquired following a merger, having failed to complete the formalities within the requisite time period. Since the original owner had ceased to exist – as an automatic legal consequence of the process of merger – the transfer could not be re-executed, and so the property was left without a registered owner.

Due to the steady increase in yields on the property market over the last few years, and the recent increase in interest rates, the focus of the Swedish property market has turned from fully developed properties towards project development. Since the developers have strived towards making exits at a very early stage in these projects, the sales structures have become a lot more complex than in ‘traditional’ acquisitions. As a consequence demands on the due diligence process and the contract structure have changed.

The Swedish tenancy legislation is protective legislation for tenants of commercial premises as well as residential tenants, where different rules apply for the protection of tenancy rights and rent-setting depending on whether the tenancy is related to a residential house or apartment or to premises to be used for commercial purposes. The purpose of this article is to illustrate the differences which currently exist between rents for commercial premises and rents for residential dwellings, as guidance for those who may be considering investing in apartment blocks in Sweden or are otherwise interested in the regulations governing the Swedish tenancy market. The article provides a survey of the fundamental principles which govern rent-setting in Sweden and provide protection of the rights of the tenants in the event of any rebuilding or demolition.