General principles

Article 41 of the Rent Act covers the right of the landlord to have access to the rented premises. The landlord has the right of access to the rented premises, though with suitable notice and in consultation with the tenant, in order to have improvements made to the premises and to inspect their condition and the way they are being treated by the tenant. The parties to the lease have a mutual obligation to show each other consideration, and therefore this could hardly be interpreted as meaning that the landlord could make visits every week to see how the tenant was treating the premises. The landlord also has the right to show the premises to potential tenants or buyers when six months or less of the lease period remain. The landlord may not enter the premises with the tenant, or his agent, being present, unless the tenant specifically agrees to this. Here, it must be borne in mind that the rented premises are the tenant’s home and, this being so, his privacy is to be respected.

Possible grounds for revocation

Article 18 of the Rent Act sets out the obligation of the tenant to treat the rented premises well and in accordance with the use of them that has been agreed. If the tenant, members of his household or his guests cause damage to the premises and fail to repair it, the landlord may have repairs carried out at the tenant’s expense following delivery of a report by an assessor. When this situation arises, the tenant shall be obliged to grant the landlord, and such persons as he may engage to carry out the repairs, access to the rented premises. If the tenant, without valid reasons, denies the landlord or other persons access to the premises for the purposes of carrying out such repairs, this may result in revocation of the lease (cf. point 7 of the first paragraph of Article 61).

Displaying the premises

During the last six months of the rental period, the landlord may display the rented premises for a certain length of time each day, though never for more than two hours per day, to prospective tenants or purchasers. Such visits shall normally be announced with at least one day’s notice. When the premises are displayed in this way, the tenant or his agent shall normally be present. The parties may, however, agree another arrangement between themselves.

House rules and conduct of tenants

For what may the rented premises be used?

Tenants may only use rented premises for the purposes covered by the lease. If the tenant wishes to put up shelves or other items for which it is necessary to drill holes or drive nails into the walls, written permission for this must be obtained from the landlord. This also applies to all modifications and improvements and if the tenant wishes to change the locks on the rented premises. The tenant and the landlord shall also make an agreement on the division of costs and, if appropriate, what is to be done with any additions at the end of the lease period.

Conduct by the tenant

The tenant shall in all respects treat the rented premises in a manner that conforms to good practice regarding the treatment of premises and their intended use. The tenant shall inform the landlord without delay of things, both inside and outside the building, that need repair or maintenance.

The tenant shall be obliged to treat the rented premises well and keep them tidy and observe the rules set and good practice regarding hygiene and health.

The tenant shall follow accepted patterns of conduct in the treatment of the premises and shall take care not to interfere with the use made of the building by others who have the right to use it or to cause them inconvenience or disturbance.

If rules of conduct have been set in a multi-dwelling building, the tenant shall be obliged to comply with them, and such rules shall be brought to the tenant’s attention.

The landlord may acquire the right to revoke the lease if the tenant fails to ensure that good order and conduct are maintained in the property; however, the landlord shall naturally be obliged to observe the formal requirements of the Rent Act and send a demand (cf. point 8 of the first paragraph of Article 61 of the Rent Act).

Conduct by others

The landlord shall be obliged to take steps to have other persons who are entitled to use the building in which the rented premises are located comply with the rules of conduct that have been set so that the tenant’s interests are secured.

Accordingly, it is assumed that tenants will apply to the landlord if other residents in the building cause disturbance or violate the rules of the Multi-Owner Dwellings Act. This rule is natural, since it is the owner of the premises, or the landlord, and not the tenant, who has membership of the residents’ association and it is therefore easier for the landlord to voice complaints and to have changes made, for example to the house rules. A meeting of the residents’ association may, however, authorise tenants to attend meetings concerning matters affecting the residents’ association, but tenants shall not have the right to vote or put forward proposals at such meetings. Tenants should inform the landlord in writing if they consider that they suffer disturbance or discomfort due to other residents. If the landlord fails to respond to such complaints, this may constitute grounds for the revocation of the lease by the tenant.

Condition of the rented premises when they are handed over to the tenant

The Rent Act contains the following provisions on the condition in which premises are to be when they are handed over to the tenant:

When they are handed over to the tenant, rented premises shall be in such a condition as may generally be regarded as satisfactory in terms of their intended use and their location.

When they are handed over, the premises shall be clean, with whole windowpanes, the locks and electrical switches in working order, and with the sanitary, heating and kitchen appliances that are regarded as normally accompanying the premises in working order, the same applying to and also the water supply and drainage systems, the smoke detector and the fire extinguisher. Premises shall furthermore meet, in other respects, the statutory and regulatory requirements regarding fire prevention measures. Premises that are let for residential occupation shall include the fixtures (fixtures may consist, for example, of a stove, fittings, etc.) that were in situ when the premises were displayed unless other arrangements are agreed specially.

If the rented premises are not in conformity with these provisions when the tenant takes possession, it is necessary that the tenant complain in writing at the first opportunity. The Rent Act states:

If it is found that the premises rented are not in the condition described in the lease, or the condition that the tenant could naturally be expected to assume, the tenant shall within four weeks from when the premises are handed over, inform the landlord in writing of his criticisms and objections and state the remedial measures he demands to have taken. Otherwise, the tenant shall be regarded as being satisfied with the premises. The tenant shall report faults in the premises that come to light at a later date and were not evident during a normal inspection within 14 days of their coming to his notice.

It is very important that tenants observe the formal requirements of the Rent Act and complain as early as possible, in writing, if they consider there is something at fault with the condition of the premises when they take them over. If, for example, the state in which the apartment has been left is not acceptable, or a stove that was in the premises when they were displayed is not there when they take them over, then these are matters that the tenant should notice immediately. If the tenant fails to complain with four weeks, on the other hand, then the view will be taken that he or she is content with the premises. If faults come to light later in the lease period, then of course complaints may be made, but they must be made within 14 days of the fault being noticed.

The tenant must send his complaint to the landlord in writing. It is absolutely necessary that the tenant should be able to demonstrate that he sent a complaint. A complaint sent by e-mail is regarded as a written complaint.

After the tenant makes a complaint, the landlord is under an obligation to respond. The Rent Act states:

If the landlord does not start measures to rectify defects in the premises within four weeks of receiving a written notification of them, the tenant may take remedial measures and deduct the resulting expenses from the rent, providing he first obtains the approval of an assessor.

If the landlord has not rectified defects in the premises within eight weeks of receiving notification of them, and if the tenant has not exercised his rights, the tenant may revoke the lease, providing that the defects involved are serious in terms of the intended use of the premises.

The tenant shall be entitled to demand a proportional reduction of the rent during the time in which nothing is done to remedy defects in the premises rented.

The reduction of the rent shall be determined by an assessor; however, both parties shall have the right to refer his decision to the Housing Complaints Committee (cf. Article 85).

It is important that the tenant should not stop paying rent even if he considers that the landlord is not fulfilling his obligations under the Rent Act. If the tenant stops paying rent, this could result in the landlord revoking the lease and the tenant could be obliged to pay the landlord compensation.

Are rented premises unfit for human habitation?

The Rent Act states, amongst other things, that when rented premises are handed over to the tenant, they are to be clean and in a condition that can be regarded as generally satisfactory. If the tenant considers that premises are not in an acceptable condition, he shall report this to the landlord in writing within 4 weeks and give him an opportunity to make amends. In some cases, it may happen that the premises become unfit for habitation before the tenant takes them over, in which case the lease then becomes void. For this to happen, something of a really serious nature would need to have happened, as the landlord generally has the right to repair or put into good condition whatever the tenant regards as being unsatisfactory about the property. It is then up to the tenant to demonstrate that the apartment is not in a habitable condition.

Assessors

Assessors are mentioned about 20 times in the Rent Act, yet they are not defined in the act. Thus, no demand is made in law that an assessor is to have specific qualifications or experience for making an assessment. In the Rent Act it is assumed that landlord and tenant will choose the person best able to carry out the assessment required. Nevertheless, it often happens that an assessor must be called in, for example if the landlord fails to honour his obligations regarding repair and maintenance under the Rent Act; in such cases, where a dispute has arisen, it is rather unlikely that landlord and tenant will agree on an assessor.

If a situation arises where landlord and tenant cannot agree on an assessor, it is advisable to have an impartial assessor who is an expert in the field in which the assessment is to be made. If, for example, the dispute concerns a non-functioning radiator in the heating system, then the appropriate expert would be a master plumber. There are also companies that are specialised in making assessments of rented premises.

The Rent Act states that assessments should be made before rented premises are handed over to the tenant and before they are returned to the landlord. An impartial assessor is to carry out the assessment if either party so requests, the cost of the assessment then being shared equally between landlord and tenant. If the parties to the lease seek the opinion of an assessor in other circumstances, the cost is to be borne by the party requesting the assessment. The parties may, however, agree on another arrangement.

Leases

The Rent Act, No. 36/1994, applies to leases.

Amongst other things, the act states that leases (rental agreements) are to be made in writing. If no written lease is drawn up, an oral agreement will nevertheless be equally valid in law, and the parties will then be regarded as having made a permanent lease (i.e. it has no agreed end date). Thus, the Rent Act applies equally to written and oral agreements. On the other hand, the natural and obvious thing to do in the case of such an important agreement is to have it in writing. Having a written lease is also a precondition for being able to have it officially registered.

Standard lease forms are available on the government homepage https://www.stjornarradid.is/verkefni/husnaedismal/husaleigumal/

The information that must be stated in a lease is listed in Article 6 of the Rent Act. It includes details of the landlord and tenant and a description of the premises to be rented, the amount of the rent and the arrangements regarding a deposit (money paid by the tenant and kept by the landlord to cover possible damage or default by the tenant; it is returned to the tenant after the end of the lease). When the rented premises are for people to live in, the provisions of the act are generally non-optional. Thus, it is not permitted to make an agreement where the tenant is to accept greater obligations, and acquire poorer rights, than are specified in the Rent Act. Therefore, if it were stated in a lease that the tenant were to relinquish some of his rights under the act, such provisions in the lease would presumably be set aside by a court of law. Nevertheless, the act covers some points on which special arrangements may be agreed, and it is therefore not unnatural that some special provisions should be made in the lease covering them. These points are specially mentioned in the standard lease form. The main ones are as follows:

• It may be agreed that the rent is to change in a certain way during the lease period.
• When the lease is made for a definite period, it expires at the specified time and may not normally be terminated during the lease period. It may, however, be agreed that such a lease can be terminated, with at least three months’ notice, for particular reasons, but these reasons must be stated specifically in the lease.
• The Rent Act contains special provisions on how maintenance of rented premises is to be carried out – i.e., what aspects of maintenance are the responsibility of the tenant or of the landlord. However, it may be agreed that the tenant is to undertake more maintenance of the property than he is obliged to do under the act. It is not required that the rent be reduced when the tenant carries out maintenance that should otherwise have been the responsibility of the landlord. Thus, the parties may agree that the tenant undertake to paint the rented premises, either in the middle of the lease period or at the end. If the parties wish to agree on some arrangement other than what is laid down in the Rent Act, it must be stated in detail in the lease what the tenant has undertaken as regards maintenance of the property.
• The Rent Act specifically addresses how the operating expenses relating to the rented apartment are to be shared between the tenant and the landlord. A different division may be agreed if the parties so wish, in which case it must be stated clearly in the lease how these expenses are to be shared.

If a prospective tenant considers that there is something odd about the lease, or wishes to have individual points in it explained better, he or she should of course be able to take it home before signing it and have somebody else read it over.

Deposits

It is common practice that the landlord demands payment of a deposit at the beginning of the lease period. Deposit sums may not be greater than the equivalent of three months’ rent. The tenant can pay the deposit into the landlord’s account; the landlord shall keep the deposit in a specially designated open account in a bank or savings bank bearing the highest interest available. The tenant may refuse to pay a deposit in the form of a monetary payment to the landlord providing that he or she offers a surety of another type that is considered satisfactory by the landlord. Deposits are intended to ensure proper payment of rent and also to cover possible damage to the premises rented.

Tenants may offer guarantees of indemnity from a bank or similar institution, or a personal warranty from one or more guarantor. It is also possible to offer insurance, which the tenant purchases from a recognised insurance company, covering payment of the rent and the return of the premises in good order at the end of the lease period.  

The landlord may not dispose of the deposit or make deductions from it without the consent of the tenant unless it has been established that the tenant owes compensation to the landlord. On the other hand, the landlord may use the deposit sum to meet outstanding rent payments, both during the lease period and at the end.

The landlord shall make any claim to the deposit sum in writing at the first opportunity and no later than four weeks after the return of the premises, or state a reservation of rights to this effect. If the landlord has not made a written claim to the deposit sum before four weeks have elapsed, he shall then return the deposit to the tenant, together with interest and arrears interest after that date.   

If the landlord makes a written claim to the deposit within four weeks after the return of the rented premises, the tenant shall inform the landlord, in writing, of whether he rejects or accepts the claim within four weeks of receiving it. If the tenant rejects the landlord’s claim, the landlord shall refer the matter to the Housing Complaints Committee, or bring a court action for the recognition of the tenant’s obligation to pay compensation within four weeks of the date on which the tenant rejects the demand; otherwise, the landlord shall return the deposit without unjustified delay.

The procedure and time-limits described above also apply if other types of insurance or bank guarantee are used.

If a dispute concerning compensatory liability is submitted to the Housing Complaints Committee or a court of law, the deposit shall remain in the landlord’s keeping until a final decision on compensatory liability has been announced.

NB!

If the lease was made prior to 22 June 2016, then the rules that apply are not the same as those described above.

The landlord used to have two months before having to decide whether or not to make a claim to the deposit due to damage that the tenant caused to the rented premises. That period has now been shortened to four weeks. Nevertheless, the landlord must, as before, present his claim to the deposit sum as quickly as possible.

Rent benefit

Tenants can apply for rent benefit from the Housing and Construction Authority (Húsnæðis- og mannvirkjastofnun, HMS). Rent benefit is intended to help tenants of limited financial resources who are renting living premises on the open market or in the socially-assisted system, and in student residences. Applicants must meet certain conditions, which are stated on the homepage of the HMS. One condition for receiving rent benefit is that the applicant must be in possession of a registered lease covering residential premises.

For information on rent benefit, see:

(https://www.hms.is/husnaedisbaetur/husnaedisbaetur/)

Written notifications

In those cases where the Rent Act specifies that requests, claims or other notifications are to be in writing it is very important to observe this so that their legal effect will be secured. Communications in electronic form meet the condition of being in writing.  

Parties to a lease are therefore advised to have all their communication with each other that could have an effect on the legal relationship between them in writing, from the beginning of the landlord-and-tenant relationship to the end, so as to avoid disputes arising later.

On the Icelandic government homepage:  https://www.stjornarradid.is/verkefni/husnaedismal/husaleigumal/ you can find samples of various notifications that pass between the parties to a lease. Tenants are advised to use them as model texts. Notifications may be sent by verifiable e-mail or by registered post. If a written communication is sent by secure and verifiable means, that will be sufficient for it to have its effect, even if the recipient maintains later that he or she never received it.

Registering a lease

Is it necessary to register the lease?

Article 4 of the Rent Act states that a lease is to be in writing. Article 10 of the act states that an oral lease is the equivalent of a written lease in terms of validity, and that if the parties neglect to make a written lease, they are to be regarded as having made an oral lease for an indefinite period. Obviously, an oral lease cannot be registered; therefore, registration of a lease cannot be a condition for its validity. If the parties made a written lease, that lease is fully valid between them and does not have to be registered. Thus, registration of a lease does not affect the legal relationship between landlord and tenant; on the other hand, registration is intended to defend certain rights of the tenant vis-à-vis third parties, e.g. bona fide purchasers (acting in good faith) or persons collecting debts that the landlord owes.

When must a lease be registered?

The provisions of the Rent Act state minimum rights and obligations of the tenant. No agreement may be made under which the tenant undertakes greater obligations, or acquires lesser rights, than those laid down in the act. If the lease is, in all respects, in conformity with the Rent Act, then there is no need to register it: the tenant’s rights under the Rent Act will be valid vis-à-vis all parties, including purchasers and debt-collectors, without being registered. If, on the other hand, the lease specifies that the tenant is to enjoy greater rights or entitlements than can be derived from the Rent Act, then such a lease must be registered so that those provisions of it that specify greater entitlements than are provided for the Rent Act will retain their validity vis-à-vis third parties, e.g. a bona fide purchaser. If such a lease is not registered, the additional entitlement may be lost; on the other hand, the tenant retains at all times the minimum entitlements provided for in the Rent Act. In such cases, not all the rights or entitlements provided for in the lease will be lost, but only those additional ones that should have been registered.

One condition for being able to apply for rent benefit is that he or she must submit a registered lease. Thus, it is necessary to register the lease if you intend to apply for rent benefit.

The Renters’ Help Line urges anyone who is entering into a lease for a definite period of more than 12 months with an extended notice period (longer than 6 months) to register the lease so as to be sure that it will regain its legal effect vis-à-vis a bona fide purchaser of the rented property. In other words, if such a lease has not been registered, the new owner of the rented property will not be bound by the lease. In such a case, the notice period for termination specified in the Rent Act would apply.

Rules on rent

Chapter VII of the Rent Act covers the payment of rent and deposits connected with the lease. The act does not lay down how high the rent is to be; that is something that the parties are free to decide between themselves. However, the act does say that the rent agreed is to be fair and normal from the point of view of both parties. It also states that the parties may agree on whether, and if so, how, the rent is to change during the lease period. It is commonly agreed that rent is to change in step with changes in the consumer price index.

Rent is to be paid on the first day of each month, in advance, for one month at a time, unless some other arrangement is agreed. If the due date for payment falls on a holiday, the rent is to be paid on the next banking day.

It should be mentioned that rent paid at the beginning of the month is the only advance payment permitted in the Rent Act if the lease is made after 22 June 2016.

Raising the rent

The Rent Act ensures tenants certain minimum rights and entitlements, and for the most part its provisions are non-optional (i.e., they must be observed) when it comes to residential premises. If the landlord wishes to make changes to a lease that is in force (for example, to raise the rent), then such changes must be agreed to by the tenant, or else the notice period for termination of the lease must run its course before the changes take effect. The Rent Act contains provisions on the expiry or termination of the lease. Article 56 states that the minimum notice period for termination of a lease for an indefinite period is six months. Leases made for a definite period normally expire at the end of the lease period, and therefore it is not necessary to give notice of when they are to end. A lease for a definite period may, however, be terminated due to specific grounds, events or circumstances; these must then be set out in the lease between the parties. For termination on such grounds, a notice period of three months is required (see the second paragraph of Article 58 of the Rent Act).

It should be noted that “special grounds, events or circumstances” does not refer to the grounds for termination that have already been covered in the Rent Act. It should also be noted that the burden of proof, i.e. the obligation to demonstrate that termination is based on the special grounds, events or circumstances stated in the lease, rests with the party who is terminating the lease.

The priority rights of the tenant are set out in Chapter X of the Rent Act. This states that, at the end of an agreed rental period, the tenant of residential premises shall have a priority right to rent the premises, providing that they are available for rent for at least one year. If the sole purpose of termination is to raise the rent and to draw up a new lease, then it must be considered that this condition is met. However, various exceptions from this main rule are listed in the act. The tenant’s priority right to rent does not apply, for example, when the landlord takes the premises over for his own use, if the tenant has, during the rental period, been guilty of non-performance or violation of the lease that may justify its rescission, etc. It is very unlikely that any of these exceptions could apply if the aim of the termination is solely to be able to raise the rent. If the tenant wishes to exercise his priority right, he must notify the landlord of this in writing by verifiable means at least three months before the expiry of the lease. The Rent Act also states that the rent specified in the new lease is to be fair and normal from the point of view of both parties. It is likely that the rent that was in force between the parties was fair; consequently, the landlord must demonstrate that this was not the case if he intends to raise the rent in connection with the new lease. If the landlord cannot demonstrate that the old rent amount was unfair, he is not then able to raise the rent.

Agreement on the rent sum

The Rent Act states that the rent sum agreed is to be fair and normal from the point of view of both parties. The notes to the Rent Act when it was debated as  bill state that the main criterion as to what could be considered fair and normal is the rent on the market for comparable premises.

Return of a rented apartment

The legal relationship between landlord and tenant may end with termination, on a specific date in the case of a lease for a limited period, or in the event of rescission, in which case the tenant must, of course, return the premises to the landlord.

The Rent Act states that the tenant is to return the property not later than 1 p.m. (13.00 hours) on the day following the end of the notice period for termination of a lease for an indefinite period. The act does not state any rules applying when properties are rented under leases for definite periods, but presumably it is natural to apply the same time limit. However, the exact timing will normally be a matter of agreement between tenant and landlord; if the tenant is late returning the apartment, he may have to pay further rent.

When an apartment is returned to the landlord, it should be clean and in the same condition as it was in when the tenant took it over, apart from normal wear and tear. Generally speaking, tenants may not embark on construction work or modifications of rented premises unless the landlord gives his consent for this, in which case it shall also be necessary to agree on what is to become of the improvements when the tenant moves out, i.e., whether or not the landlord will pay anything for them, etc. If the tenant takes with him furnishing units and other similar fixtures that he has contributed to the premises, he must be sure to restore the premises to their original condition.

When returning a property, the tenant must hand over all the keys to it. If the tenant has spent money on changing the locks, he or she must still hand over all the keys and shall not be entitled to payment from the landlord to cover these expenses. It should be noted that tenants must obtain permission from the landlord for changing the locks on the rented premises.

It is quite common for leases covering residential property to contain provisions stating that the tenant is to have the apartment painted before returning it to the landlord. In general, the landlord is to see to all maintenance. From this it follows, quite simply, that the landlord is to see to painting the walls of the apartment when a new tenant moves in. The landlord is also to see to maintenance on the apartment at suitable intervals, i.e., the painting of the walls, etc. Thus, the tenant is not required to paint the apartment when he or she returns it unless the walls have suffered damage that is not regarded as ordinary wear and tear. To take an example of a situation where it would be normal for the tenant to see to painting in view of damage, this could be where many holes are left in a wall from where shelves and a suspended television screen were fastened. It could be natural for the tenant to be required to repair such holes and to paint walls which are marked in this way. The tenant should not have to paint walls that are in a normal condition and show wear and tear that is normal in terms of the length of the rent period unless other arrangements are agreed in the lease.

Termination of a lease for an indefinite period

If the lease is for an indefinite period, i.e., it takes effect on a particular date but does not state when it is to end, then it may be terminated by either the tenant or the landlord. Notice of termination must be given in writing, it must be clear and it must be sent by a verifiable method, e.g. by registered post or by e-mail.

A sample notice of termination of a lease for an indefinite period can be found on the homepage of the Ministry of Social Affairs; it is recommended that tenants use it as a model if they want to terminate a lease.

• The notice period for termination of a lease for an indefinite period covering residential premises is six months, for both tenant and landlord.
• The notice period for termination of a lease for an indefinite period covering a single room is three months, for both tenant and landlord.
• The notice period for termination of a lease for an indefinite period covering storage sheds and similar premises is one month, for both tenant and landlord.

A tenant who wishes to terminate a lease for an indefinite period shall, therefore, send written notice of termination, a six-month notice period beginning on the first day of the month following the one in which the notice is sent. This means that if notice is sent on 20 January, the notice period will start to run from 1 February and will be complete on 31 July. In this case, the tenant would be required to have finished vacating and cleaning the premises by 1 p.m. on 1 August.

NB!

If the lease was made prior to 22 June 2016, the following rules apply regarding notice of termination of leases for indefinite periods:

The notice period for termination by either party (tenant or landlord) is one month in the case of individual rooms, storage sheds and similar premises, irrespective of the purposes for which they are rented.

 The notice period for termination by either party is six months in the case of apartments; by “apartment” is meant a place where a family is able to have normal home facilities. Where the tenant has rented an apartment for more than five years, the notice period which the landlord is required to give is one year.

The notice period for termination by either party is six months in the case of commercial premises during the first five years of the lease period, nine months during the following five years and one year after ten years’ rental.

End of a lease for a definite period (temporary lease)

A lease for a definite period comes to an end on a predetermined date without any special notice of termination being required. A lease for a definite period may, however, be terminated with three months’ notice due to specific grounds, events or circumstances; these must then be set out in the lease between the parties (see the second paragraph of Article 58 of the Rent Act). It should be noted that “special grounds, events or circumstances” does not refer to the grounds for termination that have already been covered in the Rent Act. It should also be noted that the burden of proof, i.e. the obligation to demonstrate that termination is based on the special grounds, events or circumstances stated in the lease, rests with the party who is maintaining that this is the case.

If the tenant continues to make use of the leased premises for 8 weeks after the end of the lease or notice period for termination, and the landlord has not called upon him or her to vacate the premises during this time, it is considered that a lease for an indefinite period has been established. The landlord is able to make a demand to this effect vis-à-vis the tenant.  A situation of this type would perhaps be most likely to arise if both parties are happy with the lease arrangement and simply forget when it is supposed to expire. Nevertheless, tenants should bear in mind that the notice period for termination of a lease for an indefinite period is six months; therefore, they will be bound by a lease for an indefinite period for at least six months following the end of the 8-week period.

NB!

If the lease was made prior to 22 June 2016, the following rules apply regarding leases for definite and indefinite periods, providing that the landlord has not called on the tenant to vacate the rented premises:

If two months have elapsed since the date on which the lease period ended, the tenant and/or the landlord may demand that the lease be extended indefinitely.

Priority right to rent

Tenants have a priority right to continue renting premises if certain conditions are met. An absolute condition is that, if the tenant wishes to go on living in the apartment, he or she must inform the landlord of this, in writing and in a verifiable manner, at least three months before the lease is due to expire. If the landlord does not accept that the tenant has a priority right in this connection, he shall send a rejection of the request, with reasons, within 14 days of receiving the tenant’s notification. If the landlord fails to do this, he is considered as recognising the tenant’s priority right unless the circumstances are such that such a notification is not necessary. This could apply, for example, if it should be clear to the tenant that, due to circumstances such as his or her not having complied with the lease, he or she has no right to go on renting the premises, notwithstanding the rules about priority rights.

If the lease is then renewed in accordance with the rules on the priority right to rent, the rent amount shall be fair and normal from the point of view of both parties.  It is generally assumed that the rent amount stated in the original lease was normal; therefore the party seeking to raise or lower the rent must demonstrate the contrary.
If the landlord then fails to respect the tenant’s priority right to rent, i.e. he refuses to accept the tenant’s priority right without having valid reasons for doing so, he may incur compensatory liability towards the tenant due to the latter’s demonstrable financial loss. It may be difficult to demonstrate that the landlord has violated the Rent Act; it may also be difficult to demonstrate financial loss where residential premises are involved. Thus, attention would be given primarily to costs involved in a move to other premises that would not have been necessary if the landlord had met his obligations; it is not, however, possible to claim compensation for inconvenience or disruption, for example because the tenant’s children had to change school or other similar circumstances.

 The second paragraph of Article 51 of the Rent Act lists instances in which the tenant’s priority right to rent does not apply.

The tenant’s priority right to rent does not apply:

In the case of a single person’s room.

If the rented premises are in the same building as the landlord himself lives in.
If the dwelling is rented with furniture, either fully-furnished or furnished to a substantial degree.
If the landlord takes the premises over for his own use.

If the landlord puts, or intends to put, the premises at the disposal, for at least one year, of his relations in direct line of descent, adoptive children, foster-children, siblings, nephews or nieces or parents-in-law.
If the landlord intends to sell the premises during the six months following the end of the rental period. If the sale is intended during this period, or during the six months following, the parties may, notwithstanding other provisions of the Rent Act, agree on an end to the rental period with particular conditions and on evacuation when the premises are to be handed over to the new owner. If the new owner intends to continue to let the premises out, the tenant shall have a priority right to rent them, though with the same limitations that apply under the other items in this list.

If substantial repairs, maintenance work or alterations are planned during the six months following the end of the rental period, which, in the opinion of an assessor, would render the premises unfit for habitation for at least two months.
If the tenant is an employee of the landlord and has been provided with the rented premises because of the job or in connection with it.
If the tenant has, during the rental period, been guilty of non-performance or violation of the lease that may justify its rescission.
If the tenant has in some other way neglected his obligations or conducted himself in such a way as to make it natural to suppose that the landlord does not wish to continue to rent him the premises, or if important reasons of another type argue against the tenant’s having a priority right to rent.
If a fair assessment of the interests of both parties and the overall circumstances argues against the tenant’s having a priority right to rent.
Where the landlord is a legal person that is not operated on a for-profit basis and the tenant no longer meets legitimate and relevant conditions set by the landlord for renting the premises, or fails to provide necessary information so as to verify whether or not he meets the conditions, providing that it is stated in the lease that the priority right to rent will be contingent on meeting the conditions in question.

Revocation by the landlord

The first paragraph of Article 61 of the Rent Act covers instances that may result in the landlord’s being able to revoke the lease. It is important to comply with the provisions of the act regarding how rescission is to be effected. In particular, it should be noted that in some of the instances enumerated, it is stipulated that the tenant is to receive a written demand or warning before the authorisation to rescind the lease is exercised.

Demands, warnings or notices of revocation shall at all times be presented in writing and shall be accompanied by reasons.

The rights and obligations existing between landlord and tenant under the lease expire as from the date of the notice of revocation and the tenant shall vacate the premises immediately or at an agreed time. The landlord shall be entitled to receive payments of rent for the period during which the tenant occupies the premises after being notified of revocation.

The tenant is obliged to compensate the landlord for damage or loss that results from his non-performance of the lease. It should be noted that the landlord must limit his losses and advertise the rented premises for rental at the first opportunity.

The landlord may revoke the lease in the following instances:

If the tenant does not pay the rent or his contribution to the shared expenses under Chapter V of the Rent Act on the correct due date and does not respond within seven days to a written demand by the landlord for payment, providing that the demand was sent after the due date and that the landlord stated in it his intention to exercise his right of revocation.

If the tenant is to pay part or all of the rent in the form of labour and grossly neglects this obligation or displays gross incompetence in his work.

If the tenant uses the premises, or the common parts thereof if the premises are in a multi-owner building, or the grounds, in a manner other than that provided for in the Rent Act or in the lease and otherwise permitted in law and does not desist from misusing them in this way despite a written demand by the landlord.

If the tenant assigns his right of tenancy or misuses his right to sub-let the premises according to Chapter IX of the Rent Act, or if the sub-tenant is guilty of any conduct of a type that entitles the landlord to revoke the lease with the original tenant.

If, without valid reasons, the tenant denies the landlord, or other persons, access to the rented premises in violation of Article 18 of the Rent Act.

If the tenant vacates the premises before the end of the rental period without having taken the necessary measures to look after them and protect them.

If the premises deteriorate while they are in the care of the tenant due to bad treatment or carelessness on the part of persons for whom the tenant is responsible and he does not respond immediately to a written demand by the landlord to rectify the situation (see Article 18 of the Rent Act).

If, despite written demands from the landlord, the tenant neglects his duty to ensure that good order is maintained in the rented premises and that they are treated well (cf. Article 30 of the Rent Act), or is guilty of acts of personal malice against the landlord or his family

If, notwithstanding written complaints by the landlord, the tenant of commercial premises neglects his duty to maintain normal activities and traditional operations (cf. Article 31 of the Rent Act).

If the tenant neglects his obligations under the lease or the Rent Act in ways other than those listed above in such a gross manner as to make it natural or necessary that he should be made to vacate the premises.

If the landlord has set lawful and relevant conditions for the rent of the premises under Article 3a of the Rent Act which are stated in the lease and the tenant has supplied incorrect or misleading information on the basis of which he was considered, wrongly, as meeting the conditions for being assigned the rented premises.

Landlords are urged to contact Renters’ Help Line before resorting to revocation so as to ensure that the correct procedure has been followed. Revocation is the most drastic measure provided for under the Rent Act and it is vital that the correct procedure be observed.

Revocation by the tenant

The first paragraph of Article 60 of the Rent Act covers instances which authorise the tenant to revoke a lease. If a lease is revoked on grounds of neglect under Article 17, Article 20 or the fourth paragraph of Article 30 of the Rent Act, then it is important to comply with the instructions of the act regarding written demands presented to the landlord.

Notifications of revocation must be written and reasons for the revocation must be stated.

The tenant must exercise his right of revoacation within 8 weeks of becoming aware of non-performance on the part of the landlord; otherwise his right of revocation shall lapse. The tenant’s right of revocation also lapses if the landlord makes the necessary improvements.

The rights and obligations existing between landlord and tenant under the lease expire as from the date of the notice of revocation and the tenant shall vacate the premises immediately or at an agreed time. The landlord shall be entitled to receive payments of rent for the period during which the tenant occupies the premises after being notified of revocation.

The tenant may revoke the lease in the following instances:

If the landlord does not rectify defects in the rented premises in accordance with Article 17 of the Rent Act.
If there is a substantial delay in the handing over of the premises. If the landlord is responsible for such a delay, the tenant shall also be entitled to compensation.
If, for reasons that cannot be attributed to the tenant, the premises deteriorate during the rental period to such an extent that they can no longer be used for the intended purpose or are regarded as posing a health hazard in the opinion of the health authorities.
If the landlord fails to rectify defects in the rented premises under Article 20 of the Rent Act.
If the tenant’s right is substantially abridged as a result of legislation or other public instructions or because it is at variance with other restrictions that rest on the property. The landlord shall also be liable to compensate for direct loss sustained by the tenant as a result of such abridgement if he knew of the abridgement, or could have been expected to know of it, when the lease was made and neglected to bring it to the tenant’s attention.
If the tenant’s normal use or domestic peace is substantially disrupted by disturbances or inconvenience arising from substantial or repeated violations, by other persons who are entitled to make use of the same building, of the rules of conduct or local rules, providing that the landlord has neglected his obligation under paragraph 4 of Article 30 of the Rent Act, in spite of written demands by the tenant, or the circumstances are in other respects such that it is fair and natural that the tenant should be able to rescind the lease. Such circumstances may depend, for example, on the nature of the violations and disturbance, and also on whether further violations and disturbances are foreseeable and likely.

If the landlord repeatedly or substantially violates the tenant’s right to have the agreed undiminished control and use of the rented premises, e.g. by obstructing or restricting utilisation or by entering or occupying the rented premises without authorisation, or if the landlord is guilty of a punishable offence against the tenant or his family

If the landlord fails to honour other obligations under the lease or the Rent Act in such a substantial or deceitful manner as to render revocation by the tenant natural or necessary.

Tenants are urged to contact Renters’ Help Line before resorting to revocation so as to ensure that the correct procedure has been followed. Revocation is the most drastic measure provided for under the Rent Act and it is vital that the correct procedure be observe. 

Measures taken following revocation of a lease

If the landlord revokes a lease and the tenant refuses to vacate the premises, two courses of action are available to the landlord; which is better will depend on the nature of the case. On the one hand, the landlord may apply for an eviction order; alternatively, he may bring an ordinary private action in which he can still demand that the tenant be evicted but can also present other claims relating to the lease, e.g. a demand for the payment of rent that is owing.

Can the landlord himself evict the tenant?

The landlord himself cannot effect the eviction of the tenant, even though notice of rescission of the lease has demonstrably been sent to the tenant and the tenant has not vacated the premises. A landlord who intends, personally, to evict the tenant could be guilty of illegal entry of the tenant’s home under Article 231 of the General Penal Code.

Eviction order or an ordinary private action?

The procedure chosen by the landlord will depend partly on the grounds on which the lease is rescinded. If an eviction order is applied for, only limited evidence may be presented, and consequently the landlord must be able to demonstrate his case on the basis of that limited evidence. This evidence consists of statements by the parties and visible evidence, such as documents and photographs. If the lease is revoked because the tenant has not paid the rent, the simplest and quickest alternative for the landlord is to apply for an eviction order from a court, providing in most cases that he is able to demonstrate, by means of submitting documents, that the tenant has not paid rent. If, on the other hand, the lease is revoked on the grounds of one of the provisions of Article 61 of the Rent Act, which involve elements of assessment, for example point 8, which addresses the tenant’s obligation to ensure that good order is maintained in the rented premises, then the landlord may be obliged to produce witnesses in court to prove his case. If it comes to this, then he may have to bring an ordinary private action, since the summoning of witnesses is not permitted in applications for eviction orders.

There is nothing to prevent the landlord from bringing a private action concurrently with his application for an eviction order; in the private action he can demand the payment of rent that is owing or that the tenant pay him compensation for damage caused by the tenant to the rented premises.

What if the tenant does not attend court?

If the tenant neither attends court in person nor presents a defence in an action for an eviction order, then the judge will grant the landlord’s application for an eviction order by issuing a process (writ), unless there are flaws in the demand or the landlord is not regarded as having demonstrated that his rights are sufficiently clear as to make it possible to authorise an eviction. After the judge signs the process (writ), an application for an enforcement is sent to the district commissioner in the area where the property is located and it will be attended to by the district commissioner at the first opportunity.

Eviction

If the person who is to be evicted vacates the property and returns it to the owner, the request for an eviction is recalled. If it comes to an eviction, it will be the owner of the property himself (or herself) who carries it out. The owner must obtain a van, a locksmith and porters and anything else necessary to take everything out of the apartment; a place must also be found for storing the contents (furniture, personal effects, etc.). The tenant will be obliged to reimburse the owner for all costs incurred by the owner in connection with the eviction. The owner of the property is obliged to store the tenant’s possessions for a length of time that is considered sufficient so as to give the tenant the opportunity of collecting them. After that time, the owner may sell the tenant’s possessions to defray storage costs or to destroy such of them as have no value. The role of the district commissioner in an eviction is to supervise and monitor the procedure and to call the police if necessary.

If the tenant offers no defence against an application for an eviction order, it may generally be assumed that it will take some time from the rescission of the lease until the eviction may be carried out. If, on the other hand, the tenant offers a defence, or in the case of an ordinary private action, the processing of the case could take far longer.  

Unlawful revocation ; compensation for revocation

Certain circumstances may result in the parties’ being able to revoke a lease. Then the lease is no longer in force, the tenant stops paying rent and no longer has the property at his disposal.

On the other hand, revocation may be a complex process, and if either party sustains damage or loss as a result of non-performance of the lease by the other, resulting in revocation , then he or she may be entitled to compensation.

Compensation for non-performance by the tenant which results in revocation

If the tenant is guilty of non-performance that may result in revocation and the landlord revoces the lease, then the landlord may be entitled to compensation for loss or damage that he incurs. This is covered in Article 62 of the Rent Act:

“If the lease is revoked for any of the reasons listed in Article 61, the tenant shall compensate the landlord for the damages resulting directly from his non-performance. If the lease was for a definite period, the tenant shall also pay compensation equivalent to rent until the end of the rental period, or alternatively until the time when he should have vacated the premises according to the notice of termination.

“However, the landlord shall immediately take the necessary measures to let the premises out as soon as possible in return for a suitable rent, and the rent income he receives, or should receive, in this manner shall offset the rent compensation.”

It is clear from this provision that even though the landlord is entitled to compensation, he or she is obliged to limit the loss by letting the property out again at the first opportunity.

Compensation for non-performance by the landlord which results in revocation

Regarding the tenant’s right to compensation following non-performance on the part of the landlord which results in rescission of the lease, Article 60 of the Rent Act states: “The tenant’s right to compensation from the landlord following rescission shall be subject to the general rules of the law of claims and obligations.”

This provision is not very detailed; thus, it is necessary to assess in each individual case whether the tenant is entitled to compensation, and then to what compensation. It is reasonable to suppose that if the tenant leaves the premises before the lease expires due to non-performance by the landlord, after an unlawfull revocation of the lease by the landlord then various points could qualify for consideration, e.g. the cost of moving, the cost of storing the contents of the apartment, etc. On the other hand, the tenant, just like the landlord, is under a substantial obligation to minimise his or her loss.

Assignment and sub-letting

The Rent Act contains the following provisions on assignment and sub-letting:

“Article 44. The tenant may not assign his right of tenancy or sub-let the rented premises without the landlord’s approval unless other provisions are made in this Chapter.

         It shall not be regarded as constituting assignment of the right of tenancy or as sub-letting if the tenant permits close family relations or relatives by marriage to live in the rented premises together with him or his immediate family, providing that the number of persons in the home remains within normal limits in terms of the size and design of the rented premises.”

Before further consideration is given to this prohibition, it is necessary to explain the terms “assignment of right of tenancy,” on the one hand, and “sub-letting”: these are two different things. Sub-letting is when the tenant lets the premises, either in their entirety or in part, to another party. The tenant is then, in effect, a landlord vis-à-vis the sub-tenant. Consequently, the original tenant continues to be liable to the original landlord, as the lease between the two of them remains in full force.

It can probably be assumed that it is mainly in the case of commercial premises that the parties agree that the tenant may sub-let, though it is conceivable that sub-letting could be permitted in the case of residential premises, possibly taking the form of the original tenant sub-letting a garage, a separate apartment in the property or a single room to another party.  It could also happen that the tenant might move out of the property and sub-let it to another party, he himself remaining liable for the payment of rent, and other obligations, towards the landlord. However, sub-letting is not permitted without the landlord’s approval, and could result in the landlord’s acquiring the right to rescind the lease.

Assignment of the right to rent, on the other hand, means that a new tenant would take over all the rights and obligations of the previous tenant.

Costs associated with rented premises

Chapter V of the Rent Act contains provisions on the cost of operating the rented premises and how such costs are to be divided between the parties. These are costs over and above the actual consideration to be paid as rent, yet they are considered part of the costs associated with the housing. The provisions in this chapter of the Rent Act are, however, discretionary, i.e., the parties may decide on a different division of these costs.

The standardised lease form is designed so that in addition to the total rent sum, it is also possible to state how much of the sum is just for the renting of the premises, without covering other expenses. If no other arrangement is agreed, then the operating costs are divided as follows:

The tenant is to pay the cost of water, electricity and heating of the rented premises. The tenant is to inform the relevant utilities that he or she is the new consumer. However, it is not necessary to do this if there is no separate hot-water meter for the premises.

The landlord is to pay the rates, including property tax and insurance premiums, and also the fixed charges for water supply and sewerage charges. If the rented premises are located in a multi-owner building then the landlord is to pay the joint expenses as provided for in Article 43 of the Multi-Owner Dwellings Act, No. 26/1994; these include contributions to the joint operation and maintenance of the property, including lift equipment, heating, lighting and water consumption in the common parts and the costs of improvements to the lot or the building. The landlord is to pay the annual fees levied by utilities, which are calculated on the basis of the property valuation, the volume of the property or other such bases and are not directly related to the purchase of water or energy. Where utilities charge a special fee for the rent of meters or other similar equipment which they provide, such fees are to be paid by the landlord.  

This division of costs may, in itself, be natural in terms of the use of the premises by the tenant. Nevertheless it is permitted to depart from this pattern and apply a different division of the operating costs, but any such arrangements must be defined in the lease. Unless derogations from the rules of the act on operating costs are clearly agreed, then it is not permitted to place more extensive obligations on the tenant over and above those stated in the Multi-Owner Dwellings Act.  

When a service for which the tenant is to pay is sold jointly to other parties as welll, then the costs are to be divided in accordance with the provisions of law or the lease on the division of utilisation rights, where these are held jointly, and otherwise in accordance with proportions stated in a property division declaration. If no such declaration has been drawn up, then the costs shall be divided according to the ownership shares of the apartments in accordance with the provisions of law on the determination of ownership shares in multi-owner dwellings.

If the landlord pays operating costs that the tenant is supposed to pay, then they will be due for payment to the landlord on the next rent payment date. If the tenant pays operating costs that the landlord is supposed to pay, the tenant may deduct those costs from the next rent payment.

It is common for the costs of heating and electricity to be included in the payment of rent without being stated separately; in such cases, the landlord simply pays the relevant invoices and the tenant pays only the agreed rent sum.

Tenants are urged to look closely at what is included in the rent they are to pay, as heating and electricity costs can be considerable.

Maintenance of rented premises

Chapter IV of the Rent Act covers maintenance of rented premises. Maintenance should, for the most part, be the responsibility of the landlord; nevertheless, the tenant is of course expected to treat the rented premises well and in accordance with the purpose for which they are leased.

Firstly, it should be pointed out that it may be agreed specifically, in the lease, that the tenant is to see, partly or completely at his or her own expense, to the maintenance inside the apartment which the landlord is obliged to attend to under the Rent Act. It must then be stated clearly in the lease what maintenance the tenant undertakes.

Unless some other arrangement is agreed on, the landlord is to see to maintenance of the rented property, both indoors and out of doors. This includes repairs of windows, home appliances and equipment that is considered as being included with the premises, bathroom fittings, locks, taps, electrical sockets, smoke detectors, fire extinguishers and other items included in the premises, providing that the tenant demonstrates that malfunctions cannot be attributed to neglect or oversight on his or her part, or of persons for whom the tenant is responsible.

The landlord shall at all times maintain the rented premises in rentable condition, this including having the premises painted and replacing floor coverings, carpets and other protective surfacings at suitable intervals, as appropriate in terms of good practice in the maintenance of premises

Under the Rent Act, the tenant is obliged to see to minor maintenance of the rented premises, e.g. changing light bulbs and batteries in smoke detectors and keeping drains unblocked. If the tenant considers that the landlord is not attending to maintenance in a satisfactory manner, the tenant shall inform the landlord in writing of what he or she considers needs to be done and call on him to rectify the situation.

If the landlord does not begin remedial measures within four weeks after receiving a written notification, the tenant may have the repairs carried out and deduct the resultant costs from the rent, providing he or she first obtains the approval of an assessor.

If the landlord has not remedied the defects in the premises within eight weeks from receiving a notification of them and the tenant has not exercised his right to have repairs carried out, then the tenant may rescind the lease, providing that the defects are substantial in terms of the intended use of the premises by the tenant.

The tenant is entitled to demand a proportional reduction of the rent until the defects in the rented premises have been put to rights.

An assessor shall assess the amount of reduction of rent that is to apply if the tenant or landlord so requests; either party may, however, refer his assessment to the Housing Complaints Committee (see Article 85 of the Rent Act).

The landlord shall have all repair and maintenance work carried out quickly and well so as to cause the minimum disturbance and inconvenience for the tenant.

If, in the opinion of an assessor, repair and maintenance work carried out at the landlord’s instigation results in substantially reduced use, or loss of use, by the tenant, the landlord shall compensate the tenant for this by means of a proportional reduction of the rent or in another manner agreed on by the parties. If the parties cannot agree on compensation or a reduction of the rent, they may seek the opinion of an assessor, whose opinion either party may refer to the Housing Complaints Committee (cf. Article 85).

If the rented premises or their fixtures are damaged by the tenant, members of his household or other persons whom he permits to make use of the premises or to enter and move about in them, the tenant shall take measures to repair the damage as soon as possible. If the tenant neglects this duty, the landlord may have repairs carried out at the tenant’s expense. Before doing so, however, the landlord shall inform the tenant in writing of his criticisms and state the remedial measures he demands and give the tenant four weeks from the date on which he receives the landlord’s criticisms in which to complete the repairs. Before having repairs carried out, the landlord shall seek the opinion of an assessor, and shall his approval of the expense involved after the work has been completed.

In In the circumstances referred to above, the tenant shall be obliged to put up with the movements and activities of the repairmen without any reduction of the rent, even though the tenant’s use of the premises is temporarily limited as a result of the repair work.

In all cases where residential premises are involved, the landlord shall bear the cost of damage for which compensation must be paid under the conditions of ordinary house owners’ insurance, including the own-risk undertaking as defined in the insurance policy.  

Tenants’ right to a reduction of the rent

All repair and maintenance work carried out at the instigation of the landlord is to be done as quickly as possible. The landlord must carry out the work in such a way as to minimise the inconvenience for the tenant. If due to maintenance work by the landlord the tenant is only able to make reduced use of the premises, the tenant shall then be entitled to a proportional reduction of the rent.  If the parties are not able to agree on the reduction of the rent, they may consult an assessor, who shall then determine a suitable reduction. The assessor’s decision shall then apply, but if either party will not accept it, he or she may refer the assessor’s decision to the Housing Complaints Committee.

Article 42 of the Rent Act covers the sale of rented premises.  

Whether or not rented premises are sold does not depend on the tenant. Thus, the landlord may sell the rented premises, in which case the new owner takes over the landlord’s rights and obligations.

When such an assignment of rights and obligations takes place, the original landlord is generally free of all obligations vis-à-vis the tenant, and the purchaser of the property replaces him in all respects in that capacity.

If no other arrangement is agreed, the purchaser will, on the agreed handover date, take over all rights and obligations formerly applying to the seller of the property vis-à-vis the tenant.

The legal position of the tenant generally remains unchanged and identical despite the change of ownership; his obligations are not increased, nor are his rights reduced.

If the tenant has secured, in the lease, extra rights or entitlements, then Renters’ Help Line recommends registering such a lease.

When a change of ownership of rented premises takes place as a result of the bankruptcy of the landlord or a sale of his assets in execution of a judgment, special rules apply under the Bankruptcy (Etc.) Act and the Sales in Execution Act which entail exceptions from the general principles described above.

Notifying the tenant

When rented premises are sold, the original landlord shall inform the tenant of the sale and change of ownership in a verifiable manner, without undue delay and not later than 30 days after signature of the purchase contract.

The notification shall state the name, address and ID number of the new owner, the date on which the change of ownership is to take effect vis-à-vis the tenant, how payments of rent are to be made and all other matters that it is necessary for the tenant to know.

The tenant shall pay rent and direct all communications, complaints and decisions regarding the rented premises to the original landlord until he or she has received notification of other arrangements.

The points above refer solely to the sale of properties on the open market; slightly different rules apply in the case of changes of ownership in connection with bankruptcies and sales in execution of judgments.

If the landlord requires a deposit, it shall take one of the following forms:

1. A guarantee from a bank or comparable party (a bank guarantee).
2. A personal guarantee by one or more third parties.
3. An insurance policy covering the payment of rent and the return of the rented premises in good order, which the tenant can purchase from a recognised insurance company.
4. A monetary deposit paid by the tenant to the landlord.
5. Payment into the Landlords’ Mutual Insurance Fund, which is a legal person which lets out property on a commercial basis.
6. Guarantees of a type other than those listed in points 1-5 above which the tenant offers and the landlord accepts as being valid and satisfactory.

A tenant may refuse to make a monetary payment as a deposit as provided for under point 4 of the first paragraph providing that he or she offers a deposit of another type which the landlord considers satisfactory.

The landlord may not dispose of the guarantee or make deductions from it without the tenant’s consent unless a final conclusion has been reached regarding the compensatory liability of the tenant. The landlord may, however, dispose of a deposit to pay outstanding rent, both during the rental period and at the end of it. For further discussion of deposits and guarantees above.