The Estonian government on Thursday approved a bill amending the Law of Obligations Act that would regulate the rental market and landlord-tenant relationships. The bill is to be forwarded to the Riigikogu for a vote.
Under the bill, when it comes to residential rental agreements, a ban on contractual penalties would be lifted and parties to the lease would be permitted to reach an agreement regarding the splitting of repair obligations. Landlords would also be permitted to terminate the lease if the tenant is two months late paying rent; previously, the minimum was three months.
Speaking at Thursday's government press conference, Minister of Justice Raivo Aeg (Isamaa) said that this bill is a compromise, and that there is no need to go to either extreme, leaving either tenants or landlords without any protections.
"If you have law-abiding landlords and tenants, then there will be no problems — you reach an agreement regarding conditions and everyone is happy," Aeg said. He admitted, however, that both tenants who avoid paying — referred to in Estonian as puuküürnikud, or "tick tenants" — as well as malicious landlords can be a problem.
According to the minister, the main goal of the bill is to regularize the rental market as well as protect landlords from "tick tenants." He added that the bill would allow parties to a lease to conclude various agreements and would bring balance to the field.
The bill also includes several mechanisms to protect tenants as well, however, such as limits to the size of contractual penalties, according to which a tenant can be penalized in an amount equaling up to 10 percent of their monthly rent, and no more than 20 percent total for several violations.
The bill will also establish clearer regulations for raising the rent for residential rentals as well as provide for the opportunity to agree upon a higher interest rate than prescribed by law.
Likewise to be introduced is a tenant's extraordinary right to terminate a lease if they decline to accept a new, higher rental rate, in which case rent cannot be increased until the contract has concluded.
Property owners' union wants changes
The Central Union of Estonian Property Owners finds that the main issue with the law as it currently stands is too-rigid regulation, and that making changes to this is a step in the right direction.
"The opportunity to agree differently than as prescribed by law is not enough," union chairman Priidu Pärna said, noting that this is what this bill would allow landlords and tenants to do.
"We'd like to see this opportunity be even broader," he continued, adding that there should be even broader freedom of contract when it comes to rental agreements.
When the Riigikogu begins to discuss this bill, the union wants to be actively involved in these discussions.
"We will certainly propose to the Riigikogu that contractual payments should be bigger," Pärna said. "We have also proposed that there should be rental committees in bigger local governments, in cities, that could review disputes extrajudicially.
Such a committee currently only exists in Tallinn.
Editor: Aili Vahtla