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Illegal rentals thrive in Stockholm flat crunch

The black market for first-hand rental contracts in Stockholm is alive and well as Swedes desperate for a place to live won't report illegal sales to the police, an investigation has revealed.

Published: 6 May 2013 17:21 CEST
Illegal rentals thrive in Stockholm flat crunch

An investigative report by the Svenska Dagbladet (SvD) newspaper showed that private landlords have not stopped selling rental contracts, at prices ranging from 40,000 kronor ($6,100) for the outer-lying suburbs to as much as 900,000 kronor for a two-bedroom flat in central Stockholm.

Greger Björkegren, chairman of the Stockholm chapter of the Swedish Union of Tenant (Hyresgästföreningen), underlined that big corporate landlords do not engage in under-the-table deals, as they respect the lawful housing queues.

SEE ALSO: Check out the latest home listings in The Local’s Property Section

But in the Swedish capital, there are more than a thousand landlords who own one or two buildings. As a result, these smaller players control several properties and aren’t always as scrupulous at the city’s larger landlords.

Björkegren said such smaller landlords often pop up in connection with the cash-in-hand transactions that he deals with as a member of the Rental Tribunal (Hyresnämnden).

“The housing-crunch is as it is,” he told The Local. “People get to a point when they quite simply just have to find a place to live.”

The biggest change in recent years, Björkegren said, has been the rise in fixed-term rental contracts, rather than open-ended permanent leases that allow tenants to stay in an apartment indefinitely, provided they pay rent and abide by house rules.

He believed it was part of certain landlords’ longer-term strategy to empty buildings of tenants with permanent contracts in order to convert the building into cooperative apartments (the condominium-type housing solution that Sweden employs) and in so doing, turn a tidy profit.

The same strategy would also allow them to sell an emptied building to another landlord ready to make the switch and rake in money from the conversion.

And because of the acute housing shortage in Stockholm, tenants put up little resistance to fixed-term contracts, Björkegren said.

“You’ll take anything, you don’t complain about anything, and once they throw you out you say ‘Thank you, would you happen to have another flat for me’?” Björkegren said, warning that fixed-term contracts leave tenants with little stability.

“Having a proper rental contract is like having a full-time work contract. You know your hours, you know your holiday entitlement, you know what the deal is,” Björkegren said.

“If you take a fixed-term rental contract, however, you’re in that grey zone and you don’t know whom to turn to. You are totally outside of the system,” he said.

Helena, 30, who did not want The Local to use her full name, revealed that through a friend of the family she had moved into a one-bedroom apartment in the centre of Stockholm. But when family obligations in the United States meant she had to leave Stockholm for six months, she was too afraid to sublet the apartment – which a tenant with a permanent rental apartment is legally entitled to do if studies or work require them to live elsewhere for a time.

The net effect for Helena was being stuck paying double rent, which nearly crippled her finances each month.

SEE ALSO: Find your next home with The Local’s Rentals Section

Björkegren said there are no proper estimates of how big a proportion of the rental housing stock in Stockholm switched hands illegally every year. Nor a proper inventory of the fixed-term contracts.

The official influx of new residents to the city of Stockholm every year is 10,000 people, while surrounding Stockholm County (län) adds about 25,000, according to Statistics Sweden (SCB).

While selling rental contracts does break the law – and law-abiding Stockholmers queue for years, sometimes decades, to access their dream pad or simply one big enough for their family – few buyers report black-market landlords to the police, reported SvD.

READ ALSO: Swede endures 28-year wait for Stockholm flat

Some flat-hunters resort to buying rental contracts because they have insufficient or bad credit history, which means Swedish banks are unlikely to lend them money to buy an apartment (bostadsrätt).

The SvD reporters also said that after trawling listings and going to several flat viewings with other prospective contract buyers, they encountered would-be tenants who had sold and made a profit on a cooperative apartment, and now wanted to transition to a rental apartment in order to live off the profit from their previous flat.

Others simply accepted that the black market was part of the complex Stockholm housing market.

At the Tenants Union, Björkegren said he doubted that an increase in reports to the police would do any good.

“This isn’t a police matter, it’s a matter for the politicians,” he told The Local.

Ann Törnkvist

Follow Ann on Twitter here

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PROPERTY

INTERVIEW: ‘Most foreigners in Sweden don’t know they can get back excess rent’

In Sweden, people subletting apartments are not allowed to charge more in rent than they themselves pay. But foreign subtenants don't always know this. We asked Roland Sjölin, lawyer at the Swedish Tenants' Association, about how to get back excess rent.

Published: 18 April 2024 15:19 CEST
Updated: 21 April 2024 08:12 CEST
INTERVIEW: 'Most foreigners in Sweden don't know they can get back excess rent'

More and more of the people asking the Swedish Tenants’ Association, Hyresgästföreningen in Swedish, for help with excess rent are foreigners, Sjölin told The Local in an interview.

“The problem is that if you’re coming from another country, and you’re subletting an apartment, you’re probably not familiar with the rules in Sweden, because in other countries, it might be okay to overcharge your tenants.” 

He said that clients from India in particular seeking help from the association were now “very common”. 

“Many people come here to work as engineers in the IT sector and then have to rent somewhere,” he said, adding that as a group Indians appeared to be “very aware of their rights.”

Sweden’s rental sector is heavily regulated, with first hand contracts negotiated between landlords and the Tenants’ Association, and the rent that can be charged for second-hand contracts limited to only a small fraction above what the first-hand renter pays. 

“You’re not allowed to make any profit subletting an apartment in Sweden,” Sjölin explains. “You can only charge the subletting tenant the same rent as you [the first-hand tenant] are paying to your landlord, and then you can add the costs for internet and electricity, and perhaps a parking lot, if that is included.” 

Tenants’ Association lawyer Roland Sjölin. Photo: supplied.

You can also add a påslag or “markup”, if you are renting out the apartment fully furnished, but this cannot exceed more than 15 percent of the rent. 

That doesn’t mean that most landlords follow the law. The competition for rental apartments, especially in Stockholm, is so intense, that unscrupulous sublet landlords often try to get away with charging well over the legal amount, charging what is known in Sweden as ockerhyra, or “excess rent” and hoping that their tenants are too desperate to complain.  

What many foreigners do not realise is that even after the rental period is over, they can still get back any excess rent they have paid by applying to the Rental Board or Hyresnämnden, which functions like a court judging rental disputes. 

“If you have the evidence then it’s fairly easy,” Sjölin said. “I get a new case every second week on repayment of unfair rent, and I think that I win most of them.” 

“Nowadays, you can get paid back excess rent up to 24 months back in time, so people tend to get more money,” he added. “In some cases, they can get 200,000 kronor. In other cases, perhaps it’s only 30,000 kronor or 60,000 kronor. It depends on how long you have rented the apartment, and how excessive the rent you’ve been paying has been.”

The first step is to establish what would have been a fair rent, either by asking your landlord what they themselves pay directly or by checking with the Tenants’ Association.

“Because we negotiate most rents in Sweden, we normally know what the firsthand rent is,” Sjölin explained.

Then you need to collect together your evidence.

“It’s a good thing to have a written contract and also papers from your bank showing that you paid rent every month, and perhaps photographs of the apartment, so the rental board can get an idea of the apartment you were renting and what would be a fair rent, and also the termination for the contract so you can show the court how long you’ve been living in the apartment.” 

But Sjölin underlined that since Sweden has free burden of evidence, none of this is essential. 

“Even if you’ve been paying in cash, if you have witnesses who can testify what you were paying each month, you still have a chance of getting your money back. It’s a bit more tricky, but I’ve won two cases like that this year.” 

People in Sweden, he explained, tend to wait until the rental period is over before seeking to get paid back excess rent rather than challenging their landlord while they are still living in the apartment. 

“You don’t have any legal protection for your home for the first two years, so if you bring the matter up with the person you’re renting the apartment from you risk losing your contract and having to move out, so most people wait until they’re supposed to move anyway,” he said.

If you apply to the rental board for a refund close to the day you move out, you can then make your landlord pay back all excess rent paid in the 24 months leading up to the date you contacted the rental board.

If you are a member of the Tenants’ Association, you can contact them and ask for help with your application, but there are also specialist companies, like Orimlig Hyra AB who will buy your case off you and give you a refund within 48 hours, saving you a long wait in exchange for a cut of the money reclaimed. 

Sjölin said that the rental board normally took about 8 months to come to a judgement, but that if the person with the first hand contract appeals, that could extend the waiting time by between six months and a year.

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