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Sweden cracks down on black market rentals: What the new laws mean for you

A number of changes to Sweden's housing law will come into effect from October. Here's what the new rules mean for anyone subletting or renting out an apartment.

Sweden cracks down on black market rentals: What the new laws mean for you
The laws should make it harder for unscrupulous landlords to rip off tenants. Photo: Niclas Vestefjell/imagebank.sweden.se

Sweden's parliament has voted through a range of regulations which will tighten up the housing market.

There are two major parts to the legislation: firstly, it will become illegal to buy or sell a rental contract, and secondly, landlords who overcharge second-hand tenants could lose their own first-hand rental contract.

In its summary of the new changes, a parliamentary statement said: “The proposal is made up of measures against trading of rental contracts and other abuse of the right to rent, with the aim of getting a better functioning rental market. The measures should lead to a better turnover of first-hand contracts, better rental conditions and healthier living environments.” 

Apartments in Sweden are rented out through a queue system, which means people join a housing queue and are offered rent-controlled apartments based on their position in that queue. Due to population growth and a housing shortage in the major cities, these queues can be long, with many residents needing to wait ten years or even longer to be able to rent in Stockholm, Gothenburg or Malmö.

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Photo: Tomas Oneborg/SvD/TT

People with one of these elusive first-hand contracts are able to sublet these apartments in special circumstances, usually for no more than one to two years – for example, if they have temporary employment elsewhere. But private individuals are not supposed to make a profit from subletting, and the new law changes aim to crack down on black market rentals, where some unscrupulous landlords charge second-hand tenants far more than the market value of the apartment.

Statistics from the National Board of Housing (Boverket) shared with The Local earlier this year showed that the average second-hand rental is around 65 percent more expensive than an equivalent first-hand contract.

“You can find people from all demographics struggling with housing, but it's mostly the young, newly arrived people and foreign workers. We know there's a substantial black market, but it's very hard to map this,” Assar Lindén, a lawyer at Boverket, told The Local at the time.

Under the new regulations, the punishment for selling or helping someone to sell a first-hand contract has been increased. The laws also make it a crime to buy a first-hand rental contract.

People found guilty of these offences face losing the rental contract immediately, and the typical punishment will be fines or a jail sentence of up to two years, although this could be increased to four years in serious cases.

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Photo: Björn Lindgren/TT

Landlords who charge too high a rent to second-hand tenants will also risk losing their own rental contract, even if their own landlord approved the price. In principle this means second-hand tenants should pay the same rent as first-hand tenants. Landlords can still charge extra for furniture, equipment and other items the tenant has access to, but the amount added on for this must be considered 'reasonable'.

Previously, landlords who overcharged tenants could be forced to repay the difference between the amount charged and the amount considered 'reasonable', but now the stakes have been raised as those who fall foul of the law could actually lose the apartment altogether.

The measures were based on a four-party agreement between the ruling Social Democrats and Green Party as well as the Centre and Liberal parties. The 73-point deal included proposals linked to immigration, labour law, and housing, including cracking down on black market rentals and abolishing rent controls on newly built properties.

IN DEPTH: What does Sweden's government deal mean for internationals?

These rule changes do not affect landlords who own their apartment, known as having bostadsrätt (literally 'right to the property'), rather than hyresrätt (literally 'right to rent the property', or a first-hand rental contract). 

Landlords in this category can charge rent at the cost of the property's current market value (even if they have fully paid off the mortgage) and they may also add on four percent of the home's market value to cover the 'cost of capital'.

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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.

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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