Estonia, Law and Regulations, Legislation, Real Estate

The amendments will enable market participants to regulate the relations between them in a more flexible manner, while keeping in mind the need to proceed from balanced solutions, spokespeople for the Riigikogu said, pointing out that the regulation concerning the rent of dwellings in Estonia has been unchanged for almost 20 years.

"The law proceeds from balanced solutions, which ensure sufficient protection for the tenant as the weaker side of the contractual relationship and preclude possibilities for misuse, while also offering a feeling of security to the lessor. I believe that more flexible regulation will facilitate the emergence of a rental dwelling stock of good quality and the emergence of trustworthy rent relations in the coming few years," Justice Minister Raivo Aeg said according to spokespeople for the ministry. 

The amendments will abolish the absolute prohibition on contractual penalty in the case of lease contracts, set out a maximum limit of fines for delay for lease contracts and allow for more extensive agreements than to date when it comes to the division of the obligation to conduct repairs.

To protect the tenant, the right of extraordinary withdrawal from a contract is set out for the case if the rent increased unilaterally by the lessor is not acceptable for the tenant, and in such case an increase in the rent is precluded until the expiry of the lease contract. 

The lessor will be entitled to withdraw from the contract in the event of a smaller amount due or a shorter period of default -- of two months instead of three months.

At the same time, limits have been imposed on the size of the contractual penalty, several requirements concerning content and form introduced as regards agreements concerning the obligation to repair, as well as more extensive informing requirements set for the lessor in the event of withdrawal from the contract due to default.  

Besides, it will be possible for the new owner to more easily terminate a lease contact acquired by them as result of a sale that has taken place as part of a bankruptcy or execution proceeding.