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BR renting out restrictions

How much and for how long

The Undertaker
post 2.Apr.2013, 11:46 PM
Post #1
Joined: 8.Apr.2009

Greetings experts,

You know the excessive bureaucracy which permeates every aspect of life in Sweden, usually with good intentions but sometimes just for the sake of it? Well I’m a bit murky on THE RULES for renting out my Bostadrätt apartment.

I have always understood that there were market limitations on the amount it could be rented out for, yet when I look on Blocket etc, there are apartments clearly inferior to my place with bizarrely high rents.. How do they get away with it?

I’m thinking of renting out my home for a few months while I try and evolve an aspect of personal life.elsewhere. What exactly go do THE RULES/Förening/Committe say about that? I believe they need to know and approve, fine. But do they stick their noses in to the price I rent for?

My place is nicely furnished with top quality beds, sofa etc. So I think that commands a higher price than the places furnished at the cheaper end, and in less attractive areas.

Tell me I’m wrong.
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Yorkshireman
post 3.Apr.2013, 12:28 AM
Post #2
Joined: 22.Nov.2011

QUOTE (The Undertaker @ 2.Apr.2013, 11:46 PM) *
Tell me I'm wrong.

OK ... You are wrong! smile.gif

The law changed earlier this year. Previously when renting out your BRF apartment you could only charge approx. the cost for the apartment when compared to a similar renting apartment + something for furniture etc... (basically you could only recover your monthly BRF fee + some)

Now the rule states that you can charge a rent that does not significantly exceed the capital cost + operating cost. So, this means as before, BRF Fee + something for electricity, broadband, and any other little things you may be charged for as the owner ... plus the cost of capital, but not the actual cost of any mortgage interest etc... but in theory you may not have borrowed to buy the apartment, so the Gov. changed it to be the cost of having capital tied up in the BRF to give a reasonable return. It is assumed this rate is a few percentage points above the Riksbanks reference interest rate. Can't remember off-top-of-head the exact figures.

Another major change to previous legislation is that if you rent out a BRF apartment, and the tenant takes you to Hyresnämnden and they find the rent is too excessive they cannot back date it as before for 12 months they can only backdate any repayment to the actual date the tenant registered the case with them.

However, you still need permission from the BRF board and their rules apply as before, that was not changed due to too many parties objecting.
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007
post 3.Apr.2013, 08:41 AM
Post #3
Location: Stockholm
Joined: 2.Apr.2006

QUOTE (Yorkshireman @ 3.Apr.2013, 01:28 AM) *
Now the rule states that you can charge a rent that does not significantly exceed the capital cost + operating cost. So, this means as before, BRF Fee + something for electric ... (show full quote)

thanks yorkshireman for a nice summary of the new application of the rental restrictions. very informative.
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Essingen
post 3.Apr.2013, 08:58 AM
Post #4
Joined: 2.Nov.2008

QUOTE
However, you still need permission from the BRF board and their rules apply as before, that was not changed due to too many parties objecting.

I fully understand that you need permission from the BRF board. However,previously they couldn't say no in the event of things like a job abroad, provided it was for no longer than...I think it was 2 x 2 years. If they did say no, one could appeal to Hyresnämnden.

Is this still the case, or have they got increased powers to say no?
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The Undertaker
post 3.Apr.2013, 12:20 PM
Post #5
Joined: 8.Apr.2009

Indeed, thanks Yorkshireman.

I guess the time limitation ofmaking a claim is a backhand way of introducing a supply & demand element to the market. i.e. if tenant lodges a complaint while resident, then they are simply asked to leave...therefore allows greater possibilities than before to the 'landlord'/owner.

Essingen, I guess each förening has its own guidelines re time restrictions.
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007
post 3.Apr.2013, 01:36 PM
Post #6
Location: Stockholm
Joined: 2.Apr.2006

the changes are only to help keep up with the reality of the situation; people have to sublet when they are temporarily away and there is a need for housing greater than supply. as a result, relaxing the penalties that are in place to curb extortion and profiteering will not punish the innocents and keep people from fear of making their space available.

the rules/rights to sublet are still overseen by hyresnämden. specific associations can be more generous than stipulated but not less. with a legitimate reason to sublet you can do so up to two years regardless of what the association thinks. or they can let you sublet forever if they want.
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Yorkshireman
post 3.Apr.2013, 02:35 PM
Post #7
Joined: 22.Nov.2011

QUOTE (7 @ 3.Apr.2013, 01:36 PM) *
the rules/rights to sublet are still overseen by hyresnämden. specific associations can be more generous than stipulated but not less. with a legitimate reason to sublet you ... (show full quote)

The rules around having to ask for permission from the BRF board to rent out 2nd hand have not been changed, there was too many objectors to that. The current law states that, depending what is in the BRF rules, you must ask for permission from the BRF Board, and they can refuse. If the BRF Board refuses, it may still be possible by passing the required request, reasoning etc... to Hyresnämnden, and they will make a judgement as to whether or not it should be allowed, and that judegement overrules the BRF Board. (and doesn't win you many friends on there either!)

One quite common way around this is to rent out a room in your apartment to someone, inneboende, who in theory does not have the apartment to themselves as you are there ... You can always manage to be away for a period! ...and you do not need to ask for permission to rent a room to inneboende when either having a Bostadsrätt or Rented apartment.
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gplusa
post 3.Apr.2013, 02:43 PM
Post #8
Location: Luleå
Joined: 4.Sep.2009

Most BRF require that your apartment in their building be your Primary Residence. That is to avoid people buying into a BRF in order to secure somewhere to sleep during the week for work, and then heading off back to the family in another town every weekend. I guess it becomes a judgement call on their part as to whether your extended time away has resulted in a shift of your Primary Residence. On the plus side, if you are found to be in breach of your BRF membership terms, you have 6 months to rectify the situation before the BRF can enforce a termination of your membership. Found that one out a few months ago when dealing with a potential sale/purchase of a BRF property. So in theory, if you wanted to be a really shitty member of your BRF, you could rent your place out, claim ignorance when the BRF finds out, and then give your tenant 6 months to vacate. Wouldn't recommend it, mind.
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EtoileBrilliant
post 5.Apr.2013, 09:45 AM
Post #9
Joined: 28.Feb.2007

@Yorkshireman - great response. Here's a follow up question.

Given the cost of capital will generally exceed the cost of borrowing (hence the reasons individuals/companies use as much leverage as feasible), isn't this to the advantage of the flat owner to have costs linked to "pure" capital (lets say a good return on equity is 8% pa) compared with a "mix" of capital/debt where the costs would be much lower, say, 4-5%?
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Yorkshireman
post 5.Apr.2013, 11:57 AM
Post #10
Joined: 22.Nov.2011

QUOTE (EtoileBrilliant @ 5.Apr.2013, 09:45 AM) *
Given the cost of capital will generally exceed the cost of borrowing (hence the reasons individuals/companies use as much leverage as feasible), isn't this to the advanta ... (show full quote)

The change already this year is a significant one, and one needs to take note of the fact that the setting of rent is based upon the Market Value of the property, this is a significant shift in Swedish way of thinking! wink.gif

So, in the old calculation, if you had a BRF that had a monthly fee of 3000:-/m and you had a mortgage, whatever it was, and regardless of the current value of the property, you would normally be only to charge a rent between 3000-4000:- maybe even 5.000:- (Just a benchmark figure considering assuming the cost portion only rather than exactly what is charged around the location)

In the new calculation, you have a BRF, monthly fee=3000:-, the market value is 2.000.000, and the current Riksbank reference interest is 1%. Whether you have a mortgage or paid cash is not relevant.

You could charge ( using Riksbank 1% + 2% on-top, exact percent not sure about, can be 2-3% above Riksbank rate):

3000 + ((2.000.000 * 3%) / 12) = 8000:-/m

That is the baseline that Hyresnämnden would have to use as the minimum.

You can always add into the rental agreement an index-linking of the rate to a periodical re-evaluation of the Market Value of the property ... and therefore allowing variable rents ...

This way the return is based upon market value changes of the property and Riksbank reference interest rates. Unfortunately, so I believe, the original idea was designed around the fact that the mortgage lenders tightly followed Riksbank rate changes but that link was broken a couple of years ago, and more designed in favour of those that can pay cash for apartments ie. Higher interest rates + Higher market value gives good return if you paid cash for the property rented out.

Plus, if the property indeed increases in value, you get a return on the sale also, which under the previous rule would be wiped out by the cost of capital not being recharged in the rent. (that was the original socialist thinking behind those old rules!)
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The Undertaker
post 5.Apr.2013, 04:38 PM
Post #11
Joined: 8.Apr.2009

One point I was seeking clarity on was the capability to rent out for what I consider to be its worth, based on market value, location, furnishings etc. This in some ways is regardless of the regulations.

Due to the new regulations and specifically the aspect where a petitioner/complainant can only claim back to the date when they lodge the matter, this then allows a supply & demand principal does it not? Otherwise if they lodge a complaint about the rent, I can activate the notice of termination of the rental.

Am I wrong?

No, I don't mean morally wrong - frankly a reason for (sadly, separated with children) considering leaving is the lack of employement opportunities, the government has given me nothing despite the previous high taxes and NI paid when I was contributing. Why? Precisely because I own a bostadrätt which is an asset.

I have therefore been living on in increasingly shrinking (sterling) nest egg and I need to take some action or I'll be a can collector in a couple of years.
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swedenflx
post 2.Jan.2015, 12:58 AM
Post #12
Location: Stockholm
Joined: 9.Oct.2013

QUOTE (Yorkshireman @ 5.Apr.2013, 10:57 AM) *
The change already this year is a significant one, and one needs to take note of the fact that the setting of rent is based upon the Market Value of the property, this is a si ... (show full quote)


Thanks a lot of this informative post Yorkshireman. Time has come for me to move away from Stockholm for a while and I want to rent out the apartment I own. I already did the BRF part, but now I need to figure out the details of the rental agreement, specially how much rent I'm allowed to charge. Your post already gave me some ideas, but where can I find the exact numbers or laws to read up on? As I did a lot of renovations in my place, how do I find out now the real market value? I guess I just could search blocket and such and compare it to my place and set a price after that, but I want to do it in a legal way I don't want any problems while away.
Another option would be maybe to higher an agency to deal with a tented. Is something like that common in Sweden? If so, any recommendation which agency?

Thanks for your help!
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LLHope
post 5.Jan.2015, 01:58 PM
Post #13
Location: Stockholm
Joined: 1.Jan.2014

QUOTE (swedenflx @ 2.Jan.2015, 12:58 AM) *
I already did the BRF part, but now I need to figure out the details of the rental agreement, specially how much rent I'm allowed to charge.
http://www.regeringen.se/content/1/c6/20/72/35/4d06d424.pdf

QUOTE (swedenflx @ 2.Jan.2015, 12:58 AM) *
As I did a lot of renovations in my place, how do I find out now the real market value?

If the apartment was purchased relatively recent then the market value is what you actually paid for it, otherwise why not just get an agent to do a new valuation and have them give you a document stating the current valuation.
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swedenflx
post 6.Jan.2015, 07:09 PM
Post #14
Location: Stockholm
Joined: 9.Oct.2013

Thanks for your help LLHope!
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