ACCELERATING inflation may result in significant increases in rents in Finland, reports Helsingin Sanomat.
The daily newspaper reminded earlier this week that lease agreements typically contain a clause that enables the lessor to increase the rent yearly either in accordance with the consumer price index, as is common especially in the private rental market, or by a fixed percentage.
The agreements can also contain a clause that ties the increase to the consumer price index while establishing a minimum annual increase. Anne Viita, the chief operating officer at Finnish Tenants, told Helsingin Sanomat on Monday that in the latter case the minimum increase is typically roughly three per cent.
Some lease agreements prescribe that the rent must be adjusted by comparing the index at the time of adjustment to both the index and rent at the time of original signing.
Consumer prices have surged faster than for decades in Finland in 2022. Statistics Finland has reported that the year-on-year rise in consumer prices – or inflation – stood at 5.7 per cent in April. Eurostat, meanwhile, has released preliminary data indicating that inflation continued to pick up pace noticeably in May.
A tenant who is presently paying 800 euros a month in rent may soon have to cough up 46 euros more if the lease agreement allows for an increase in accordance with the consumer price index.
Rents, however, will probably not increase for all tenants as lessors are under no obligation to raise their rents on an annual basis regardless of the clauses in the lease agreement. Viita considers it nonetheless likely that lessors will start raising rents as inflation accelerates.
“It’s very probable that lessors hold on to their grounds for raising the rent because also the costs they incur increase by way of charges associated with ownership expenses,” she said to the newspaper.
Many lessors, she also highlighted, have forgone rent increases during the coronavirus pandemic.
“This has been very unusual. I reckon lessors may be under some pressure of their own to raise rents if they haven’t introduced raises during the coronavirus period and their own interest rates are on the rise,” said Viita.
If the grounds for rent increases are not set forth in the lease agreement, the increase must be negotiated with the tenant or the agreement has to be terminated to amend the clause.
Aleksi Teivainen – HT