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Leases as an alternative to homeownership in
Europe. Some key legal aspects
Working Paper No. 2/2014
Author
Sergio Nasarre-Aznar
Universitat Rovira i Virgili
sergio.nasarre@urv.cat
This working paper corresponds to the pre-print of the article published at the European
Review of Private Law. Suggested citation: Nasarre-Aznar, S. ‘Leases as an alternative to
homeownership in Europe. Some key legal aspects’. European Review of Private Law,
vol. 22, Iss. 6/2014, pp. 815-846. Published paper may be found at:
https://www.kluwerlawonline.com/abstract.php?area=Journals&id=ERPL2014064
© S. Nasarre-Aznar
S. NASARRE-AZNAR
LEASES AS AN ALTERNATIVE TO HOMEOWNERSHIP IN EUROPE
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UNESCO Housing Chair – Working Paper No. 2/2014
Leases as an alternative to homeownership in Europe.
Some key legal aspects
Sergio Nasarre-Aznar
Abstract. Leasing a property is sometimes not a real alternative to
homeownership in many countries. A low proportion of rented housing
hinders the efficiency of the housing market. Reasons for this may be
of different natures but, for sure, most of them have roots in the urban
leases legal system. A lease conceived as not flexible, not stable and not
affordable for tenants has little opportunity to be successful. At the
same time, if it entails legal uncertainties, has low guarantees and does
not have an efficient eviction process, it is neither attractive for
landlords, who might prefer to close down their properties and leave
them in disrepair. This paper analyses some key legal features in the
three countries with the highest proportion of rented dwellings and in
five Southern European countries with low proportions of rented
properties and tries to find common elements that encourage or
discourage citizens from opting for renting a property instead of buying
it.
Keywords: leases, tenancies, housing, tenures, rent control, stability,
affordability, flexibility, profitability
1. Introduction
Generalisation of homeownership and deeper housing and financial crises are related
since the 2007 crash
1
. Not by chance, the most affected European countries have (and
have reached in the recent years) the highest rates of homeownership and, accordingly,
the lowest rates of rented-housing (if Eastern European countries are excluded) on the
Continent
2
. And it is no coincidence that the main reforms of the law of residential leases
have been undertaken in most of them very recently, as a reaction to the current crisis,
even in some cases compelled by the so-called “Troika”
3
as a requirement to get
international financial aid.
1
S. NASARRE AZNAR, ´A legal perspective of the origin and the globalization of the current financial crisis
and the resulting reforms in Spain`, in P. KENNA (ed.) Contemporary Housing Issues in a Globalized World
(Ashgate Publishing, 2014), 71 and 72.
2
See it at
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Population_by_tenure_status,_2
011_(%25_of_population).png&filetimestamp=20130522183046 (last checked 30-11-2013).
3
The so-called “EU Troika” (composed by the European Union, European Central Bank and International
Monetary Fund) has intervened in recent years in several countries to press (even require) for changes in
many fields of the law and economy, including leases. These countries are Greece (Greece: Memorandum
of understanding on specific economic policy conditionality, 2-5-2010, available at
http://peter.fleissner.org/Transform/MoU.pdf) and Portugal (Portugal: Memorandum of understanding on
S. NASARRE-AZNAR
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UNESCO Housing Chair – Working Paper No. 2/2014
This work relates to some core elements of the law of leases that help to understand how
law affects the good or bad functioning of a housing leases market in a comparative
perspective. And this is essential because an inefficient rented housing market
dramatically encourages the globalization of homeownership as a form of housing tenure,
especially where no other alternatives exist (such as intermediate tenures
4
), thus favouring
those bad banking practices that led to the US (sub-prime mortgages) and international
(moral hazard in securitizing those sub-prime mortgages) crisis in 2007 that still continues
today in many EU countries
5
.
To undertake the comparative perspective some Southern European countries (Spain,
Portugal, Greece, Italy and Malta), that, according to Eurostat 2011 (see Figure 1), have
relatively low rates (in fact, the lowest, leaving apart former communist countries) of
rented housing and the three European countries (Switzerland, Germany and Austria)
with highest rental rates (social and private combined) have been chosen.
Figure 1. Population by tenure status, 2011 (% of population). Source: Eurostat.
Present work has been possible thanks to the provisional country reports
6
of the first deep
European-wide research on law of leases backed by the 7th Framework Programme of the
specific economic policy conditionality of 3-5-2011, available at
http://economico.sapo.pt/public/uploads/memorandotroika_04-05-2011.pdf ; last checked on 14-6-2013).
4
See an economic approach in S. MONK &, C. WHITEHEAD (eds.), Making Housing more Affordable: The
role of intermediate tenures (Oxford: Wiley-Blackwell, 2010). See a legal approach in S. NASARRE AZNAR
& H. SIMÓN MORENO, ´Fraccionando el dominio: las tenencias intermedias para facilitar el acceso a la
vivienda`, 739 RDCI (Revista crítica de Derecho Inmobiliario) 2013, p. 3063-3122.
5
See S. NASARRE AZNAR, ´A legal perspective of the origin and the globalization of the current financial
crisis and the resulting reforms in Spain`, in P. KENNA (ed.) Contemporary Housing Issues in a Globalized
World (Ashgate Publishing, 2014) in toto.
6
The Spanish report’s author is Elga Molina; the Maltese’s report was written by Kurt Xerri; the Portuguese
one by Décio Correia, Maria Olinda Garcia and Nelson Santos; the Greek one by Thomas Konistis; the
Italian one by Ranieri Bianchi. The author of the Swiss one is Anna Wehrmüller, of the German one is
Joanna Rzeznik (assisted by Julia Cornelius) and, finally, the Austrian one is authored by Raimund
Hofmann. Currently (November 2013), Part I and Part IIa have been finished and delivered, although no
international peer-review undertaken so far. Those versions of the reports (sometimes some of them a bit
S. NASARRE-AZNAR
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UNESCO Housing Chair – Working Paper No. 2/2014
EU Commission, the TENLAW project (2012-2015), led by Prof. C. Schmid of the
University of Bremen
7
.
2. Core aspects of the efficiency of the law of leases
Landlord and tenant hold different positions under a lease contract. While the former sees
it a source of income and a way of keeping an unused dwelling up and running, the latter
regards it as his home. And, if the property is mortgaged, the mortgagee sees it purely as
a financial asset
8
.
These twofold (or threefold) and, even, contradictory positions seem to be sometimes
irreconcilable. Proof of this is that lease law is seen in some jurisdictions as a pendulum
(e.g. Malta or Spain) that sometimes is too close to the homeowner’s position and
sometimes too close to the tenant’s one. It is difficult, as a legislator, to reach a true
equilibrium that somehow satisfies both parties.
But what seems important for a healthy rented housing market is that both the offer
(landlords) and the demand (tenants) feel comfortable with this type of tenure. Figure 2
shows some factors that, to my view, are likely to be most relevant for both parties to
consider leasing a property.
Figure 2. Most relevant drivers for landlords and tenants. Links to the black market.
Source: own elaboration.
As a starting point, both professional and non-professional landlords’ initial motivation
to rent their empty dwellings is the return they could get
9
. In relation to this, modest
more updated) are used throughout this work to get the information on each country to make the
comparative study and sometimes are quoted as “TENLAW Spanish report, Part I, p. X”, etc. This author
is the team leader for the TENLAW project for South-West Europe (Portugal, Malta and Spain).
7
http://www.tenlaw.uni-bremen.de (checked on 30-9-2013).
8
See a discussion at S. NASARRE AZNAR, The shift in the concept and protection of ‘home’ within the
Spanish legal system in the context of the international crisis of 2007 (2014), forthcoming.
9
In this sense, M. OXLEY and J. SMITH pointed out in relation to the British housing policy four important
factors that help the private rental sector to be a success. One of them is the rate of return required by
investors (“to encourage sustained investment in a variable private rented sector landlords must be able to
Preferences under
a lease contract of
a dwelling
Landlord
Foreseeable profit
Rehabilitation capabilities
Public subidies
Private
Guarantees
Deposit
Other guarantees of payment at law (eg.
floating pledge, personal guarantors,
insurances)
Efficient eviction or ADR
Tenant
Affordability
Initial (deposit & other expenses)
Ongoing (rent & other expenses)
Stability
Open-ended lease contracts and/or minimum
compulsory duration
Legal nature
Intermediate tenures
Rights of first refusal
Flexibility
Unilateral early termination
Subletting
Social perception
Balance of rights and obligations
Taxation
Reparations
Condominium expenses
BLACK MARKET
Social deffence
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UNESCO Housing Chair – Working Paper No. 2/2014
returns such as the one in Spain (3%, very close to a term deposit, for example)
10
provide
little incentive for them to get entangled in all of what renting a property entails (eg. risk
of default in the rent payment, state of disrepair of the property). That is why I have
pointed out that at least two more relevant aspects for a landlord: first, the existence of
certain guarantees to assure the payment of the rent and an efficient eviction process;
second, the existence of rehabilitation capabilities for landlords.
In its turn, from my perspective, renting a house should be seen and should be legally
ready to work as a true alternative to homeownership or, at least, to work efficiently as a
last resource mechanism of access to a dwelling for those who cannot afford to buy (either
because they are not granted the loan or do not have the required initial amount, which
usually represents 20% of the value of the property) that should be able to overcome the
financial barriers buying a dwelling entails. That is, if the initial income (i.e. deposit) is
too high or burdensome, the system is inefficient as it is leaving that person without the
possibility of accessing a dwelling (by either buying or renting), except for those countries
that provide for systems of intermediate tenures. That is why the affordability of the lease
is not only linked to the rent but also to the initial required amount. In connexion to this
are the expenses related either to the ownership or to the use of the property.
Theoretically, those expenses (including taxes) related to ownership (e.g. expenses of the
condominium, taxes over land) should be born by the landlord and those related to the
use (e.g. refuse tax, gas, electricity, water) by the tenant. However, it is possible that, in
the praxis, all expenses are born by the tenant (lack of balance of rights and obligations),
which could represent an extra monthly cost for him in addition to the rent, which directly
affects the affordability of the property.
The last three main factors that are important to the tenant are the stability, the flexibility
and the social perception
11
of renting a dwelling (instead of buying it)
12
. In relation to the
achieve a competitive rate of return”); see M. OXLEY and J. SMITH, Housing policy and rented housing
in Europe (London: E & F Spon, 1996), p. 170. With reference to the social perception, for instance, under
English law the leaseholder has a proprietary right; as a result, the leaseholder can transfer or mortgage the
leasehold. This way, the leaseholder has the perception of being a true owner and not just a simple tenant;
see M. DAVEY, ´Long Residential Leases: Past and Present`, in S. BRIGHT (ed.), Landlord and Tenant Law.
Past, Present and Future (Hart Publishing: Oxford, 2006), p. 147-148.
10
TENLAW Spanish report, Part I, p. 45. A European-wide comparison of rental yields may be found at
Global Property Guide (http://www.globalpropertyguide.com/Europe/rent-yields, last visited 20-3-2014).
It shows gross rental yields that are a bit different among the countries we compare in this study: while
Spanish, Portuguese, German and Italian returns are rather similar (from 3.84% Italy to 4.42% Germany),
Austrian, Maltese, Swiss and Greece gross returns rank below the other group (from 2.87% Greece to 3.54%
Austria). European countries with much higher gross rental yields are mainly Eastern European countries
(from Moldova (10%) to Hungary (5.83%)), while the gross rental yield in The Netherlands is 5.68%,
5.18% in Denmark and only 2.09% in the UK.
11
Social perception of renting a dwelling instead of buying is very relevant because if this type of tenure is
perceived to be only for low-income families, the amount of properties available and their quality would
drop and families would try to avoid this possibility (e.g. maybe by investing too many economic resources
and personal efforts in buying). On the contrary, if it is seen as a true alternative to homeownership (e.g.
transmit similar or substitutive values), buying or letting would be only a matter of deciding the most
convenient property for those who could afford both types of tenures.
12
In this sense, “in particular, private renting is more flexible than other tenures and its benefits include
low entry and exit costs and the fact that tenants can rent units that are smaller and cheaper than in other
tenures” (CENTRE FOR HOUSING AND PLANNING RESEARCH (CCHPR), University of Cambridge, The
Private Rented Sector in the New Century. A Comparative Approach (Cambridge: September 2012), p 71.
Available at:
http://www.cchpr.landecon.cam.ac.uk/Downloads/The%20Private%20Rented%20Sector_WEB.pdf
(visited on 26-2-2014). The same Report points out that “Security of tenure is a set of provisions in the
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UNESCO Housing Chair – Working Paper No. 2/2014
fist one, tenants should have a degree of certainty that they are able to stay in the property
or, at least, in the neighbourhood (this is related to the location of the property, which is
directly linked to the aid net of the tenant, or proximity to health centres, schools, etc. or
even related to the involvement of the tenant in the community and/or in the
neighbourhood) as long as they fulfil their obligations (basically, paying the rent and
keeping the property in good repair). Ways to achieve this may vary: periods of
protection, rent control, etc. But this is not the case in all jurisdictions.
Flexibility is also an essential advantage for leases in contrast with homeownership
13
.
However, some legal jurisdictions might establish limits to the tenant’s freedom of
movement to protect landlords. This would be the case, for example, of compelling the
tenant to pay the rent due for the remaining time of the lease even if he leaves the property
(e.g. he finds a job in another city or country); or, instead, he can leave the property but
with a burdensome compensation for the landlord. From my perspective, these measures
might go against the right of free movement that is present in many constitutions (e.g.
Spain, Portugal) or even against EU law
14
.
But, of course, many other aspects are taken or could be taken into account by landlords
and tenants that might affect their decision, such as the energy efficiency of the property
(see Directive 2012/27/EU
15
), the possibility for the tenant and/or landlord to get tax
exemptions or reductions due to the mere fact of renting a property (as a public incentive
to improve the rate of rented properties, such as in Spain since 2011
16
), the legal certainty
for both of them if there is a coexistence of several regimes (eg. overlapping of law of
leases due to the fact that very old rented properties’ legal regime is maintained after new
laws, as these are not retroactive), if there is a constitutional/fundamental right to housing
or at least a broad interpretation of the social function of ownership (which would compel
a landlord to keep tenants in a home in unexpected circumstances)
17
, the existence of
landlord-tenant contract which provide the tenant with protection against a number of types of occupancy
risks. Most importantly, it provides security against the risk of ‘economic eviction’, when the landlord gets
rid of the tenant in order to let the property to someone prepared to pay more. Taken together with rent
regulation, security of tenure reduces the uncertainties concerning the future path of rents. This can help
both landlord and tenant as vacancy and turnover costs are also reduced”, p. 30.
13
CENTRE FOR HOUSING AND PLANNING RESEARCH (CCHPR), University of Cambridge, The Private
Rented Sector in the New Century. A Comparative Approach, p 71.
14
See, for Portugal, Mª OLINDA GARCIA, Arrendamento urbano anotado: regime substantivo e processual:
(alterações introduzidas pela Lei no. 31/2012), (Coimbra: Coimbra Editora, 2012), pp. 57 and 58. In
relation to the EU, the ECJ finds it sometimes difficult to distinguish between freedom of services, freedom
of capital or freedom of movement of persons in connection with cases involving immovable property (see
the comments of Advocate General Geelhoed in the case Reisch at B. AKKERMANS, ´Property law and the
internal market`, in S. van Erp et al. (eds.), The future of European property law, (Munich: Selp, 2012), p.
227-229). See, in relation to the restrictions of acquisition of inmovables within EU member states and their
violation of the principle of free movement of capital and services in cases ECJ 1 June 1999, C-302/97
Klaus Konle v Republik Österreich; two Austrian laws that required administrative authorisation to be
obtained prior to the acquisition of land in the Tyrol region were found contrary to Art. 56 EC Treaty) and
ECJ 5 March 2002, Joined cases C-515/99, C-519/99 to C-524/99 and C-526/99 to C-540/99, Hans Reisch
and Others.
15
OJEU L 315/1, 14-11-2012.
16
See articles 23.2 (landlords) and 68.7 (tenants) of Act 35/2006, of 28 November, del Impuesto sobre la
Renta de las Personas Físicas (BOE 29 November 2006, num. 285, p. 41734); both articles were only
introduced in 2010, by Act 39/2010, 22nd December.
17
See H. SIMÓN MORENO, The regulation of the right to housing in certain European countries (2013),
paper presented at DAAD Seminar ‘The Housing Markets of Southern Europe in the face of the crisis’, 1-
5 December 2013, Hochschule Zittau/Görlitz, Görlitz (Germany).
S. NASARRE-AZNAR
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UNESCO Housing Chair – Working Paper No. 2/2014
social defence for the tenant or the possibility for the professional landlord to massively
securitize his leases, thus getting extra funding.
Some of these aspects cannot be covered in this article due to length constrains. I’ll focus
into those more relevant from a legal point of view: guarantees for landlords and the core
aspects of stability, flexibility and affordability, for tenants. This is a clear limitation of
this piece of work.
3. The comparative perspective: the landlord's position. Guarantees in
case of default or misuse
Guarantees landlords can get from the legal system can be both ex ante (deposit) and ex
post (extra guarantees beyond the deposit and the effectiveness of the eviction process).
3.1. Deposit
There are at least two central aspects to be discussed about the deposit. First, its nature
and function: a guarantee for the landlord in case of misuse of the property and/or the
default of the rent payment by the tenant. And, second, its amount should be related to
this and not so high that it works as a deterrent or a barrier for any tenant to access a
dwelling (ie. leases cannot be funded by third parties such as banks; therefore, tenants
must pay the deposit upfront with their own resources).
These aspects are compared among low-rental rate states and high-rental rate states in
Table 1.
S. NASARRE-AZNAR
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UNESCO Housing Chair – Working Paper No. 2/2014
Spain
Portugal
Malta
Greece
Italy
Switzerland
Germany
Austria
Nature
The purpose
of the deposit
is to ensure
the
performance
of the contract
and especially
the rent
payment, as
well as the
damages
caused to the
dwelling or
premises at
the time of the
contract
termination.
So it is
technically a
“guarantee”
and not a true
“deposit”.
Portuguese
legislation (art.
1076.1 PCC)
allows the
landlord to
receive the
payment by the
tenant of three
months in
advance plus
the first month
(four in total,
then).
Moreover, the
parties can
arrange any
other security
(bond; art.
1076.2) to
assure the
proper
payment of the
rent; normally
it consists of
requiring a
personal
guarantor.
It is used to pay
any damage
caused to the
property by the
tenant or if he
has defaulted in
paying any
utility.
Under Greek
law, the
deposit is a
guarantee
for the
landlord’s
claim
against the
tenant
The deposit,
according to
Italian law, is a
form of guarantee
for any kind of
breach of the
contract by the
tenant. It is
considered a form
of irregular
pledge (on
fungible goods,
ie. money).
The deposit is
considered as a
security for the
landlord and
can be in the
form of cash or
negotiable
securities.
According
to §551 (1)
BGB, the
security
deposit may
amount to a
maximum
of three
monthly
rents,
excluding
utilities.
The tenant
can pay it in
three
monthly
instalments.
It has been
recently
regulated in
2009, and it is
used as a
security for the
coverage of all
future claims of
the landlord
arising from the
tenancy
contract. It may
be paid either in
cash or in the
form of a
surrender of a
bankbook.
Amount
Equivalent to
one month's
rent (art. 36.1
LAU). During
the first three
years of
contracts, it
There is no
specific
maximum
amount foreseen
in the Civil
Code. However,
any payment
equivalent to
There is no
legal
maximum
foreseen,
although in
the praxis it
amounts to
the
Art. 11 Act no.
392/1978
establishes that
the deposit cannot
exceed three
months' rent .
There is a legal
maximum of
three months’
rent (net rent
plus utilities).
However, a
study of 1999
reveals that
The law does
not provide any
limit, and the
Supreme Court
has stated that
its amount must
be fixed taking
into
S. NASARRE-AZNAR
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UNESCO Housing Chair – Working Paper No. 2/2014
Table 1. Deposit issues in a comparative perspective. Source: own elaboration.
cannot be
increased.
more than 6
months is void if
any prejudice is
caused to the
landlord’s
mortgagee or to
the person that
will succeed him
in the title. In the
praxis, for leases
of more than 6
months, a
deposit
equivalent to 1
or 2 monthly
rents is required.
equivalent
of 1 to 2
months of
rent.
only 1/3 tenants
pay deposits.
consideration
the landlord´s
interests (e.g.
the property
value, the size
of the
dwelling…). An
amount
equivalent to 6
months has
been accepted
by the Supreme
Court.
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UNESCO Housing Chair – Working Paper No. 2/2014
3.2. Floating charge over tenant’s chattels.
An important deterrent measure to prevent default in the payment of the tenant is that all
chattels that he introduces into the rented property are automatically charged (pledged) to
the landlord, such as occurs in Germany, regulated at §562 BGB (Vermieterpfandrecht
18
).
The risk for the tenant of losing his belongings in payment of the defaulted rent or due to
caused damages could encourage him to fulfil his obligations under the lease contract. A
similar disposition exists in Austria (§ 1101 ABGB), which charges with a lien the money
and other chattels that belong to the tenant and his relatives living within the premises of
the rented dwelling as a security of the rent, overheads, taxes and other costs and expenses
considered as service of the landlord.
In Spain, this measure is not foreseen in the legislation, although there is no problem in
accepting an express agreement on this between the parties, taking into account that there
is a general legal limit on certain personal belongings of the tenant that cannot in any way
be seized (eg. clothes). In Portugal there is also no legal provision on this possibility, but
a personal guarantor is often required. However, Maltese law foresees that the landlord
has a privilege over the value of all things that serve to furnish the dwelling, except for
those things that are within the property premises but belong to a third party. In Greece,
art. 604 GCC foresees a security interest (legal pledge) in favour of the landlord over the
things brought upon the premises by the tenant or his spouse and children if they live with
him, unless such things are not subject to attachment. Only rents defaulted in the previous
two years are secured with this pledge and it grants the landlord a privilege (if those
chattels are auctioned off, he is entitled to payment first). Tenants can discharge certain
chattels from the pledge if they substitute them. It seems that the legal pledge has not
been very successful and has been substituted in the praxis by the guarantee deposit that
also covers damages. According to art. 2764 Italian Civil Code, the landlord of a dwelling
is the holder of a particular kind of lien –‘movable special privilege’ – over the things
brought upon the premises by the tenant. Its scope of application is limited to furniture
and does not include, for example, money, jewels, clothes and other similar things that
can anyway be found in the dwelling. It can be used not only for the payment of rents,
but also for any claim arising from a breach of the tenancy contract, such as the refund
for repairs not carried out by the tenant or damages to the dwelling.
Although the special lien over the tenant’s chattels used to exist in Switzerland, it was
abolished with the new tenancy law of 1990, but it still remains for commercial leases.
3.3. Eviction process
18
According to the BGB, this security right may not be asserted for future compensation claims and for
rent for periods subsequent to the current and the following year of the tenancy contract, and the security
right of the landlord is extinguished upon the removal of the things from the plot of land, except if this
removal occurs without the knowledge of or despite the objection of the landlord (§562a BGB). In this
sense, the landlord may prevent the removal of the things that are subject to his security right, even without
having recourse to the court, to the extent that he is entitled to object to removal (§562b BGB). Finally, The
lessee may ward off assertion of the security right of the lessor by provision of security (§562c BGB). In
case of non-payment of rent, the landlord can start an enforcement procedure of these goods with preference
to other creditors (art. 50 Insolvenzordnung 1994, 5 October 1994 (BGBl. I S. 2866).
S. NASARRE-AZNAR
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UNESCO Housing Chair – Working Paper No. 2/2014
Spain has reformed its rules on eviction in the field of leases twice in the last three years
19
.
The main cause behind this is the traditional inefficiency of the lease enforcement
procedure, which could last up to 18 months or more in certain cases until the defaulting
tenant is effectively evicted from the property, despite the fact that there is a special
(theoretically quicker) procedure foreseen in Spanish procedural law. During that period,
the tenant is allowed to stay in the property for free (he does not need to pay anything to
be able to stay); this time he remains in the property should be added to the months in
arrears (the cause for the eviction process to start) during the process. This situation has
led to “professional defaulting tenants” that go from one property to another staying there
for free (only paying the first month) for several months. The main cause of such a
delayed process of eviction is the constitutional procedural guarantee, ie. nobody is
evicted without previous notice, no one can enter another house or prevent him from
entering without a judicial order, right to appeal all court resolutions, etc. An additional
extra legal cause is the traditional delay of Spanish courts, as no special courts for
tenancies exist and lease cases are solved together with any other civil law matters. In
addition to this, alternative dispute resolution methods (mediation or arbitration, ADR)
are not commonly used and they have only been expressly foreseen in the urban leases
law in 2013.
In Portugal there are also no specialized courts on leases, so civil law courts decide on
this matter. Nor are there any in Italy, although the procedure for eviction under
residential leases is quicker than an ordinary procedure. There is even an additional
procedure – so called, “notice to quit” - just for cases of eviction for termination of the
lease contract or because of default in payment. Greece has a similar situation with a
special procedure but civil courts are the ones competent to decide. In 1997 an even more
special process was introduced in arts. 662A-662Θ GCCP, that covers evictions in cases
of non-payment of the rent: after 15 days of giving notice to the tenant, the landlord can
file for an order of eviction to a judge, which he issues without hearing the tenant; the
order is enforceable 20 days thereafter, during which the tenant can oppose it.
On the contrary, Malta has a special judiciary board for leases called Rent Regulation
Board (RRB), but not on an exclusive basis, as ordinary civil law courts can also decide,
for example, in relation to the validity of the lease contract. Act X 2009 also empowers
RRB to decide cases of eviction through a summary procedure, which can be appealed to
the Court of Appeal.
Meanwhile, Switzerland requires a conciliation process between the parties before filing
a claim before a court (art. 197 Swiss Civil Procedure Order). The cantons provide for a
special joint conciliation authority (paitätische Schlichtungsbehörde), with a chair person
and an equal number of representatives of tenants and landlords, that hear such
conciliation processes and give advice to the parties. Clear cases are excluded from the
compulsory previous conciliation process. Processes cannot last more than 12 months.
The conciliation process can end with an agreement by the parties (which is binding for
them), or without one, so the authority grants authorisation to process to court to the
plaintiff or the authority itself proposes a judgement, which can be rejected by the parties
within 20 days. There are ordinary courts and those specialising in leases. Most tenancy
matters benefit from simplified proceedings (eg. those for less than CHF 30,000 and
19
First, through art. 4 of the Act No. 37/2011, 10th October (BOE 11 October 2011, num. 245, p. 106726),
and later by the Act 4/2013. The rules concerning the eviction process are gathered in the Spanish Code of
Civil Procedure 1/2000 (BOE 8 January 2000, num. 7, p. 57).
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UNESCO Housing Chair – Working Paper No. 2/2014
disputes regarding the deposit, protection against abusive rent or against termination,
etc.).
In Germany, civil law courts are the ones competent to decide on tenancy cases. In some
Länder it is required to have a pre-trial conciliation for disputes for less than €750.
In Austria the ordinary court (“Bezirksgericht”, District Court) – has generally exclusive
competence on tenancy issues. However, in some municipalities, like Vienna, Graz or
Salzburg, there are arbitrational boards authorized to deal with specific tenancy law issues
in first instance, for example the tenants’ claim to review the adequacy of an agreed or
demanded rent.
4. The comparative perspective: the tenant's position
The principle of demand and supply establishes that in order to achieve a healthy rented-
property market, not only should landlords be protected (guarantees, efficient evictions)
and economically interested (return, possibility of rehabilitation with external help, public
or private), but also the tenant should find in this type of tenure a certain attractiveness
(affordability, flexibility) and protection (stability).
However, in countries in which this second aspect is too high, the position of landlords is
too weak (both economically and legally speaking) and/or the quality of dwellings is
essential to achieve a valid transaction and controls are not enough, a “black market” of
rented properties may appear. According to SCHMID
20
, black market contracts are
“unofficial, informal contracts, which violate legal regulations and therefore remain in an
extra-legal, unprotected sphere, typically to the detriment of the tenant”.
4.1. Affordability
To lease a property is often the last resort in the private housing market for a person/family
to access housing when he does not have enough savings or does not get enough external
funding to buy the property.
Therefore, any restriction on its access (affordability) would have a tremendous impact
on the housing system. In fact, art. 18.5 a) of the Directive 2014/17/EU of the European
Parliament and of the Council of 4-2-2014 on credit agreements relating to residential
immovable property
21
does not allow credit institutions to grant mortgage loans to people
that presumably will not be capable of repaying them. Even if this is considered a proper
measure to avoid overindebtedness
22
, its strict application would expel many families
from the homeownership market (e.g. those unable to pay upfront with their own
resources at least 20% of the value of the property); and in those countries without mature
intermediate tenure markets, this would mean that leases are the last possibility for them
to access housing in the free market (leaving apart, of course, those non-cost hosting
20
C. SCHMID, Comparative tenancy law and black rental contracts in Europe, plenary speech, 25th
international conference of the European Network for Housing Research (Tarragona, Spain, June 2013).
See the full speech at http://www.youtube.com/watch?v=XGzUHqd8HD4 (last checked on 20-11-2013).
21
OJEU 28-2-2014, L 60/34. Available at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2014:060:0034:0085:EN:PDF.
22
For the importance of this phenomenon in the origins and spread of the 2007 financial crisis see S.
NASARRE AZNAR, ´A legal perspective of the origin and the globalization of the current financial crisis and
the resulting reforms in Spain` (2014), 50-53.
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UNESCO Housing Chair – Working Paper No. 2/2014
situations, such as rights of use or habitation or even alimony or child support granted by
law or a court resolution).
An additional perspective is whether renting a property, in the long run, is really less
expensive than homebuying. Although this may vary according to the mortgage interest
rates, taxation and the possibilities of revision of the rent over the years, in general, at
least for Spain, it must be said that ceteris paribus renting is usually more expensive than
buying and it requires more family economic effort every month
23
.
4.1.1. Rent
The initial affordability for a lease has already been covered above in relation to the
deposit. Dealing now with the ongoing affordability, the amount of the rent plays a central
role to determine the attractiveness of renting.
In Spain there is no rent control system for private market rented housing (a version of
this exists only for the social one), so the principle of freedom of contract applies (art.
17.1 LAU) without any control for excessive rents. The rent can be updated on an annual
basis according to what the parties have agreed. If they have not agreed anything, the
“consumer price index” increase is applied.
In Portugal there is also no system of rent control or rules for excessive rent. The same
for Greece, but the commonly known rebus sic stantibus rule has been applied by courts
to (commercial, so far) leases arranged before the current crisis started (2007) as this is
considered an unexpected changes of circumstances, as an exception to the pacta sunt
senrvanda rule. From 1978 until 1998 the Italian legal system imposed a legal rent ceiling
for residential tenancies. The following statute (Law n. 431/1998) introduced
amendments. The contracting parties have the faculty to choose between two different
possibilities: in one case the rent is freely negotiated and in the other the rent is determined
by local agreements between landlord and tenant associations.
In Switzerland, the principle of freedom of contract also applies to fix the rent, but in
leases for residential purposes (no holiday or luxury apartments), there are legal
provisions against “unfair rents” (Art. 269 ff. CO). In this sense, tenants can challenge,
within 30 days after taking possession of the property, the initial rent (on the basis that
the tenant felt compelled to accept this rent due to personal or family hardship or for
reasons prevailing on the local market for residential premises; or if his rent is
significantly higher than the previous rent for the same property); or within 30 days of
receiving the notice, any rent increases (it is the landlord who has to give reasons for that
increase); or even they can request a reduction during tenancy (in this last case, if the
landlord makes excessive profit because of significant changes to the calculation basis;
eg. reduction of costs for the landlord or when he reduces the services). Under Swiss law,
in general, where a rent permits the landlord to derive excessive income from the lease
(i.e. it is still reasonable if the rate of return of the lease exceeds 0.5% of the reference
mortgage rate) or where the rent is based on a clearly excessive sale price (i.e. when it
exceeds the earning value of a comparable property, calculated on rents customary in the
23
TENLAW Spanish report, Part I, p. 43. With reference to the economic effort of the so-called
intermediate tenures in Catalonia in comparison to homeownership and rent, Mª JOSÉ SOLER, Cálculo del
esfuerzo económico de las tenencias intermedias, Paper presented at the ENHR Conference “Overcoming
the Crisis: Integrating the Urban Environment”, Tarragona, June 2013.
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UNESCO Housing Chair – Working Paper No. 2/2014
locality or district), the rent is considered to be unfair, although there are exceptions to
this (e.g. the rent falls within the range of rents customary in the locality or district).
In Germany, according to §558 (I) BGB, the landlord may demand approval of an
increase in rent without the consent of the tenant
24
only a) up to the reference rent
customary in the locality (ortsübliche Vergleichsmiete) and b) if, at the time when the
increase is to occur, the rent has remained unchanged for fifteen months. It can be made
at the earliest one year after the most recent rent increase. The rent may not be raised
within three years by more than 20%, or even 15% in regions which can be determined
by the Land governments (section 558 (III) BGB), such as in Berlin, Hamburg and
Bavaria
25
. The reference rent customary in the locality is formed from the usual payments
that have been agreed or that have been changed in the last four years in the municipality
or in a comparable municipality for residential space that is comparable in type, size, etc.
(§ 558 (II) BGB). Many municipalities, including the twenty-five metropolises in
Germany (except Bremen), have lists of representative rents (einfacher Mietspiegel).
These tables, showing the reference rent customary in the locality, have to be jointly
produced or recognized by municipalities or by landlord and tenant associations (§558c
(II) BGB).
In Austria, there are three rent control systems for most properties purported for human
habitation, which are usually ruled under the Mietrechtgesetz 1982 (MRG, §1 par. 1). §
16 MRG establishes strict limits to rent increase: the resulting rent after the increase
cannot exceed the limits of an “adequate rent” (normative rent control system that limits
free market rents depending on size, type, location, maintenance condition and furniture
of a dwelling; adequate rent is fixed by the judge), the “category rent” (maximum monthly
rent is fixed per m2 and enacted by Decree, according to the classification of dwellings
according to their equipment level) or the “standard value rent” (for statute-so-defined
“standard dwellings”, a certain basic rent per m2 and month is fixed for each Austrian
State separately in bylaws).
4.1.2. Utilities and taxation of the property
General rule for all countries is that the parties can arrange what they want in relation to
who is liable for the payment of the utilities of the leased property. However, in practice
this may change.
In Spain, for example, it is common to apply what the law establishes (art. 20 LAU),
especially when the parties have not agreed otherwise. That is, the tenant pays the
individual expenses (i.e. utilities; eg. water, electricity, gas) and the landlord pays the
non-individual expenses (i.e. those related to ownership of the property; e.g. contribution
to the condominium expenses, rubbish collection fees and tax over property’s ownership).
However, in a context of falling rent prices (since 2007), tenants are usually paying also
the non-individual expenses.
In Greece, tenants pay the utilities as they are considered to be “expenses for the use”.
These include the share of the common expenses (eg. cleaning) in case of condominiums.
In Malta, the electricity and water company may require the landlord and the tenant to be
24
Both can agree on future increase in rents according to §§ 557a (Staffelmiete) and 557b (Indexmiete)
BGB. If either of those two systems are applied, application of §558 BGB is excluded.
25
TENLAW, German report, p. 144.
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UNESCO Housing Chair – Working Paper No. 2/2014
jointly and severally liable for the bills. Art. 1078.2 Portuguese Civil Code (PCC)
establishes that, in case of non-agreement, the expenses of supplies of goods or services
are borne by tenants and it is the landlord who pays all costs related to the condominium
(eg. use of common services).
In Italy the parties are free to agree who has to pay the expenses. They usually specify
that the tenant has the duty to manage the supply of utilities, because if nothing has been
agreed in the contract, the landlord cannot pass them on to the tenant (Art. 9 Law no.
392/1978) (i.e. if he remains the contractor in the supplies contracts, he must pay them
and cannot claim reimbursement from the tenant, if nothing otherwise is stated).
In Switzerland, however, there is another perspective. It is not permitted for the landlord
to make a profit out of the charges for utilities (in general, “accessory charges”) and he
has to stipulate which utilities are not individually included in the rent; otherwise, all are
included. Utilities may include, not only heating and hot water, but also taxes arising
from the use of the property (e.g. basic fees for water, waste water and waste collection),
common-areas electricity or even service contracts (repair of elevator or washing
machine). The same can only be transferred by contract to the tenant if they cover regular
checks and minor maintenance works, but not if they refer to major repair works, as it is
a duty of the landlord to maintain the dwelling. Finally, on the one hand, real estate taxes,
mortgage interests or building insurance premiums, and also maintenance costs and
general administrative expenses are not covered by the term “utilities”. And, on the other
hand, tenants should always pay for the costs arising exclusively from their consumption
(eg. electricity within the dwelling and telephone charges).
In Germany, pursuant to section 535 (I 3) BGB, the landlord must bear all costs to which
the rented object is subject. However, the parties may agree that the tenant is to bear the
operating costs (Betriebskostenverordnung; section 556 (I 1) BGB) (i.e. real estate tax,
the charge for sewage water, the costs for the supply and the consumption of water and
heating as well as the costs for the maintenance of the heating system, for street cleaning,
waste disposal, house cleaning, disinfestations, garden maintenance, lighting for shared
parts of the building, chimney cleaning, lifts, caretaker, insurances and benefits in kind
and performances rendered by the owner). In relation to electricity, in the absence of an
agreement, the tenant must bear its supply and consumption costs.
In Austria, the general expenses (such as water supply, facility management, fire
insurance, etc.), public charges (taxes on land and buildings and taxes of the states) and
extraordinary costs (lifts, central heating, laundry room or green keeping) are expenses
of the landlord, but the tenant has usually to pay them.
4.2. Stability
4.2.1. Open-ended lease contracts and compulsory minimum duration
As mentioned above, the stability of the tenant can be achieved through more intrusive
(direct, paternalistic) methods or less intrusive ones. If a piece of legislation establishes a
compulsory (ius cogens) minimum duration for residential leases, this is an intrusive way
of compelling the landlord to rent a property at least for that number of years.
However, a similar result can be achieved through less paternalistic ways, such as
allowing open-ended lease contracts or, even, limiting the amount of every rent increase,
meaning that the landlord does not have any incentive to evict the tenant (as long as he
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UNESCO Housing Chair – Working Paper No. 2/2014
fulfils his obligations) because he is not allowed to charge more rent to anybody else (e.g.
he is getting at any given time the adequate rent for a given neighbourhood), as has been
shown above.
Those more intrusive measures that tend to protect tenants might be a source for a black
market of rented housing
26
.
In Spain, open-ended lease contracts are not allowed, as lease contracts require a time
limit (art. 1543 CC), although the parties can stipulate it in a very vague way (e.g. “you
can stay as long as you work in this city”); if there is no stipulation, the law provides for
a duration (e.g. a year, if the rent is paid yearly; art. 9 LAU). However, they must have a
minimum duration of 3 years (until 2013, it was 5 years), that is, even if the parties have
agreed on a shorter duration, the contract will be legally and automatically extended
yearly up to three years (art. 9.1 LAU).
Portugal allows the creation of open-ended contracts (art. 1094 Portuguese Civil Code)
and until 2012 (Act 31/2012) there was a minimum duration period of 5 years (art. 1095.2
Portuguese Civil Code). Greece also requires a 3-year minimum duration for first
residence leases (Act 1703/1987, amended by art. 5.1 Act 2235/1994). In Malta, open-
ended contracts are not allowed, as any lease contract must provide for a specific duration.
Maltese law does not require contracts to have a minimum duration.
Italy draws a distinction between open-ended contracts and contracts limited in time. The
former cannot last more than 30 years, but they are automatically renewed at the end of
the contractual term (arts. 1573-1574 CC). In relation to the latter, it is also possible to
agree a contract for the lifetime of the tenant plus two more years, and the minimum
contract term is four years (art. 1 Law no. 431/98).
Swiss law does not establish any minimum duration for lease contracts, but they can be
arranged for long duration, such as for the lifetime of one of the parties (although eternal
contracts are not allowed). However, if the duration seems obviously excessive, the
parties are allowed to terminate the contract in advance (art. 266g CO).
For its part, Germany allows open-ended contracts; which are the most common type,
because fixed-time tenancies are only allowed under certain reasons (§ 575(I) BGB; if
the landlord, upon termination, wishes to use the premises as a dwelling for himself or
his family; or if he wishes then to eliminate the premises or change or repair them; or he
wishes to rent the premises to a person obliged to perform services, Werkswohnung).
Finally, in Austria, the legislator has a preference for the conclusion of contracts unlimited
in time, which serves the protection of tenants, because these contracts unlimited in time
are only terminable by the landlord under exceptional circumstances. However, landlords
can limit the duration of tenancy agreements to three years in written form and do not
need to allege any particular reason, unlike German law.
4.2.2. Legal nature of the lease contract
As an initial assumption, the conception of a lease as a property right or, at least, with
regard to some of its elements, contributes to the tenant’s stability. That is, if entitled with
26
See above.
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UNESCO Housing Chair – Working Paper No. 2/2014
a property right, a tenant is able to possess and use the property by himself, not depending
on the landlord’s right (existence, new owner of the property, etc.) or tolerance (idea of
“living in someone else’s house”). Moreover, in principle, property rights are those that
are normally registered in the Land Register, thus giving notice to buyers, forced-buyers
or prospective owners of other property rights over the dwelling that a lease exists and
they should respect it. Rights in rem can also be used as a basis to obtain funding, such
as the possibility that exists of mortgaging long leases (leaseholds) under English law.
However, landlords often see property rights with reluctance as they encumber their
property and maybe dislike long-term relationships (due to which the contents of their
right-of-ownership over the property is emptied).
In Spain, leases are contracts, i.e. of personal nature. However, they can be registered in
the Land Register after formalising them through a notarial deed. If the lease is registered,
then the buyer of the property must respect it (art. 14 LAU); also buyers of a forced sale
must respect it if the lease was registered before the enforced mortgage (art 13 LAU).
Meanwhile, in Portugal there is a big debate regarding its nature (either personal or real).
Although a majority of arguments are in favour of the former, tenants are protected as
possessors of the dwelling and the right of possession is only conceded to a holder of a
right in rem (arts. 1251 and 1276 Portuguese Civil Code); moreover, the principle of
emptio non tollit locatum is applied, which is a consequence of the tenant holding a right
of sequel, that is, that its right is respected regardless of who the landlord of the property
is (art. 1057 PCC). For this same reason, the qualification of leases as personal rights in
Malta should be nuanced, as there is also a doctrinal debate there.
In Italy, leases are directly considered as a tertium genus, differentiated from personal
and real rights. On the one hand, tenants can file a proceeding directly against the
molesters that cause nuisances to the former, just as the landlord can; and, on the other
hand the principle of emptio non tollit locatum is applied, although with limits if it is not
registered (the buyer has to respect the tenant for a maximum of 9 years). The first reason
is also shared under Greek Law (art. 997 GCC), although it seems clear that a lease is
created by a personal contract.
In Germany, tenants also enjoy only a personal right, but they are also considered real
possessors, who can defend themselves from nuisances and deserve compensation for
damages in case their position is injured (§§ 823 (I) and 858 BGB). Another clear
exception is the obligation of the buyer of the rented property to respect the lease under
§ 566 BGB.
Austrian law considers that a lease is not a real property right. But the jurisprudence has
led to considering the tenant as holding a quasi in rem position (quasi-dingliches
Recht)because he is legitimated to claim against disturbances and infringements by third
parties, just like the landlord.
Also in Switzerland, since 1990, the buyer of the rented property must respect the lease,
regardless of whether or not it is registered in the Land Register. However, art. 261b CO,
allows its registration, thus preventing the buyer from terminating the lease even under
exceptional circumstances (e.g. he claims he or his relatives need the premises urgently).
4.2.3. Rights of first refusal
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Pre-emption rights also give tenants stability: as soon as the landlord wants to sell the
property or is compulsorily deprived of the property (e.g. due to a mortgage enforcement)
legislation can allow tenants to acquire the property’s ownership with preference over
any third party for the same sale/enforcement price. This gives tenants the possibility to
remain in the same property, but now as homeowner, thus stabilizing their tenure.
Thus, while in Spain pre-emption rights for tenants are legally foreseen in art. 25.1 LAU,
for contracts signed after 6-6-2013 they can be excluded by the parties to the contract.
Before then, this used to be a ius cogens (mandatory) statutory provision of which the
tenant could not be deprived. On the contrary, in Italy, a statutory pre-emption right exists
in art. 3.1 g) Law 431/1998. In Portugal it exists for leases of more than 3 years and not
only for the case of sale of the property but also in case of leasing the property to a third
party. In Malta, they do not exist.
In Germany, a statutory pre-emption right exists as a mandatory provision in §577 (I)
BGB, except if the landlord sells the property to a member of his family or a member of
his household. While in Switzerland it does not exist, discussions to introduce it are
ongoing in 2013.
4.3. Flexibility
Broadly speaking, “flexibility” refers here to the real possibility for the tenant to leave
the property before the duration agreed in the contract without the need for the consent of
the landlord, without compensating him or giving him any valid reason, without the
obligation to stay for a minimum period of time or without the obligation of finding
someone else, or any other related constrains.
In fact, this freedom includes two possible options for the tenant that might help him to
move out: simply, a tenant’s right to freely (i.e. without having any valid reason to do so)
leave the property and/or giving him the right to unilaterally sublet the property (i.e. to
allow the tenant to let a third party occupy the dwelling, who takes care of it and of the
payment of the rent instead of him without the need for the consent of the landlord).
Finally, it must be taken into account that, sometimes, strong limits to the transferability
or subletting might contribute to increase the “black market”, such as in Austria, The
Netherlands and Sweden
27
.
4.3.1. Early, unilateral and free termination by the tenant
In Spain, a tenant who wants/needs to unilaterally terminate the lease contract before the
agreed number of months or years and without the need to allege any valid reason for that
must pay the first 6 months of rent even if he is not living there and, after that, he can
terminate the contract but, usually, paying the landlord a compensation, which consists
of the value of as many monthly rents as the number of remaining years of the contract
(art. 11 LAU)
28
. The law does not clarify what happens if the landlord does not suffer any
27
See Ch. SCHMID, Comparative tenancy law and black rental contracts in Europe.
28
E.g. in a 4-year contract, the tenant wants/has to leave the very first month; he must pay the regular rent
for the first six months; after that, he has to pay three-months rent for the 3 remaining years and a half-a-
month rate for the last half remaining year.
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UNESCO Housing Chair – Working Paper No. 2/2014
damage (e.g. he rents the property to another tenant immediately after the first one has
left) due to the early termination of the contract.
Portuguese law of leases (art. 1098.3 PCC), since 2012, does not allow the tenant to
terminate the lease contract in advance until 1/3 of the initial duration or its renewal has
passed, although he does not need to pay any compensation to the landlord (just to give
him notice in advance). Another situation in which an early termination is allowed is
when the landlord opposes the automatic renewal of the lease, which is valid for both
time-limited and open-ended lease contracts.
Under Maltese law, tenants cannot unilaterally terminate contracts before the agreed term
is reached if the landlord has fulfilled his obligations. The single exception is those lease
contracts of “presumed duration” (none are possible after 1-1-2010 as the term must be
fixed) that can be terminated by either of the parties at any time. And under Greek law
art. 609 GCC, for leases of more than a month's duration, only 3 months' advance notice
is required; no compensation is due to the landlord.
In Italy, the tenant may withdraw from open-ended contracts by giving adequate notice
to the landlord (Art. 1974 CC). For contracts limited in time, it is necessary to distinguish
between contracts with free rent and contracts with limited rent. In the former (4 years +
4 years extension), the tenant may withdraw once 8 years have elapsed and giving notice
6 months in advance (Art. 2.1 Law no. 431/1998); in the latter (3 years + 2 years
extension), the tenant may withdraw at the end of the 5 years giving notice 6 months in
advance (Art. 2.5 Law no. 431/1998). In addition, art. 3.6 Law no. 431/1998 entitled the
tenant to terminate the contract at any time by giving six months’ notice due to serious
causes. The parties may agree other causes of termination or withdrawal without cause
and fix other periods of notice provided that there is no prejudice to the tenant.
In Austria the tenant may unilaterally put an end to a tenancy contract concluded for a
limited period of time, once the first year of the contract has elapsed. Furthermore, a three-
month period of notice is foreseen. The landlord has no right to compensation whatsoever.
The same takes place in contracts concluded for an unlimited period of time, but here the
notice to be respected depends on the contract terms (if nothing has been agreed upon,
the notice period shall be one month).
In Germany, the tenant can unilaterally terminate the lease contract in advance by giving
ordinary notice to the landlord (§ 573 BGB) with a notice period of three months in leases
arranged for an indefinite period of time (not for those that are time-limited). He does not
need to give any reason. The TENLAW reporter emphasises the idea that this is to
promote the mobility of tenants.
And finally, in Switzerland, tenants can terminate indefinite duration lease contracts,
giving notice 3 months in advance and in writing. But if he does not want to observe the
notice periods or if the tenant wants to terminate a time-limited lease early, he can do so
without negative consequences by proposing to the landlord a new tenant who is solvent
and acceptable to the landlord and who will accept the same conditions under the lease.
4.3.2. Subletting by the tenant
Table 2 summarises this possibility.
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COUNTRY
ALLOWS
SUBLETTING
WITHOUT THE
CONSENT OF THE
LANDLORD?
SPAIN
No (art. 8.2 LAU)
PORTUGAL
No (1038 pcc)
MALTA
NO (art. 1514 CC)
ITALY
Yes, but only in partial
subletting (Law art. 2 no.
392/1978)
GREECE
No (art. 593 GCC)
SWITZERLAND
In principle no, but
landlord has limited causes
for opposition (art. 262.1
CO)
GERMANY
In principle no, but
landlord has limited causes
for opposition (§§ 540 (I)
and 553 (I) BGB)
AUSTRIA
In principle no, but
landlord has limited causes
for opposition (§ 11 par. 1
MRG).
Table 2. Unilateral subletting by the tenant. Source: own elaboration.
5. Conclusions
The goal of this paper was to evidence how crucial points of the law of leases might
influence a low or a high ratio of the same. While affordability, stability and flexibility
are crucial for tenants, profitability, incentives for rehabilitation, guarantees and an
efficient eviction process are important values for landlords. All these factors are
influenced directly or indirectly by the law of leases: who bears the costs, how is the rent
fixed (limits to the freedom of contract), possibility to substitute it by reparations, control
of the tenancy by the tenant (early termination without reason possible or subletting),
minimum duration period by law, etc.
But although this is a preliminary study based on some preliminary national reports for
the EU Project TENLAW, it is hard to say whether and how the law of leases influences
the (higher or lower) rate of leases in a given country, or if it depends on many other legal
dispositions as well (taxation, subsidies), or even if the main driving factor should be
found outside the law, just in socio-economic and cultural factors such as social values
(private wealth instead of social wealth), who is renting and who is buying (immigrants,
ghettoization), investment, safety, etc.
However, it seems clear that, for some of these values, a straightforward link can be traced
down to some legal roots. Therefore, from the point of view of the tenant, stability is
S. NASARRE-AZNAR
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21
UNESCO Housing Chair – Working Paper No. 2/2014
directly linked to the time the tenant can remain within the premises without depending
on the opinion of the landlord (forced minimum duration, open-ended contracts) or if
conditions are legally created to avoid an abuse in the rent so he can afford to continue
paying it (controlled rents). Flexibility is linked to the tenant’s possibility of early
termination of the contract without too many burdens and without giving any valid reason
or, at least, the possibility for him to sublet the property with certain freedom. And from
the point of view of the landlord, public and private law incentives for rehabilitation
should be available to him to rehabilitate his property and to allow him to legally rent it
instead of abandoning it; policies towards a healthy tenancies market should be created
and a good balance of obligations and costs should be legally established to guarantee
him a minimum profit to make it attractive for him to let instead of investing elsewhere
(e.g. a long term bank deposit); legal deposits and other legal guarantees should be
available to him to prevent bad behaviour of the tenant towards the property or his default
in payment; and an efficient eviction procedure (in time and costs) should be available
along with efficient alternative dispute resolutions methods that can help to prevent too
much litigation.
That is, it was the intention of this work to compare the laws of leases of those countries
with the highest urban tenancy rates with those with the lowest. Once again, it is a North-
South comparison. Table 3 summarises the attitude of each studied country’s urban leases
legislation towards the key issues that it has been considered might affect the
attractiveness of renting (for both landlords and tenants).
S. NASARRE-AZNAR
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UNESCO Housing Chair – Working Paper No. 2/2014
Spain
Portugal
Malta
Greece
Italy
Switzerla
nd
Germany
Austria
LANDL
ORD
(Guarant
ees only)
a) deposit
b) Legal
pledge
over
tenant’s
chattels
a) Yes;
not too
burdenso
me for
tenant
b) No
a) Yes;
quite
burdensom
e for tenant
(3 months
and
personal
guarantor)
b) No
a) Yes;
quite
burdenso
me
sometim
es (up to
6 months
in
advance)
b) Yes
a) Yes; not
too
burdenso
me for
tenant (1
or 2
months)
b) Yes
a) Yes; quite
burdensome
for tenant (3
months)
b) Yes
a) Yes;
rather
burdenso
me (up to 3
months
rent) but
only 1/3
tenants
pay
deposit
b) No (yes
until 1990)
a) Yes;
rather
burdensom
e (up to 3
months
rent)
b) Yes
a) Yes, very
burdensome
(up to 6
months has
been accepted
by
jurisprudence
).
b) Yes
Efficient
eviction
process
and ADR
Special
process
with
important
delays (up
to 18
months)
but not
special
courts.
ADR only
available
since
2013
No special
courts
Special
judiciary
board
Special
process
but not
special
courts
Special
process but
not special
courts
Conciliati
on
compulsor
y prior to
the judicial
process
(not for
clear
cases)
No special
courts. In
some
Länder,
pre-trial
conciliatio
n is
compulsor
y
a) No
specia
l
courts,
but
arbitra
tional
boards
deal
with
specifi
c
tenanc
y
cases
S. NASARRE-AZNAR
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23
UNESCO Housing Chair – Working Paper No. 2/2014
TENAN
T
Affordabi
lity
a) Rent
b)
Utilities
and
taxation
a) No rent
control
b) Tenant
often pays
all taxes
and
expenses
a) No rent
control
b) Tenant
pays costs
related to
supplies of
goods or
services
N/A
b) Tenant
and
landlord
often
jointly
liable for
electricit
y and
water
a) No rent
control
b) Tenant
pays
expenses
for the use
a) Yes, rent
control for
one kind of
contracts.
b) Tenants
usually pay,
but it may be
agreed by the
parties.
a) A sort
of:
measures
against
“unfair
rent”
b) Many
utilities
included in
the rent
a) A sort of
rent
increase
control
(Mietspieg
el)
b) Except
for
electricity,
if nothing
is agreed
against, it
is the
landlord
who pays
all costs
a) Three rent
control
systems
b) Tenant
often pays all
taxes and
expenses
S. NASARRE-AZNAR
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24
UNESCO Housing Chair – Working Paper No. 2/2014
Stability
a) Open-
ended
contracts
and/or
compulso
ry
minimum
duration
b) Legal
nature of
lease
contract
c)
Statutory
pre-
emption
rights
a) No
open-
ended
contracts
but
minimum
duration
compulso
ry (3
years)
b) Not a
right in
rem but
shares
elements
with them
(eg.
registratio
n in Land
Register)
c) Yes,
but can be
excluded
by the
parties
a) Open-
ended
contracts
possible.
No
minimum
duration
since 2012
(before, 5
years)
b)
Doctrinal
discussion
between
personal
and real
right
(tenant is
considered
as
possessor
and emptio
non tollit
locatum)
c) Yes, but
only for
leases of
more than
3 years
a)
Neither
open-
ended
contracts
nor
compuls
ory
minimu
m
duration
b)
Doctrinal
discussio
n
between
personal
and real
right
(emptio
non tollit
locatum)
c) No.
a)
Minimum
duration of
3 years for
residential
leases
b) It seems
clear it is a
personal
right, but
tenants can
defend
themselve
s from
molesters
c) No
a) Open-
ended: 30
years that
may be
renewed.
Limited in
time: Free
rent.
compulsory
minimum
duration of 4
years.
Limited rent:
compulsory
minimum
duration of 3
years
b) Leases are
considered as
tertium
genus, as
tenant can
defend
himself from
molesters,
and principle
of emptio non
tollit locatum
c) Yes
a) No
minimum
duration,
but can be
arranged
for long
periods
b) Emptio
non tollit
locatumi
and leases
can be
registered
in the
Land
Register
c) No
a) Open-
ended
contracts
are
common,
as fixed-
time
tenancies
are only
allowed
under
certain
circumstan
ces
b) Personal
right, but
emptio non
tollit
locatum
and tenants
can defend
themselves
from
molesters
and can
claim for
damages
c) Yes.
Mandatory
provision
a) Open-
ended
contracts
possible,
legislator´s
preference
towards
contracts
unlimited in
time
b) Tenant
holds a quasi
in rem
position, as he
can defend
himself from
molesters
c) N/A
S. NASARRE-AZNAR
LEASES AS AN ALTERNATIVE TO HOMEOWNERSHIP IN EUROPE
25
UNESCO Housing Chair – Working Paper No. 2/2014
TENAN
T
Flexibilit
y
a)
Unilatera
l early
terminati
on by the
tenant
b)
Unilatera
l
subletting
a) Yes,
but
minimum
compulso
ry stay of
6 months
and
compensa
tion to the
landlord
b) No.
a) Tenant
cannot
terminate
the
contract
early until
he has
stayed 1/3
of the
duration.
No
compensat
ion due to
the
landlord
b) No.
a)
Tenants
are not
allowed
to
terminate
the
contract
early
b) No.
a) Yes,
with 3
months in
advance
notice. No
compensat
ion for the
landlord
b) No.
a) Possible in
open-ended
contracts;
more limited
in other cases
b) Yes, but
only in case
of partial
subletting.
a) Yes in
open-
ended
contracts,
with 3
months
notice.
However,
no notice
or even for
limited-
time
contracts,
also
accepted if
tenant
finds a
new
suitable
tenant.
b) No, but
landlord
has limited
causes to
oppose the
tenant’s
decision
a) Yes in
indefinite
lease
contracts,
with a
notice
period of 3
months.
b) No, but
landlord
has limited
causes to
oppose the
tenant’s
decision
a) Yes, after a
stay of one
year plus 3
months notice
(limited in
time
contracts). No
compensation
due to the
landlord.
b) No, but the
landlord has
limited causes
to oppose the
tenant’s
decision.
Table 3. Conclusions. Comparative study among 8 European countries in relation to their leases system. Source: own elaboration.
From Table 3, the following conclusions may be driven:
1. Guarantees for landlords:
a. in all of the jurisdictions studied there exist at least two (deposit plus pledge over
tenant’s chattels or personal guarantor), except for Spain, where only the deposit is
legally foreseen.
b. There are no special courts for lease contract-related cases in any of the jurisdictions,
except for Malta, and specific arbitrational boards in Austria. Alternatively, there are
relatively effective ADR in Switzerland and Germany, with only recent reforms in
Portugal and Spain to push forward these methods of dispute resolution.
c. Deposit can be considered to be very burdensome in Malta and Austria (equivalent to
up to 6 months of rent) and quite burdensome in Portugal, Italy and Germany (at least
equivalent to up to 3 months of rent). This combined with no unilateral subletting in
all studied Southern European countries (except for partial subletting in Italy) and
important constrains in unilateral early termination in Spain, Portugal and Malta, and
this raises a question: does this framework contribute to configure tenancies as a real
flexible type of tenure? Contrast all this with:
i. limited causes of opposition by the landlord to subletting by the tenant in
Germany, Austria and Switzerland (i.e. to some extent, freedom for the tenant
to find third parties to subrogate in his position or to share expenses of the lease).
ii. tenants have always the possibility of early termination of the lease contract
without compensation for landlords with only 3 months advance notice in
Switzerland, Germany and Austria (similar provisions in Greece and Italy).
2. Affordability for tenants:
a. In general, tenants pay possession-related expenses and taxes, but not in Spain (where
for the tenant, since 2007, paying for everything, including ownership-related costs
such as property tax and condominium expenses, is increasingly common). Generally
speaking, Switzerland and Germany, depart from the principle that it is the landlord
who has to pay the utilities and expenses of the rented property, which are included in
the rent if not otherwise stated in the lease contract.
b. No rent control in SE countries, except for one type of lease contracts in Italy (more
liberalization since 1998). However, several types of rent control and rent control
increase do exist in Germany, Switzerland and Austria (quite strict).
3. Stability for tenants:
a. all countries studied (except Malta) have mechanisms of duration protection for
tenants (compulsory minimum duration, rent control or open-ended contracts), but in
all Southern European countries the measure is, or used to be until very recently, very
intrusive through the “minimum compulsory duration” rule, which has been
substantially reduced in Spain (2013) and recently disappeared in Portugal (2012).
While in Germany, Austria and Switzerland there is a preference for the combination
of long-run lease contracts plus a system of rent (increase) control.
b. Clear emptio non tollit locatum rule in 5 jurisdictions. But trend in Spain (needs
notarial deed and registration; reduced minimum duration) and Portugal to reduce it
(no minimum duration since 2012). Is this the way to improve the rented housing ratio?
c. In all Southern European countries, except in Italy, there are no pre-emption rights in
favour to the tenant to guarantee him stability in case of sale of the property to a third
party, or they are limited (in Spain they can be excluded by the parties and in Portugal
they only exist for leases of more than 3 years of duration). However, they exist in
Germany and in Switzerland they are under consideration.
S. NASARRE-AZNAR
LEASES AS AN ALTERNATIVE TO HOMEOWNERSHIP IN EUROPE
UNESCO Housing Chair – Working Paper No. 2/2014
27
From all this, it may be extracted that the main differences between Southern European countries and
those three with highest rental market share in Europe are the following:
1. It seems that tenants in Switzerland, Germany and Austria, as far as they fulfil their own
obligations, have more stability and more flexibility (freedom) and it is a type of tenure oriented
to be more affordable. Table 4 summarises this.
Switzerland, Germany and
Austria
Studied Southern European
countries (majority or all)
Stability
- preference for long-run lease
contracts
- emptio non tollit locatum
- pre-emption rights
(Germany)
- more intrusive system of
minimum compulsory
duration
- weaker emptio non tollit
locatum
- weaker pre-emption rights
Flexibility
- limited causes of opposition
of the landlord for unilateral
subletting by the tenant
- early termination of the lease
contract without
compensation for landlords
with only 3 months notice in
advance
- no subletting allowed
without the landlord’s
consent
- important constrains in
unilateral early termination
in Spain, Portugal and Malta
Affordability
- rent control
- profits of the deposit for
tenants
- tenant-friendly system of
costs
- no rent control
- profits of the deposit are not
for the tenant in either Spain
or Malta
- more landlord-friendly
system of costs
Table 4. Tenants’ stability, flexibility and affordability in Switzerland, Germany and Austria and in
studied Southern European countries. Source: own elaboration.
2. This is not contradictory, and is even combined with having in Switzerland, Austria and
Germany mechanisms to avoid or against “bad tenants”, both ex ante (quite burdensome deposits plus
a statutory pledge over tenants’ movables) and ex post (efficient recourses for eviction).
All this probably contributes to the size of the share of the tenancy-occupied housing in each country.
S. NASARRE-AZNAR
LEASES AS AN ALTERNATIVE TO HOMEOWNERSHIP IN EUROPE
UNESCO Housing Chair – Working Paper No. 2/2014
28
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