Real Estate Law in Sweden

The Swedish Land Code

The Swedish Land Code (1970:994) (in Swedish: Jordabalken) is the most comprehensive legal framework in the real estate area in Sweden, covering most aspects of real estate law. It regulates the definition of immovable property and its appurtenances and boundaries, as well as the purchase, exchange, lease/rent and gift of immovable property and the rules governing the granting of various forms of usufruct. It furthermore constitutes a framework on the relationship between neighbors and the rights and obligations they have towards each other, which can become relevant e.g., when roots of trees or other vegetation on one property encroach on the other. Rules on the title and mortgaging of a property (how this should be done, by whom and when) can also be found in the Swedish Land Code.

The provisions in the Swedish Land Code are often mandatory, meaning that the law governs certain relationships regardless of what the contracting parties may have agreed upon. This applies mainly to purchase contracts and the various rights of use. The rules on tenancy are furthermore a clear example of mandatory legislation, designated to protect the tenant or the usufructuary and, therefore, might have consequences for the landowner’s ability to cultivate his own land.

Other frameworks

Other important legal frameworks on the field, in selection, are the Swedish Planning and Building Act (2010:900) (Plan– och bygglag), which regulates the planning of land, water and construction, the Real Property Formation Act (1970:988) (Fastighetsbildningslag), containing provisions on, inter alia, the division of land into properties, as well as how the properties and land may be changed and under what circumstances, and the Swedish Environmental Code (1998:808) (Miljöbalken), promoting sustainable development and rules on good environment.

The Sale of Goods Act and the Contracts Act

For indirect property purchases, i.e., purchases of shares in real estate companies, in commercial contexts, the Sale of Goods Act (1990:931) (Köplagen) and the Contracts Act (1915:218) (Avtalslagen) applies.

Ownership restrictions

There are no specific restrictions related to the ownership of real property or condominium flats (bostadsrättslägenheter) in Sweden. On the contrary, regarding purchases of condominium flats, the Swedish Tenancy Act (1991:614) (Bostadsrättslag) prohibits the establishment of such requirements, which would stipulate e.g., a certain citizenship, income, or wealth in order to become a member of the condominium association. Membership can be denied only if there are reasons to believe that the applicant in question would not be able to fulfil their obligations towards the condominium association, for example not being able to pay the monthly fee.

Regarding purchase of real estate, the purchase type differs from purchases of moveable property in the sense that the law prescribes formal requirements which must be fulfilled for validity,

Some restrictions regarding foreign ownership of properties may however apply following the entry into force of the Foreign Direct Investment Act (2023:560) (Lag om granskning av utländska direktinvesteringar) in December 2023. However, these restrictions only apply if the activities conducted on the property are classified as an essential service for the country or are especially worthy of protection (e.g., importance for national defense, hospitals, or infrastructure).

Easements and usufructs

Real property can be afflicted with easements (servitut). or usufructs (nyttjanderätt), which affect the property owners’ use of land. Easements can be contractual (i.e., easements agreed upon between the property owners) or official (i.e., an easement created via an authority decision). They usually remain until further notice, despite ownership changes since they are connected to the property rather than to the owner. Usufructs on the other hand are binding for a maximum of 25 years if located on properties within zoning plan areas, alternatively 50 years if not located within zoning plan areas. They are created through an agreement with the property owner.

Property fixtures

Some additions or improvements to a land area, such as buildings, are deemed integral parts of the property and cannot be sold separately from the land. These additions are classified as immovable property (Fast egendom), and in order to separate immovable property from the land, it must be physically detached from the land area first.

The same principles apply to industrial property, including machinery or other equipment, unless the owner explicitly specifies in the property register that the industrial property should be distinct from the land.

The right of public access

One unique element of Swedish real estate law is the right of public access (allemansrätten). In short, the right of public access is described in Chapter 2 § 15 in the Constitution of Sweden as the “public’s right to nature” and prescribes a right to travel and temporarily reside on private land without the property owner’s consent.

The right furthermore implies that the public may, to a certain extent, use the private land for e.g., nature tourism and for picking berries and the property owner would not be entitled to compensation. Even if the right to public access versus the property owner’s proprietary rights is controversial, the public’s use of private land must not infringe the property owner’s financial interests. Neither must the public cause any inconvenience to the property owner or those who reside on the property while exercising their rights.

Application for title with the Swedish Mapping, Cadastral and Land Registration Authority

According to Swedish law, title to real property must be applied for within three months from the acquisition. The title is registered in the Property Register kept by the Swedish Mapping, Cadastral and Land Registration Authority (Lantmäteriet) to act as proof of ownership, after which it may constitute grounds for potential banking errands and similar. If the acquirer of the property fails to apply for title within the three-month period, the Swedish Mapping, Cadastral and Land Registration Authority may force the acquirer to apply for title with a recurrent fine. Should the property be acquired via purchase, the buyer must pay stamp duty of 1.5% of the purchase price if the buyer is a physical person, alternatively 4.25% of the purchase price if the buyer is a legal person. In addition to the stamp duty, all acquirers must pay a registration fee of approximately SEK 825 The application for title must be submitted with a copy of the document of purchase, which may be either the title deed (köpebrev) or purchasing contract (köpekontrakt).

If the applicant is a legal person

If the buyer or seller of a real property is a limited liability company, the application for title must be submitted with a document of purchase and a certificate of registration/extract of registration to show the signatory rights of the company. Should the real property be acquired in connection with a merger, an additional certificate will be required from the Swedish Companies Registration Office (the SCRO), confirming that the merger is executed.

In Sweden, real estate transactions do not require attestation from notaries. The acquiree’s signature on the document of purchase must be attested by two persons, who do not need to be notaries, in order for the application of title to be approved by the Swedish Mapping, Cadastral and Land Registration Authority.

Buyer’s duty to investigate

According to Swedish real estate law, the buyer has an extensive duty to investigate the real estate prior to purchase. Any potential defects and damages that should have been noted during the investigation cannot be invoked by the buyer in retrospect. During the investigation, if the buyer notices a defect on the property or something that leads the buyer to believe that the property is not in the anticipated condition, the buyer’s duty to investigate the property is extended. Another factor that may call for an even more extensive investigation is e.g., if the seller informs the buyer of a suspected defect (however, the buyer is not obliged to investigate areas of the property when the seller has given guarantees about the area’s condition and the guarantees are not too general in nature). The scope and extent of the buyer’s investigation must be adjusted based on the property’s age, price, condition, and area of use.

Seller’s responsibilities

The seller has no general liability to disclose information, which corresponds to the buyer’s duty to investigate. However, the seller may be liable to pay damages if they omit to inform the buyer of defects on the property if they were aware of the defects or should have been aware of them. Furthermore, the seller loses the right to invoke the buyer’s negligence in terms of the duty to investigate, should the seller omit to inform the buyer about a defect to such extent that the omission can be considered dishonest conduct. The seller can also become liable if they provide the buyer with inaccurate guarantees about the property’s condition. As mentioned above, general statements regarding the property cannot be considered guarantees. Finally, the seller is responsible for hidden defects during a period of ten years after the buyer’s purchase. The responsibility for hidden defects only includes defects which could not possibly have been discovered during the buyer’s investigation and applies regardless of whether or not the seller was aware of the defect in question.

Contractual representations and warranties

In terms of contractual representations and warranties, freedom of contract applies to the parties’ responsibilities for the property condition. Therefore, they are free to divide their responsibilities irrespective of what is stated by law. One example could be that the seller disavows their responsibility for the property condition, in general or with respect to a specific function.
Some common warranties of the seller in indirect real estate acquisitions include that the seller has registered title to the property, that all buildings and objects on the property constitute property and building appurtenances and fixtures in accordance with applicable law, and that mortgage certificates have/have not been taken out on the property.

Mortgage deeds

Sweden has a system of mortgage deeds (pantbrev), which are executed upon hypothecation of real estates. Mortgage deeds can only be issued for entire real estates and not a portion of it. Additionally, buildings on the real estate cannot be subject to mortgage.

The property owner wishing to mortgage the real estate applies for mortgage with the Swedish Mapping, Cadastral and Land Registration Authority and receives a mortgage deed in return. The mortgage deed is then handed over to the creditor. The mortgage deed that was issued first will have priority over the mortgage deed which was issued second, the second over the third and so on. In other words, it is the time of registration and not the amount on the mortgage deed which determines the precedence. As the mortgages are being paid, excess-security (överhypotek) arises.

Second-hand mortgage

In case of excess-security in the already existing mortgage deeds on a property, one alternative is to apply a second-hand mortgage. A second-hand mortgage implies that security is taken in an already-existing mortgage deed rather than in a completely new mortgage deed in order to have better priority in case of e.g., the debtor’s bankruptcy. It is also possible to combine a second-hand mortgage with a new mortgage deed as security for a loan.

When a real estate is subject to mortgage, stamp duty of 2% of the mortgage amount must be paid along with a registration fee to the Swedish Mapping, Cadastral and Land Registration Authority.

Types of tenancies

Sweden has different types of tenancies. The first concerns tenancy of buildings in whole or in part, being divided between (i) tenancy of dwelling units (bostadshyra), and (ii) tenancy of non-housing premises (lokalhyra). It is also possible to grant land for use in return for consideration in form of (i) commercial ground leasehold (anläggningsarrende), (ii) agricultural leases lägenhetsarrende). The different types of tenancies are regulated in the Swedish Land Code, Chapter 8–12.

Lease of non-housing premises

The relevant and most common alternative for companies wishing to lease premises for commercial purposes, depending on the nature of business, would be the lease of non-housing premises. Lease of non-housing premises is defined in Chapter 12 § 1 of the Swedish Land Code as the lease of “… a unit other than a dwelling unit”, i.e., other than for housing accommodation. Indirect security of tenure applies to the lease of non-housing premises and arises after a period of nine months. In Sweden, the indirect security of tenure does not mean that the tenant has a right to renewal of the lease in the event of termination, but only a right to damages in the event of unjustified termination. When leasing non-housing premises, the parties also have more freedom to negotiate the terms of the lease especially regarding the condition and responsibility of the lease object.

The tenancy agreement must be drawn up in writing if the tenant or the landlord so requests.

Commercial ground leasehold

When a landowner grants their land with buildings in writing to a tenant with the purpose to continue some form of business activity, it is a commercial ground leasehold. Commercial ground leasehold is defined in Chapter 11 § 1 of the Swedish Land Code as “… land granted by leasehold for a purpose other than agriculture and the lessee is entitled, under the leasehold grant, to erect or retain, for commercial activity on the leasehold property, a building which is of more than minor importance for the conduct of activity.” Common types of commercial leaseholds are land leased for gas stations, roadside restaurants, and wind turbines. Similar to leases of non-housing premises, indirect security of tenure applies to commercial ground leasehold.

Miscellaneous

Provisions contradicting those in the Swedish Land Code regarding leases of dwelling units and non-housing premises are of no effect against the tenant or a party entitled to enter into the tenant’s stead, unless otherwise prescribed by the relevant legal provisions.

Building permits

A building permit (bygglov) is normally required for the erection of a new building or if adding on to an existing building by increasing the volume of the building in any direction (upwards, downwards, or sideways). Building permits are also required in the following situations:

• If the building is located within an area of a zoning plan, to change the appearance of the building by e.g., changing the color, cladding or roof material;
• When changing the building into an additional dwelling or premises for trade, craft, or industry, or to use the building for a substantially different purpose from which it has been previously used, e.g., by changing a dwelling into an office or a garage into a shop;
• When arranging, setting up, moving, or substantially altering certain facilities, e.g., walls and fences, storage, or material yards (such as permanent parking for cars, storage of boats or containers set up on site if not temporary), sports grounds, marinas, golf courses, radio and telecommunication masts and towers; or
• If in areas with zoning plans, to put up or change signs and floodlights.
  Once a building permit has been granted, construction must commence within two years and must be finished within five years. Some building permits can furthermore be time-limited if only some of the criteria for building permits are met.
  

There are some exemptions to the requirement for building permits that apply to one- or two-family houses. For example, patios, canopies, outbuildings, walls, and planks can be built without a building permit and alterations to the façade can be made. Building permits are also not required for sheds (Attefallshus) of 30 square meters or less, for an extension of 15 square meters or less, or an additional dwelling in single-family houses. However, the building committee of the municipality must be notified of the measure.

Neighbors’ consent and permission under the Environmental Code

As part of the process of notification to the building committees, consent of the neighbors might be required, and especially if an extension of a building will result in the building being closer than 4.5 meters from the boundary. Permission may also be required under the Environmental Code within a shoreline protection area, i.e., normally 100 meters from the sea, lake, or watercourse.

Environmental recommendations and guidelines

The Environmental Code (1998:808) (Miljöbalk) sets out the general framework for environmental protection and has a broad scope. More specific provisions are found in bylaws under the Environmental Code. Chapter 2 of the Environmental Code sets out the most important rules; the polluter pays principle, the precautionary principle, the product choice principle and the principles for recycling, management, and suitable activities. The rules apply for every operator of an environmentally hazardous activity from starting the activities and as long as the activities are ongoing. Besides material provisions, the Environmental Code also includes rules of supervision, sanctions, and provisions of different permits. Many activities may not be carried out until a permit has been granted.

In terms of environmental rules and codes, Fastighetsägarna, a trade association that works for a sustainable and functioning real estate market, issues several recommendations and guidelines on the area. They provide e.g., recommendations on how the property owners can structure their work on climate adaptation by identifying risks, critical properties, measures, and to follow up and develop an action plan. As part of Fastighetsägarna’s effort to contribute to sustainability on the real estate market, they also provide, inter alia, tenancy agreement templates, which delegates ESG-related responsibilities between the tenant and the landlord. The template agreements can be bought for a fee of approximately SEK 80–100.

The property owner is responsible for ensuring that the property is maintained well and for implementing measures within the area of responsibility.

Energy requirements

The National Board of Housing, Building and Planning (Boverket) provides rules on energy conservation and thermal insulation properties. The rules are divided into three requirements, which are for the building to have good energy management, limited electricity use, and sufficient thermal insulation. They apply when building a new house, as well as in case of renovating, converting, or adding on to an existing property.

Certain buildings are required to have an energy performance certificate. These buildings are (i) buildings with a floor area of more than 250 square meters that are frequently visited by the public, (ii) buildings occupied by tenants, and (iii) buildings that are newly constructed or to be sold. By establishing the energy declaration, the building owner gets a good overview of the building’s energy status and indoor environment. It also shows whether it is possible to use less energy without reducing the quality of the indoor environment, which in turn would save the building owner money. Energy performance certificates are valid for 10 years.

Stamp duty

Stamp duty must be paid when buying a real property or leasehold, as well as when a mortgage is taken on the property. For the purchase of properties, the stamp duty is calculated on the higher of the purchase price and the assessed value from the previous year. Stamp duty is 1.5% for private individuals, housing accommodations and municipalities. Stamp duty is 4.25% for legal entities such as limited companies, partnerships, and economic associations. Stamp duty is not payable in cases of inheritance of property or divorce.

Download: Handbook for Real Estate Transactions