The government approves the bill for a new Law on Residential Tenancy aimed at higher level of protection of tenants and development of rental housing market

03-05-2018

During the meeting of May 3, 2018, the bill for a new Law on Residential Tenancy prepared by the Ministry of Economics was supported by the Cabinet of Ministers and it provides for a new regulation in the rental market for residential premises and will promote the creation of quality and more affordable rental apartments, will offer a new solution to the ongoing and time-consuming litigation processes and will promote investment in the rental housing sector and labour mobility for cities and regions where well-paid jobs are created.
 

“In 2017, we signed a memorandum of cooperation for the development of the real estate market, which envisages both specific tasks for the government and specific commitment from the entrepreneurs in the sector. After several years of discussions, we have succeeded in finding the first common denominators for the new conditions in the regulation in the rental housing market. The bill for a new Law on Residential Tenancy has been drafted with the purpose to ensure a higher level of protection for tenants, organize the business environment, as well as to attract investment for construction of new residential housing and reduction of shadow economy,” emphasizes Edmunds Valantis, Deputy State Secretary of the Ministry of Economics.
 

The bill for a new Law on Residential Tenancy is a part of a joint legislative package including amendments to the Law on Law On Assistance In Solving Apartment Matters, amendments to the Notariate Law, and amendments to the Civil Procedure Law.
 

      Following the adoption of the said bills in the Saeima, in 2018, EUR 3 578 260 shall be allocated from the state budget program “Emergency funds” to provide co-funding for the payout of living space vacation allowance for tenants of denationalized buildings, in accordance with the actual expenditure of the municipalities.
 

With a view to provide better protection of the interests of tenants, the bill stipulates that the lessor will be able to increase the rent only when the rental agreement sets out the principles and procedures for raising the rent, for example, linking the raise with the average annual inflation, planned expenditures, or periodically raising the rent.
 

In order to reduce the shadow economy, the new bill provides for registration of all tenancy agreements in the Land Register, thus ensuring publicly available and reliable information on concluded transactions that will protect both tenants and new owners of real estate. It is important to emphasize that registration of a tenancy agreement in the Land Register will be free of charge, thus avoiding any additional costs to the lessor or tenant. Simultaneously, registration of a tenancy agreement in the Land Register will allow to eliminate fictitious rental agreements as well as to protect honest tenants in the event of a change of lessor.
 

The new bill will also significantly accelerate the settlement of disputes between the lessor and the tenant, as well as reduce the costs involved. The current law provides for the settlement of all disputes in court. With introduction of the new law, by making appropriate amendments to the Civil Procedure Law, non-contentious performance of obligations in certain cases (where there is no dispute) will be provided for - the tenant will be obliged to vacate the rented residential space if the term of the lease has expired and a new agreement has not been reached, if there is a rental debt, as well as in the event of the sale of immovable property, if the rental agreement has not been registered in the Land Register. At the same time, such a solution will significantly reduce the risks for potential investors to invest in the construction of new rental housing.
 

Compared to the current law, significant changes are provided for as to the term of the tenancy agreement — from now on, the tenancy agreement can no longer be concluded for an indefinite period. Namely, the tenancy agreement will be entered into only for a finite period of time, and, upon expiry of the term, the tenant will be obliged to vacate the living space, unless a new tenancy agreement is concluded with the tenant. In the context of the term of the agreement, it should be noted that, as before, a tenant, without giving a reason, will be able to terminate the agreement by notifying the lessor in advance; while the lessor will still be able to withdraw the contract only in cases and within the time limits provided for in the law.
 

Similarly, the rights of the tenants' family members will also be affected - members of the family will no longer enjoy permanent right to use the living space, thus the members of the family will no longer be jointly and severally liable for the obligations arising from the tenancy agreement. Only in the event of the tenant’s death the family members shall be entitled to request a new tenancy agreement without changing the terms of the previous agreement.
 

Taking into account the significant differences between the new regulation and the current law, the bill provides for a transitional regulation. Accordingly, tenancy agreements that were concluded prior to the entry into force of the new law will have to be registered with the Land Register within 5 years from the entry into force of the said law.
 

Meanwhile, within two years from the entry into force of the law, the lessor and tenant currently using the living space, based on the tenancy agreement concluded by the previous tenant, must conclude a new rental agreement (for example, a tenant of a denationalized building if the living space is used on the basis of the Soviet-era rental agreement). On the other hand, if the agreement cannot be reached, the relevant claim can be submitted the court, which, after an objective analysis of the situation, will determine both the term of the tenancy agreement, which can not exceed 10 years, as well as the amount of rental fee.

Last update:    01-02-2019