When you buy an apartment in a housing company, you don't actually buy the apartment itself, but rather the shares that entitle you to possession of the apartment. The housing company owns the building and the apartments and the shareholders are joint owners of the housing company.
Information concerning the housing company should be carefully inspected before making a purchase decision.
Familiarise yourself with at least
- the house manager's certificate and all pertinent details such as the age of the building, the square area of the apartment, paying particular attention to the apartment's share of housing company debt, current repair needs as well as planned and completed renovation projects.
- the energy certificate
- the articles of association, financial statements and financial plan of the housing company
- the most recent shareholder's meeting. The minutes of the meeting may provide additional information on upcoming significant renovation projects such as plumbing renovation.
If the building is several decades old and its plumbing has not been renovated, such work is generally to be expected. If you are buying a semi-detached house or there are only a few apartments in the housing company, check the articles of association to confirm whether shareholders have a broader liability for repairs than usual. If that is the case, the shareholder is personally liable for structural repairs if e.g. water damages occur. Normally structural repairs fall within the housing company's liability.
When attending a public viewing, inspect the apartment carefully. If you are genuinely interested in an apartment, request a private viewing.
- Peek inside closets, behind paintings and under carpets
- Knock on tiling in washrooms - are they properly attached?
- Also check cellars, attics and common storage spaces.
Defects in the apartment which should have been detected in a normal inspection will be inadmissible as grounds for compensation from the seller later on. Things such as natural wear and tear on surfaces, structures and HVAC technology are not considered defects.
Commissioning a formal condition inspection is not, however, mandatory.
- A standard condition inspection may not reveal defects such as humidity damage to the apartment.
- If a condition inspection has been commissioned and the resulting report mentions a humidity risk, the buyer must be prepared for the possibility of humidity damage.
The age, condition and price of an apartment
Both the age of the apartment and renovation work done are key factors in assessing its condition and price.
The older the building, the greater the extent to which the buyer of an apartment should be prepared for renovation work and their resultant costs in the form of maintenance charges.
You can't expect to get the quality of a newly built apartment at the price of a used apartment. For example, construction methods and regulations regarding damp proofing have changed and developed significantly in the last twenty years or so.
The price of apartments is indicated in adverts as both a sales price and a debt-free price (if different from the sales price).
- The sales price (transaction price) = the sum the buyer pays the seller
- Debt-free sales price = transaction price + share of housing company debt allocated to the shares being sold.
If the housing company has debt, the buyer can generally choose whether to pay off the housing company debt month by month as charges for financial costs paid to the housing company or make a one-off payment of their share of debt.
When real estate agents are used, bids are always made in writing. If the owner is selling the apartment on his own, bids may also be made orally.
- A written bid is always preferable, as it helps both parties be aware of their rights and obligations
- Do not make a bid if you aren't certain that you really want the apartment and are able to pay for it
- Cancelling a bid may result in having to forfeit a down payment or pay a contractual penalty as specified in the bid. These are limited to 4% of the total sales price of the apartment.
The bid may include a so-called resolutive condition, which specifies the circumstances in which the bid shall not be considered binding. For example
- if you aren't sure whether you will be able to secure a sufficient mortgage at satisfactory terms, have it noted in the bid as a resolutive condition
- if you commission a humidity survey or some other type of inspection after making the bid, include a resolutive condition in the bid stating that the bid is cancelled if the inspection reveals a defect that may affect the sales price.
A real estate agent may sometimes suggest a condition stating that the validity of the bid is contingent on whether the bidder is able to sell his previous apartment by a specified date. This type of condition may prove tricky for both the buyer and the seller.The marketing of an apartment usually continues even after a bid has been received. The bidder, for his part, can't be certain that he will be able to buy the apartment at the bid price, even if the seller has accepted the bid.
The bidding phase is usually quick
Bids should not be made out to have excessively long validity. A couple of days are usually enough.
- The first bid, often clearly below the asking price, is frequently not accepted. The seller may elect not to respond to the bid. In that case, the bid will become void once its validity has expired.
- The seller may make a counter offer, in which case the original bid will become void. The prospective buyer must respond to the counter offer within the time frame specified. Despite the fact that the bidding phase is often hectic and features short deadlines, make sure you record any agreements in the bidding process in writing, or at least by e-mail. This way you can avoid having to rely on spoken promises alone regarding the price, payment terms or the date on which the transaction will be concluded.
The seller decides whom to sell the apartment to The seller does not have to sell the apartment even if he has accepted a bid. The seller can always choose whom to sell his apartment to. Even the acceptance of a bid that meets the asking price is not mandatory. The seller must, however, pay the bidder the contractual penalty specified in the bid if he withdraws from an already accepted bid.
Deed of sale
The deed of sale for a share in a housing company should always be prepared in writing, and in at least two copies, one for the buyer and one for the seller. If a real estate agent is used, the agent will prepare the deed of sale.
The service of preparing the deed of sale can also be purchased from an agent separately. Banks and law firms also prepare deeds of sale in exchange for payment.
Templates for deeds of sale are also available e.g. on the Internet. The deed of sale must specify all the terms of sale agreed upon, such as
- the seller's and buyer's personal information
- the name and address of the housing company
- the numbers and quantity of shares and the number of the apartment
- information regarding the apartment (building, entrance, apartment number, number of rooms and area)
- price and terms of payment
- date of handing over the share documents
- dates of transferring ownership and possession and the date from which the maintenance fee will be payable by the buyer
- a note regarding payment of transfer tax
The deed of sale should also include notes on any material defects in the apartment which the seller has informed the agent of at the time of drafting the brokerage contract.
Apartment buyers must pay the transfer tax
Transfer tax must be paid within two months of the transaction date. The transfer tax for a share in a housing company is 2 per cent of its debt-free price, also including the portion of the company's loans concentrated on the shares.
Buying shares in a housing company (Tax Administration)