Commercial Rent Increases in Finland: B2B Indexation

Because commercial leasing (B2B) is not subject to political rent ceilings regulating residential leasing in Finland, the foundation of rent increases primarily relies on the increase conditions originally written into the lease agreement, governed by the Act on Commercial Leases (482/1995). However, under Section 25 of the Act, either party has the statutory right to seek a court-ordered adjustment if the rent becomes unreasonable or significantly deviates from market levels. If the conditions are forgotten to be recorded, the landlord loses the real return of their investment to inflation year after year.

1. The Most Common Solution: Cost-of-Living Index (EKI)

By far the most popular rent review mechanism that has become standard in B2B real estate investing in Finland is the Cost-of-Living Index (Elinkustannusindeksi 1951:10=100), the figures for which are published monthly by Statistics Finland.

Use of Index Conditions in Commercial Premises

Since the repeal of the Act on Restricting the Use of Index Clauses (1195/2000) on 1 January 2013, the use of index conditions is completely free in commercial leases, regardless of the length of the contract. Indexation is fully permitted and no longer subject to the duration limits that previously existed under older legislation.

• Point figure and ratio: The contract defines the "Base Index" (The point figure roughly around the time the contract was concluded) and the review month. Every year at the same time, the most recent available index figure is compared to the base index. If the figure has risen, for example by 5%, the rent increases by 5%.
• "Only Upwards" Rule: It is a permanent B2B industry statement that a blocking clause is attached to contracts similarly to housing: "The rent always invariably remains at least the base rent when the index falls and therefore can never fall below the base rent during the index review."

2. Flat Increase and Percentage Increase

Especially in the leasing of new fast, scalable commercial centers and "pop-up" business premises (1-2 years), fixed increases are increasingly used instead of the heavy operational requirements of index calculation:

• Percentage Increase: "The rent will be increased by 3% annually on January 1st". (A very risk-free solution in years of moderate inflation, a clear budgetable model for companies).

• Stepped Rent (Flat increase): A 5-year fixed B2B rent is made, to which a fixed list of increases is made. "Year 1: 5000 EUR. Year 2: 5500 EUR ... Year 4: 6500 EUR". The landlord gets a secure growing cash flow as the tenant brings the initial investment in as a lagging expense.

3. Neglect and LHVL § 25 (Adjustment of Unreasonable Rent)

What can an investor do if the m2 price of a commercial space that has risen automatically with a low EKI index for 10 years is, after an explosive value increase of the area, 40% cheaper than the newly completed equivalent insurance property on the adjacent block?

Under Section 25 of the Act on Commercial Leases, either the landlord or the tenant may request a court to adjust the rent or a term concerning its determination if it is deemed unreasonable. This applies if the rent significantly deviates from what is considered market rent (käypä vuokra).

If negotiations fail and the parties rely on termination:

• According to Section 52, for leases valid until further notice, the landlord's notice period is 6 months if the tenancy has lasted at least one year.
• If the tenancy has lasted less than one year, the landlord's notice period is 3 months.
• The tenant's notice period is always 1 month.

(Note: If the corporate tenant's experienced EKI inflation has swelled the rent well OVER the market value, they can also take the matter to the District Court under Section 25 to seek a reduction to market levels).

Automation Saves Thousands

Do you want to avoid Excel and forgotten index adjustments in the rush of early January, from which your real estate department loses real guaranteed m2 yield in a portfolio of millions? Landager's software automatically reads the increase conditions of thousands of B2B lease agreements. The system enters into a dialogue with Statistics Finland's open EKI report data over an API. Placing completely flawless, legally stable VAT rent calculations with decimal precision directly into the tenant's incoming financial management invoicing channel a month before the payment moment on the review day. Ensuring a secure growing real estate value to your portfolio with zero-hour routine.

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