Commercial Leases Act: Overview (B2B) in Finland
A comprehensive guide to the Act on Commercial Leases (LHVL) in Finland. Learn about freedom of contract, notice periods, and B2B tenancy.
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Unlike the strictly regulated residential tenancy act that protects the resident (AHVL), the leasing of premises between companies (offices, retail spaces, warehouses) in Finland is governed by the Act on Commercial Leases (LHVL). The guiding theme of this law is extraordinarily broad freedom of contract. The parties (B2B) can largely freely negotiate and agree on the terms of the tenancy as they wish.
Freedom of Contract vs. Mandatory Legislation
A commercial lease agreement is primarily based on the conditions written into the contract document itself. LHVL is in many respects so-called dispositive law. If the parties have not agreed on a matter (for example, the length of the notice period in a continuous contract), the default provisions of LHVL are applied directly as a fallback.
However, certain sections of LHVL are mandatory, meaning they cannot be deviated from even by mutual agreement if the deviation weakens (generally) the tenant's position. For example:
- The requirement of a district court in an eviction (taking the law into your own hands is also prohibited on the B2B side).
- The strict criteria and notification procedures for cancelling a contract.
Key Defaults of the Law (If not otherwise agreed)
1. Duration of the Contract: Fixed-Term and Valid Until Further Notice
In Finland, commercial lease agreements are typically either:
- Fixed-term (e.g., 3, 5, or 10 years): Commits both parties. In principle, neither side can terminate the contract in the middle of the period. This protects the investor's cash flow and guarantees the company peace for its business location.
- Valid until further notice (Continuous): Often supplemented with a first possible notice date (e.g., "The contract is valid until further notice, but the first allowed notice date is at the earliest after 3 years").
2. Rent Increases and Index Conditions (B2B)
Rent increases must absolutely be agreed upon in the lease agreement; otherwise, a unilateral increase is illegal. The most typical method in commercial premises is to tie the rent to the Cost-of-Living Index (EKI). Unlike in residential housing, where broad index conditions in fixed-term contracts are restricted, the use of index conditions in commercial premises is extremely free and they are the absolute industry standard to combat inflation. If the rent is considered extremely unreasonable, LHVL allows applying to a court for adjustment of the rent.
3. Value Added Tax (VAT) in Business
Most commercial real estate are "Registered for VAT liability" regarding the transfer of the right to use real estate. This means that normal VAT (25.5%) is added to the rent of the commercial space.
- VAT conditions in the contract: It is critical for the contract to have a clause where the tenant assures that they continuously run business entitling to VAT deduction in the space. If a medical center (VAT-exempt industry) is taken into the premises, the entire property's VAT benefits can be jeopardized and cause massive retroactive tax consequences for the owner.
Explore more commercial compliance guides for Finland:
- Commercial Security Deposits and Bank Guarantees
- Commercial Eviction Process and Cancellation
- Commercial Required Disclosures and VAT Appendices
- Commercial Rent Increases and Indexation
- Commercial Lease Requirements and Conditions
- Maintenance Obligations and the Interface Matrix
- B2B Late Fees and Penalty Interest
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