Commercial Rent Increases in Finland: B2B Indexation

Because commercial leasing (B2B) is not subject to political rent ceilings or indexation limits regulating residential leasing in Finland, the foundation of rent increases relies 100% on the increase conditions originally written into the lease agreement. 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 (October 1951 = 100), the figures for which are published monthly by Statistics Finland.

Use of Index Conditions in Commercial Premises

Unlike in residential housing (where the law has strict duration limits for certain types of index clauses in short fixed-term contracts), under the Act on Commercial Leases (LHVL), the use of index conditions is completely free between companies, regardless of the length of protection – except when the rent is for some reason tied to the very rarely used General Index Act.

• 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 § 24 (Reduction 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? Unlike in Denmark, where the Market Rent Adjustment can be performed according to "The Market Rent Adjustment", in Finland the owner's right to force a massive, so-called regional level increase without a separate level correction point recorded in the contract onto an existing tenant is difficult. If negotiations fail, the only practical means (if the termination conditions and duration allow it) is the legal termination of the entire contract in 6 months and looking for a new free yield rent from the sales market!

(Note: If, on the other hand, the corporate tenant's experienced EKI inflation has swelled the rent well OVER the market value, and it is a major dispute, either party can take the matter to the District Court within the framework of LHVL under the law "Adjustment of unreasonable contract term" - which is a broad process with compensation decisions).

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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