Do Our Laws and Customs in the Rental Market Treat Tenants Unequally?

Estonian apartment owners are truly very selective and tenants generally have to meet many conditions. It is quite natural and also necessary that a real estate agent conducts a thorough background check among all interested parties to clarify the tenant's background. For foreigners, we definitely ask for a residence permit, a workplace in Estonia, an employer's certificate, and often foreigners are also asked for a security deposit amounting to two months' rent. It is also harder to find a rental apartment for people who have pets, and smokers are not welcome either.

A real estate agent must act loyally towards the principal and with due diligence, and must follow the principal's instructions. A real estate agent who has been active and mediated a contract in favor of the other party loses the right to a brokerage fee under the Law of Obligations. However, the same law also states that an agreement harmful to the tenant is void.

"An agreement that deviates from the law to the detriment of the tenant is void."

The basis of a rental contract is usually drawn up by a real estate firm's lawyer and agreements between the parties can be added to it. Based on the landlord's instructions, agreements are added to the rental contract draft and presented to the tenant, who can always make their own proposals to change and/or supplement the terms of the rental contract, and the landlord can agree to these proposals or refuse them. It is very important that the tenant knows their rights. If a rental contract contains a term that is more harmful to the tenant than provided by law, the landlord cannot rely on it. Section 275 of the Law of Obligations provides that an agreement in a residential rental contract that deviates from the law to the detriment of the tenant regarding the rights and obligations of the contracting parties and liability is void.

There has also been much discussion about insurance obligations. Let me clarify here: the insurance obligation for residential space is in the interests of both the landlord and the tenant. Therefore, the division of the insurance obligation for the rental space depends on the agreement of the parties.

"The landlord has the right to offset the tenant's debts, late fees, and compensation amounts for damage to property against the security deposit."

Many questions have also arisen about interest payments on security deposits. If the contract does not specify the requirement for interest payments on the security deposit, then the lack of information in the contract about where the rental security deposit is kept does not exclude the tenant's right to demand that the landlord fulfil the obligation to pay interest based on the relevant provision of the Law of Obligations. In order to enforce an interest claim, it is not necessary to change or supplement the existing contract, so the contract remains in force in its original form. If the landlord has added a provision to the rental contract about non-payment of interest on the security deposit, then the statutory regulation regarding interest continues to apply. The landlord has the right to offset the tenant's debts, late fees, and compensation amounts for damage to property against the security deposit. A tenant may not offset their payment obligations to the landlord from the deposit.

"A rental property is the tenant's home, and they have the right to prohibit the landlord from entering their home."

I have heard of cases where the landlord enters the apartment without the tenant's permission, but I have not personally encountered this so far. Therefore, even if there is a condition in the rental contract that allows the landlord to enter the rental property without prior notice and without the tenant's presence, this still cannot be done. A rental property is the tenant's home, and they have the right to prohibit the landlord from entering their home.

Rather, in my view, sometimes the requirements for tenants are too harsh and somewhat also unfair. On the other hand, this prevents further problems. We have certainly seen many examples – even on television, for instance, where people are in trouble with so-called problem tenants. By researching the client's background, hearing from our colleagues, or obtaining such information about the client from other sources, we do not deal with such problematic people.

My personal opinion is that if we as real estate agents act at the request of the landlord and represent primarily the landlord's interests, then the brokerage fee compensation could be split in half between the landlord and the tenant. In Estonia, it is usually the case that the tenant is obliged to pay the contract fee to the broker for organizing the preliminary activities necessary for the rental transaction and for drawing up the rental contract.

The Tallinn rental market is expected to liven up, as many people do not have sufficient funds to buy apartments. Apartment sales prices have indeed fallen somewhat by half, but this has not yet brought about an improvement in purchasing power, as people's salaries have not risen as quickly. The liveliness of the rental market is also encouraged by tax increases and the continuing high euribor rate. People still need to live somewhere, and so the focus of the real estate market is shifting more towards the rental market than before. This creates a situation where there are many interested parties in the rental market and the landlord, in turn, has a choice from whom to select a suitable tenant.

Article author: Hiie Tamm, Domus Real Estate broker/senior consultant