Pricing guide for landlords

Questions regarding rent and how much you can charge are amongst the most interesting part of subletting. Since February 2013, a new law is applied to private letting. This means there is now a difference between the rent you can charge for a rented apartment and a condo. In both cases there are some important aspects to take into consideration as a landlord.

Samtrygg has complied the most important aspects in this guide about rent concerning subletting, so that you can get a fair picture of the correct rent for you and your sublease – quick and easy.

Because the law makes a difference between tenancy apartments (hyresrätter) and co-op apartments (bostadsrätter), this guide is divided in two. The first part describes the rules applied to rents regarding tenancy apartments. The other part describes the rules applied to rents regarding co-op apartments.

Tenancy apartment (Hyresrätt)

When you sublet a tenancy apartment, you are allowed to charge the same rent as you, the sublessor (original tenant), already pay. But, if the apartment is furnished and/or if other benefits apply to the apartment, you are allowed to charge a higher rent.

In this section, you will find explanations of what is intended with reasonable rent, the user-cost method, and equivalent apartments and the escalation rule. Additionally, you will find examples of how the rent should be calculated – and what could happen if you charge too much rent.

Reasonable rent, the user-cost method, and equivalent apartments

According to Hyreslagen, the rent has to be reasonable. Normally, this means that the rent should represent the practical value (the user-cost value) that the apartment has from a tenant’s point of view. Broadly speaking, this means that the rent charged needs to match other apartments with corresponding qualities (equivalent apartments).

The user-cost value for an apartment constitutes of its qualities, including: size, how modern the apartment is, the apartment’s layout (planning), the location, reparations, and so forth. If apartments have other benefits, such as an elevator, wash-house, garbage chute, parking, and so on, this can affect the practical value of the apartment, the user-cost value.

The tenancy apartment’s common areas, as well as how close the location is to public transport, also affects the apartment’s practical value, the user-cost value.

Equivalent apartments are apartments with similar qualities and should likewise have a similar location regarding the city centre. To make a comparison possible, some differences in qualities are acceptable. Because of this, every comparison has to be individual.

Equivalent apartments – an example: You are interested in knowing the reasonable rent for a rented apartment with the following qualities:

• Size: 50 square meters
• How modern the apartment is: built in 2001, modern technical appliances
• Planning/Layout: 2 separate rooms, 1 kitchen
• Location: 3rd floor of 6
• Reparations: no need for reparations
• Sound proofing: Yes
• Elevator: Yes
• Wash-house: Yes
• Garbage chute: No
• Special storage spaces: No
• Acceptable real estate service: Yes
• Garage and parking: No
• Close to public transport: Yes

This means that an apartment for comparison with a little less space (45 square meters) but with a better planning might have the same user-cost value. Size and planning are, in this case, comparable.

In the same way, other user-cost values can be compared with each other if they are similar. If, for example, the other apartment has no elevator but is located further down in the building, and on top of that has a garbage chute and you would get longer time in the wash-house, then they might have the same user-cost value. 

On the other hand, a worse planning is not comparable with, for example, a shorter distance to public transport.

Hyresnämnden has more information about what factors to consider when you decide the user-cost value and how equivalent apartments are tried.

Typically, the rent you, as the sublessor, pay represents the user-cost value of the rented apartment. It is you, the landlord, and the Hyresgästföreningen (Tenants’ association) that have to negotiate a reasonable rent. It is good to find out if the rent that you are paying is reasonable before you are thinking about subletting. Your landlord should be able to answer that question. If the rent is not reasonable, you own the right to demand a decrease of rent with the Hyresnämnden. 

Further reading regarding this subject can be found further down in this guide.

Furniture and other costs

A clear law regarding how much you are allowed to add to the rent in a partly or fully furnished apartment is not yet available. But Hyresnämnden often approves an increase of rent for up to 10–15% for a fully furnished apartment. Addition to the rent is also allowed regarding other costs included in the apartment. 

Examples are: free electricity, gas, parking spot, internet, TV-license, and so on. This is allowed because the benefits are bound to the apartment and should therefore be included in the rent.

Calculate the rent for a tenancy apartment – an example

A fully furnished rented apartment, with a user-cost value of 8 000 SEK per month with included internet (200 SEK/month) and parking spot (900 SEK/month) will give your tenant the following rent:

(8 000 SEK * 1.15) + 200 SEK + 900 SEK = 10 300 SEK/month

It will not pay off to charge too much rent

If you charge more rent than what is considered to be a reasonable rent, your tenant can apply for a decrease for future rent with Hyresnämnden.

Additionally, the tenant can demand to receive the difference between the rent they have already payed (the exceeded rent) and the rent that is considered to be reasonable by Hyresnämnden (the user-cost rent). This is a, so called, retroactive obligation to repay exceeded rent and means that you can be obligated to repay the difference between rents for up to a year into the future.

Read more about rules regarding repaying rent here.

Obligation to repay rent – an example

You have charged the tenant 11 000 SEK/month for an apartment where your tenant has been living for 8 months. The reasonable rent for this apartment is 9 000 SEK/month. If the Hyresnämnd approves the tenant’s request for a decrease of the rent and request of repayment, you will owe your tenant a total of 16 000 SEK.

(11 000 SEK/month – 9 000 SEK/month) * 8 = 16 000 SEK

The escalation rule

Sometimes, the reasonable rent for a rented apartment can increase. This happens for a number of reasons, for example with changes in the rental market or if the apartment has had renovations that increase its value. If the increase of rent is big enough, approximately 10 percent or more, you can demand that it is split up.

This means that the rent will increase once a year for a few years time. If the rented apartment that you intend to sublet is escalated, your tenant will have the same right for reduction as you would have had. In other words, you are not allowed to assimilate the difference between the escalated, lower rent, and the new, higher rent.

Example: You mean to sublet an apartment with a user-cost value of 8 000 SEK/month that has been increased with 10 percent.

The increase of rent happened during 2014, the first year, and will be escalated for five years. You will sublet during 2016, the third year.

New rent after increase:

8 000 kr * 1.10 = 8 800 SEK/month

Escalation:

10 / 5 = 2% increase of rent/year

Increase of rent during the third year:

3 years * 2% = 6%

Which means your tenant should pay:  8 000 SEK * 1.06 = 8 480 SEK/month

Read more about escalation rules here.

Co-op apartments

Since February 2013, letting of own property is regulated according to the ‘private letting law’ (2012:978). The new law makes it possible for you to charge more rent, because it does not need to correspond with the property’s user-cost value. The law is applied to all kinds of private letting concerning houses, apartments, and rooms alike. The rent you charge must, however, be reasonable which in this case means that it is cost-based and that it does not exceed the total sum of capital costs and running charges.

In this section, you will find explanations for what is meant with cost-based and reasonable rent, as well as capital costs and running charges. Additionally, you will find examples of how the rent should be calculated and information about what might happen if you charge too much rent.

Cost-based rent

A reasonable rent for a co-op apartment should not exceed the total sum of your so called capital costs and running charges.

Capital cost: This should be calculated as a yearly yield interest of the property’s market value, which is typically three percent. This requires that you have the capital bound to the property and that you therefore have the right to a yearly yield interest. N.B. It does not matter if the property has a mortgage or not since the interest rate is hypothetical and not connected to any of your actual costs.

Running charges: Fees and charges to the housing cooperative, as well as costs for electricity and internet, are examples of running charges that you might need to have in order to keep the property in a specific state for letting. Compensation for wear and tear of furniture is allowed and will be seen as a running charge.

N.B. It is important to remember that the new law only applies to the first subletting. If you want to let more properties, or rooms, the same rules that apply to rented apartments will apply here.

Example: You let a condo according to the law for letting of private property, but you want to let your vacation home as well. The new law will only apply for your first property. For the vacation home, the same law that goes for subletting rented apartments apply here – no matter if you own it or not.

Calculate a cost-based rent for your private condo unit – an example

An unfurnished private condo unit, with a marketing value of 3 000 000 SEK, is sublet. The fee to the housing cooperative is 1 900 SEK/month. With a reasonable yield interest of three percent, the following costs applies to you per month:

(3 000 000 SEK * 0,055) / 12 months + 1 900 SEK = 15 650 SEK/month 

You will no longer be obligated to repay

The new law for letting of private property means that you as a landlord cannot be obligated to repay if you have charged too much rent. Hyresnämnden, on the tenant’s request, can in this case only demand a decrease of future rent, if they conclude that the rent has been too high.

Charge the correct rent – safe and simple

With some background information it is easy to decide on a reasonable rent. The advantage of charging the correct rent from the beginning is that you as a landlord avoids any risk to be obligated to repay if the rent has been too high, or lose any money if it has been too low. Additionally, you will avoid potential problems from the Hyresnämnd and from your tenant. Besides, you will make the housing market a favour to sublet – and naturally you should get a reasonable compensation for it.

Are you wondering what your property can be let for? Use Samtrygg’s Rent calculator to look at average prices for your kind of property.