After 10 years of zero growth, property owners are calling for the repeal of the Tenancy Law.
An increase in rents of up to 6% for the following two years, 2023 – 2025, is provided for in the new decree issued by the Ministry of Justice in April , following a decision by the Council of Ministers.
The specific decision concerns only the properties that fall under the Tenancy Law of 1983; for buildings that were built before 31/12/1999 and the tenant has become established. Information on this law is explained further down.
It is noteworthy that the decision for a 6% increase comes after 10 years, where the specific decrees issued every two years provided for zero rent increase . The last Decree was issued on April 22, 2021 and expired on April 21, 2023.
More specifically, the new Decree states:
The Council of Ministers, exercising the powers granted to it by paragraph (a) of subsection (4) of article 8 of the Tenancy Laws of 1983 until 2020, upon the recommendation of the Minister of Justice and Public Order, determines, for the purposes of the aforementioned article, the percentage of 6 percent, as the upper limit of rent increase for the two years starting from April 22, 2023 until April 21, 2025.
For commercial properties:
The Council of Ministers, exercising the powers granted to it by subsection (2) of article 19 of the Tenancy Laws of 1983 until 2020, upon the recommendation of the Minister of Justice and Public Order, determines, for the purposes of the aforementioned article, as a percentage ratio rent increase for shops in a disadvantaged area, 6 percent, for the two years starting from April 22, 2023 until April 21, 2025.
So, for properties that fall under the Tenancy Law, if there is no agreement in force, the owner can increase the rent by up to 6% for the next two years and the tenant is obliged to pay it.
It is noted that for properties built after 2000 until today, the Law on Contracts applies. Owner and tenant sign a contract and agree the obligations and rights of each side. At the end of the contract, the owner can impose as much increase as he wants. If they do not reach an agreement on an increase, then the landlord can take the dispute to court, seeking to evict the tenant.
The Tenancy Law
The Tenancy Law of 1983 regulates the relationship between owner and tenant, creating certain obligations for them.
A tenant becomes established when he holds a property as a tenant and the tenancy agreement he had with the landlord has expired or been terminated.
So when a tenant becomes established, then:
– He can continue to live in the property as long as he pays the rent. If he does not pay, he can be evicted through court proceedings. Eviction procedures for non-paying tenants became simpler and faster with a law passed in January 2020. More specifically, according to this law, the owner of a property contracted under the Tenancy Act, if the payment of rent for 21 days can initiate the eviction process of the tenant and if he does not pay his debts, or does not give a satisfactory answer to the Court, then the eviction process proceeds which will have a total duration of 6 months. The Court will give a grace period of 90 days to the tenant to surrender the property, whether it is residential or commercial.
– Any rent increase is determined by the Tenancy Law. Previously and for many years, the maximum rate of increase was 14% every two years and then it became 8% for two years, before reaching the last 10 years with zero increase.
When does a tenancy become institutional:
- The property must be in an area provided for by law. Essentially, however, the law covers almost all areas, both in cities and in the suburbs.
- The construction of the property must be completed by 31/12/1999.
- The property was rented or offered for rent on 31/12/99. The specific criterion arose after a decision of the Court in a case in 2020.
- Have a rental agreement
- The first rental agreement has expired or terminated and the tenant still owns the property.
It is noted that in case the rent is too low compared to other properties in the area, the law provides for a specific procedure through the court, where the owner can claim a significant increase in the rent.
The Property Owners want the repeal or serious differentiation of the law
For several years, the Property Owners have essentially been asking for either the repeal or the differentiation and modernization of the very old and anachronistic as they say the Tenancy Law. The law, they claim, is unfair and creates many problems for property owners, who effectively lose ownership and control of their property. There are even cases where tenants live in a property for life, and now it is as if they are the owners. As the President of the Association of Real Estate Owners Giorgos Mouskidis
states, the issue was discussed many times with parties and governments. As he notes: “All the parties, with the exception of AKEL, have a position that either it should be abolished or a serious differentiation should be made to the Tenancy Law. This is exactly our position.”
How the law increases rent prices
As Mr. Mouskidis emphasizes , this law creates many distortions and many problems and is one of the main reasons for the increase in rents.
“Since, for example, the increase was zero for 10 years, the tenants had no reason to leave. Thus there are no available houses subject to the Tenancy Law for rent. Therefore, all the interest in the market falls on the properties that are not subject to the specific law, with the result that the rents also increase significantly. If the law goes away, rent prices will also fall. Removal or significant differentiation is a one-way street anyway so that rents are determined by the market. This is how the rent prices will be regulated . All the demand now falls on non-rentable properties. If there is a lot of demand in fewer properties, it makes sense for prices to rise.”
The destruction of the apartment buildings in the city centers
Moreover, because of this law as Mr. Mouskidis notes, the apartment buildings in the city centers were destroyed since the repair is unprofitable for the owners. “The owners have no motivation and no reason to proceed with repairs to their property since, for example, for 10 years the increase was zero and it was very difficult for tenants to leave.” Additionally, as it states “in cases where landlords ask tenants to leave in order to carry out renovations and repairs, they face backlash and in many cases the tenants do not leave the property”. It is worth mentioning that the legislation being promoted for frequent inspections in these buildings, will result in evictions from properties that need to be repaired as the law will force tenants to leave dangerous properties that need renovation and repair.
Mr. Mouskidis emphasizes that “today there is no reason to have this law which was made to protect the refugees after the invasion so that they are not taken advantage of with rent increases.”
He notes that “The tenant is best protected by the contract they will have with the landlord. In the contract are the rights and obligations as agreed between the owner and the tenant.”
Regarding the new decree to increase rents by up to 6% over the next two years, Mr. Mouskidis stated that there is no logical explanation as to how the 6% came about. He noted that the fact that for 10 years the increase was zero created several problems.
Translated from: Brief