Title & Contracts in Sweden
There are formal requirements on the sale of property units. The contract of sale must be in writing, it must be signed by the parties, it must state the price, it must declare that the property unit is transfered, and finally, the property unit which is being sold must be specified (e.g. ”city” ”Name” ”2:13”). If any of these requirements are not met the agreement is null and void, consequently oral agreements cannot be substantiated in court. If the formal requirements are met oral agreements on specific matters can be valid, but certain clauses must always be in writing.
In order for the purchase agreement to have effect a deed of purchase must be formed in addition to the contract of sale. The formal requirements on the deed of purchase are the same as for the contract of sale. But there is an additional requirement; there must be a declaration that the buyer has received the purchase price.
The function of the deed of purchase is to prevent the seller from revoking the agreeement because the buyer has not paid the purchase price. It is only when the deed of purchase has been formed that the buyer can have its ownerships registerd by the authority. (Johan Larsson Linklaters Sweden)
Every court of first instance maintains a land register in which all transfers of ownerships, changes of mortgages, etc., are entered. Every transfer of real estate must be recorded in register. Fact of seller's registration combined with buyer's good faith generally gives buyer good title, except in cases of grave irregularity, such as forgery, duress, etc. The land register is open for public inspection and its correctness is guaranteed.
A computerized title and property register (inskrivnings- och fastighetsregister) exists in Sweden which is planned to include all properties by the mid-1990s. In the meantime, manual registers of similar content are being maintained in parts of the country. These registers are in the public domain and therefore of particular value to persons requiring an instant view of the legal conditions relating to a property.
A person who has acquired a property must apply to the registration authority to have the acquisition (the title deeds) registered. The title deed registration application must specify the acquisition document. It is important to note that clients, foreign companies etc. normally have to obtain acquisition permits in order to purchase real estate for commercial purposes. A title deed gives publicity to the purchase transaction.
Oral agreements, as a rule, are binding. However, the law requires written contracts in certain cases, for example contracts involving agreement to purchase real property. (Martindale-Hubbell, Sweden Law Digest, Deeds 2003)
Real estate can be freely bought and sold, with certain exceptions, but transactions are only valid if certain formalities are complied with. Agreements to sell real property must be in writing. Documents for the purchase and sale of real property must include a declaration that the seller conveys the property to the buyer and the purchase price must be stated.
Unless time of grace is granted, oral offer must be accepted immediately and offer made by mail or telephone must be accepted within such time as offeror could reasonably estimate as being required. Time of grace in offer by mail or telegram is to be calculated to fun from day letter is dated or from the time of day telegram is handed in for transmission. Acceptance must reach offeror within time stated. A binding agreement exists when both parties have signed the document. If only one party has signed, the agreement is not binding on either party. It is important to note that the Swedish Property Code does not accept options in the form of a promise concerning the purchase or sale of real estate. When the purchase price is paid, a deed of purchase is made out.
The municipality has a right of pre-emption over certain properties, and the title deed application date is normally the starting point for this three-month option. The right of pre-emption means that the municipality may acquire the property sold to another purchaser, on the terms which that purchaser and the seller have agreed on.
A contract of sale is signed as soon as the parties have agreed on the deal. This contract then sets out all the details of the deal, e.g., the buyer’ basis for raising certain loans, any surveys which have to be carried out and the deadlines for them. Only when all the conditions in the contract have been fulfilled is the sale completed.
As soon as the contract has been signed, both the vendor and the buyer are bound to the deal. The buyer also deposits 10 percent of the purchase price. The rest of the purchase price is paid when the buyer moves into the property, and the parties then sign a final deed to signify completion of the deal. This deed is registered with the authorities and the buyer is registered as the owner of the property. The agent makes this registration at the local court.
In Sweden, the estate agent has overall responsibility for the sale of a property. All transactions are carried out by the real estate agent, and no other lawyers or notaries are involved.
Property Taxes:
Property transactions also trigger stamp duties which are paid by the purchaser. These fees are often due at the time of registration with the Land Registry. Stamp duty is based upon the purchase price or the tax assessment value in the year prior to purchase, whichever is higher. For individuals and tenant-owners the stamp duty is 1.5% and 3% for legal entities. Mortgages are also impacted by the stamp duty at 2% of the mortgaged amount.
Real property is value-assessed. This is typically about 75% of the fair market value. The assessed value forms a basis for computing various property related taxes, e.g. wealth tax, property tax, gift tax, estate tax and, in some cases, stamp duties. From 2003 onwards, the property tax on commercial properties will be 1% of assessed value and .5% of assessed value for both industrial and residential property. Residential properties will either be tax exempt or taxed at a lower rate within the first 10 years of construction (Invest in Sweden Agency 2003). Capital gains tax will have to be paid on any sale of the property. To this end, the nominal profit on the sale (sale price minus purchase price) will be taxed at 30%. In certain situations, it will also be possible to deduct repairs from the profit.
On the sale of a personal residence, instead of having the 30% tax apply to the actual gain, a taxpayer may choose a ceiling provision that allows the gain to be computed at 30% of the sales price for permanent homes or 60% of the sales price for holiday homes. As a result, the total tax on the sale of a personal residence never exceeds 9% (30% rate x 30% of sales price = 9%) of the sales price on permanent homes or 18% (30% rate x 60% of sales price = 18%) of the sales price on holiday homes. A permanent home is a home acquired at market price in which the taxpayer has been resident for at least one year, provided that the period of ownership during which the taxpayer has not been resident does not exceed one year. However, a house is always regarded as a permanent home if the taxpayer has been resident in it for at leas three of the preceding five years.
Real estate transactions are initiated through negotiation and a purchase agreement (Köpeavtal). The second portion of the transaction process is carried out on the date of transfer. The parties or their representatives will meet a and do cash flow accounting, apportionment of inter alia service charges, rent, interest, and insurance premiums, formalize the purchaser's taking over of any loan related to the property (if so agreed) and the purchaser will pay the net purchase sum in cash. At this stage the vendor will issue a Bill of Sale (Köpebrev), stating mainly that the transfer of title to the property has been completed and that the purchase sum has been paid. The Bill of Sale (as well as the Purchase Agreement) must meet all the mandatory requirements and serves as a receipt of full payment as well.
Land Use & Control
Ownership rights are restricted for the best interests of society. Judgments and authority on these matters lie with building and planning registration of the over 300 municipalities in Sweden. The surveyor acts on behalf of the municipality. In all subdivision of property, the surveyor must investigate whether the new properties are enduringly suitable for their purpose and whether they conform to any detailed plan or subdivision plan for the area. If the surveyor finds that the subdivision application cannot be put into effect, the transaction has to be called off. All decisions can be contested by appeal. Authorities granted to the municipalities are outlined in the Planning and Building Act (Plan- och bygglagen). The PBA instructs municipalities to outline the use and preservation of natural resources in comprehensive, regional, and detailed plans. The Environmental Code (Miljöbalken) regulates planning on a national level in an effort to sustain natural resources. PBA also states that building permits are required prior to starting construction. Sweden also has provisions for the preservation of historic structures and relics.
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