The registration system has been in the works since the 1970's and was finally completed in 1995. Now land is registered in a computerized system which has been open to the public since 1996, and for a small fee anyone can obtain information from the system. The registration system is divided into 7 geographical districts that input all the information dealing with property transactions. The 7 authorities were drastically reduced in 2001 from 89.
All the registration takes place in the land registry with the purpose of giving publicity and legal protection for all purchases and to establish certainty of ownership which all helps to promote the buying and selling of houses. The land registration has a controlling body that deals with running and maintaining the system called Lantmateriet. Land registry consist of title, site leasehold grant, site leasehold right, encumbrances such as mortgages and rights of use, official notifications and history (10). Title/Deeds
In order for a mortgage deed to be valid it has to have the following information included: The seller and buyer, the price, the real property to be conveyed, and the intent to convey. If this information is not included in the deed it will be voided. There are different types of ownership in Sweden the first we will talk about is Direct Ownership, which has both co-ownership and sole ownership of land. When speaking of ownership we are speaking about the land and all the buildings on the land including all fixtures.
Another form of ownership is Site Leasehold (tomtratt) which is created through the municipality, it is a site leasehold agreement for an annual fee, and all buildings belong to the site leaseholder, and the leaseholder can only transfer the leasehold not the land. Lease (hyra) is a form of ownership for a period of time, which gives the right to occupy the whole or part of a building. The landlord grants the lease, who is the owner of the property to a tenant for payment.
Land leasehold (arrende) is an agreement between a lessor who grants the lease to a lessee the right to use the land in return for payment. Easement (servitut) is the right to use a facility, building or road, which can only be created if it is deemed necessary and the easement promotes and appropriate use of the land and can be created by two property owners. Easements can also be created by expropriate measures and also by the Real Property Formation Act.
Another type of easement is a utility easement (ledningsratt) and a public road easement (vagratt) which are specific for utility companies (9). When it comes to title, the Land Registration Authorities are in charge of the applications and also the registrations. Title to real estate is evident by registration (lagfart) and is state guaranteed. The way in which the state guarantees title is that if a loss is suffered by wrong information on title by anyone, the government will be liable to pay compensation in the amount that was lost.
Since the government is strong about the information that is entered into the Land Registration, they will compensate for any damages, which is the reason that there is no such thing as title insurance in Sweden. After a home is purchased the home owner has a maximum of three months to register for title. If the title is not registered within the three months allowed the Land Registration Authority has the ability to pose a fine on the homeowner. When applying a conveyance tax will be assessed of 1. 5% of the taxable value and be paid at the registration of ownership.
The registration of ownership fee is 825 SEK and the registration of mortgages and interest fee is 375 SEK. The application of title consist of the original deed of sale, a personal identity number and the name and domicile of the applicant, the telephone number and the legal representation of the attorney and also the address of the property. The application needs to be signed by either the person who drew up the application or by the applicant and has to be written. The applicant can also be rejected by the Land Registration Authority if the applicant does not meet all legal requirements.
You can not apply for title on only part of a property it has to be the entire property or it can be several properties as long as they are under the same applicant and under the same registration authority. When applying for a mortgage the borrower has to have a registered title in order to get funding, just like in the US the borrower has to be on title in order to obtain a mortgage (11). Leases and Contracts In Sweden the amount charged for rent is linked with the consumer price index with mandatory regulations which are stipulated from the Land Code in favor of the tenant.
Leases are entered into for a term of three to five years, with a standard contract that is familiar resulting in shorter times for negotiating and thus lower legal fees (12). Residential leases are normally entered into for an indefinite period of time, but a three-month notice period has to be given before termination. The Land Code also has provisions that are in favor of the tenant, and prices cannot significantly exceed the rents that are set by the municipality housing companies. Purchase contracts require a 10% down payment and the remaining balance will be owed at closing.
Currently no legal frame work exist for REIT's(9). When it comes to the leasing of buildings in Sweden the typical term is from three to five years, but longer leases are becoming more and more popular. The lengths of leases are limited to 25 years in urban areas and 50 years in rural areas. If the lease is for three years or longer there is the possibility to increase the rents if the parties involved agreed upon this while negotiation took place. The only way to sub-lease a property is if you have consent from the landlord, you do not need consent if you only sub-lease a portion of the property.
The tenant needs to maintain the property in an "as is" condition from when the property was leased (21). Financing and the Secondary Market In Sweden mortgage loans are provided by mortgage credit institutions, which provide credit for mainly residential properties, but they will also provide credit to municipalities and also commercial and office buildings. The way the bank securitizes the loan is that it has the property for collateral incase the borrower defaults on payments and then the bank needs to foreclose and sell the property in order to get payment for the loan.
When considering a first mortgage the banks will normally lend out 70 – 80 % loan to value, if the borrower needs additional money they can get a second mortgage from the original bank who issued the first loan or by a bank that co-operates with the original. The two largest credit institutions, which are Stadshypotek and Spintab, are own both by Handelsbanken and ForeningsSparbanken, they account for majority of the lending. They offer loans with fixed rates and have a maximum maturity of 20 years. When you have a mortgage that is based in Sweden they add a 2% tax.
The amount that the lender will lend all depends on earnings and not any other source of income, for example a tenant that also receives income from rentals cannot get a mortgage based on the rentals. In Sweden the lenders get financing for the loans that they make by the sale of bonds and commercial papers in the open market (13). When funding in Europe they have three main sources that are used for funding. The first is retail deposits, which accounts for 2/3 of the mortgages in Europe which are funded through deposits.
The problem with this is that deposits are normally short term liabilities while mortgages are long term. Another method of funding is covered bonds, which are dept instruments that are secured over a pool of loans which use the property as a form of collateral, and account for about 15-20% of the loans. The third form is mortgage back securities, which are debt securities that are issued off a balance sheet, so in other words means that the loans are transferred away from the bank, and are put in SPV (special purpose vehicles) which in return issues securities.
A lot of benefits can come from a secondary market, the main benefit would be that it increases liquidity which in turn provides more available funding and can also lower the interest rates and allows more people the ability to get mortgages. In order to have a well developed secondary market the banks are going to have to encourage a standardization of contract terms and conditions so this would help facilitate an integrated mortgage market which would allow banks to get exposure in different types of markets without having to originate the loans in those markets (14).