Finnish Home-Ownership System Is Weird – You Don’t Own Your Home

My girlfriend and I bought a 320 000€ three-room apartment in Finland. Here’s the thing, the walls, the floors, or even the sauna inside the apartment. We don’t own any of it. Plus, we still have to pay monthly payments to live there. It turns out this kind of system is only in Finland. Does it make sense to buy a home in Finland at all? Read on and find out.

In Finland, you don’t own your apartment

In Finland, if you buy a detached house, you will buy the land plot and the buildings, the real estate, and you will own everything. It makes sense, right? But buying a block of flats or a row house will make things quite interesting.

Each building complex is owned & managed by a particular type of company called Limited Liability Housing Company (Asunto-osakeyhtiö or taloyhtiö in Finnish). Its primary responsibility is to take care of the buildings so the residents and the owners are happy. Most importantly, the company does not try to make a profit. The company owns the buildings, and the share capital of the companies allows controlling the corresponding apartments. The apartments and shares are outlined in that essential document called the Articles of Association (yhtiöjärjestys in Finnish) which establishes the rules in the company.

So, when you buy an apartment, you are not buying an apartment. You purchase shares of a housing company that allows you to control the apartment. But what the heck is all about the rent mentioned?

You need to pay monthly (not mortgage) to live in your place

The company takes care of the everyday stuff: waste management, internet access, running water, keeping the yards clean, etc. Where do they get money for that? Each shareholder (=owner of an apartment) has to pay something called yhtiövastike, and it consists of two components (the can be other components too, but the two below are the most common).

Yhtiövastike = hoitovastike + rahoitusvastike

The first component, hoitovastike, means the maintenance charge that each shareholder has to pay every month as defined in the Articles of Association. The amount is X euros per square meter. According to stat.fi, in 2020, the average fee was 4,10€/square meter. For example, a 70 square meter place would be 287 euros a month. It’s important to note that these are much lower than regular rents and utterly different from rents. For example, I lived in a 60 square meter apartment in Espoo with a rent of 1000€.

For comparison, If you buy a detached house (omakotitalo) in Finland, there is no maintenance fee because you will be responsible for everything yourself: getting the waste management and repairs and fixes. In short, you’re paying this money to make sure that the company will keep everything in order.

The second component in the equation is rahoitusvastike (the capital expenditure cost). Often the hoitovastike payments are not enough to cover the significant renovation costs. The housing companies usually take a loan to finance renovations, like pipe renovation, which can easily cost 1000€/square meter in the capital region. If the company has 30 apartments, you can quickly tell that it will cost hundreds of thousands or even millions. So the company will negotiate the loan and the terms, and they can use the buildings as collateral. That’s one of the system’s benefits because they can use the assets to ensure they will get the loan.

But guess who will pay the loan? The shareholders. They are not parties in the loan agreement, but they are the ones who will pay. Each shareholder gets a slice of the total loan and is proportional to the size of the apartment. You can pay it in monthly installments (rahoitusvastike) or a lump sum with one go. This is important to understand if you want to buy a home in Finland.

Examples

Let’s look at an example below. Here we have an apartment that is on sale. As we can see, the yhtiövastike is 309,23€ per month with 255,73€ hoitovastike (maintenance fee) + pääomavastike (the capital expenditure cost) 53 euros a month. We see that the “velaton hinta” (debt-free price) consists of myyntihinta (sale price, the money the seller gets) + velkaosuus (debt portion, the outstanding loan amount for this particular amount). So if you were to buy this place, you could pay the debt portion in a lump sum or monthly installments (rahoitusvastike).

Let’s look at another example below. As we can see, the velkaosuus is zero, and there is no current outstanding loan from the company for this apartment. As an apartment owner, you would need to pay only hoitovastike charges of 303,03€/month.

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When we bought my first apartment, it had no outstanding loans. So we only have to pay the hoitovastike to live here.

Who runs the housing companies?

There are three key players. First of all, there is hallitus, the board of directors (BoD), who is in charge of managing the buildings and organizing the everyday stuff and accounting plus communication to the shareholders. These are chosen annually among the shareholders (= the owners of apartments). On average, there are around four meetings a year, so it’s not a full-time job, but still a responsible position. If you buy a home in Finland, you can consider becoming a board member, but you don’t have to.

The second key player is isännöitsijä, the estate manager. This person is the COO of the company, the chief operating officer. They will take care of executing the everyday errands and in the company, such as coordinating the maintenance, negotiations, and contracts with the waste management, internet, etc.

But the most important and most potent deciding body is the yhtiökokous = the shareholder meeting. It votes and decides everything essential. For example, the board of directors cannot carry out anything vital unless they have approval from the shareholder meeting. Another benefit here is that a shareholder, an owner of an apartment, gets their voice heard. They can influence the decisions by participating in the discussions and voting. I haven’t been to one yet but will go once the next one takes place.

The responsilibilites

What about the responsibilities and rights between the shareholders and the company? As I mentioned earlier, the company is widely responsible for the buildings and maintenance. In addition, the company takes care of the common areas, the storage rooms, the yards, and so on. As a rule of thumb, the shareholders are only responsible for the areas inside their apartments.

A quick story. When my girlfriend and I moved here, we had noticed. The previous owner had removed the ceiling light fixtures, and only two electrical wires were hanging from the top (see photo below). We called the maintenance company, and it turned out that these things were the company’s responsibility. Even inside the apartments, the companies are responsible for air conditioning, radiators, heating system, toilets, etc. So they sent that guy to install and fix them, and we didn’t have to pay anything.

The owner has the right to modify their apartment, for example, to paint walls or make renovations. However, more extensive renovations that could cause changes to the entire building needs approval from the board of directors in advance. In our apartment, there was a very worn-out parquet floor. We took it off and replaced it with vinyl planks. After notifying the board, we got the green light in a few days.

The Pros of the system

For pros, there are many. First of all, they have clearly defined owners, and the list of responsibilities is clear: who takes care of what. Secondly, there is a straightforward administration process and the board of directors. This is a similar way how regular limited liability companies are managed. Many housing companies have high-quality accounting because they have auditors to ensure that everything from the bookkeeping aspect runs smoothly. So it’s well-known, and decisions are made with majority voting, which is straightforward.

And here’s the exciting thing. Housing shares are considered securities, not fixed assets. In other words, when you buy an apartment (not a house), you buy shares, not physical real estate. This makes selling and buying housing shares relatively easy because real estate transactions require more red tape. The owner of the shares can be a regular person or a company. Renting out the places are straightforward, too. In addition, the company can make sure that there are no reckless renovations made inside the apartments that would cause damage to the entire building.

As I mentioned, the companies can quickly get loans for renovations using the buildings as collateral for the loans in my example. From an international perspective, an important pro is that from the start of 2020, buyers outside of the EU or EA have to get permission from the ministry of defense to buy real estate. But because apartments are securities, anyone can purchase with no restrictions.

The Cons of the system

First of all, there is a dependency between the shareholders. So if someone cannot make the payments, the other shareholders may have to pay those. If I wouldn’t pay the monthly payments at all, let’s say that. The company would probably send me a warning first, but eventually, they could take control of this apartment and rent it out to cover the missed payments. I would remain as the owner. It is rare, though, but it could happen. Another con is that if you run into a poorly managed company because, in these, there could be some unexpected renovations that could be expensive for you.

In addition, there is a chance that the housing company could go bankrupt. This scenario would happen if multiple shareholders could not pay their payments. The housing company wouldn’t get the money to pay their expenses. So eventually, it would go bankrupt. And that would mean that the shareholders would lose their homes. It is also scarce. Between 2013 and 2018, there have been only six bankruptcies of the housing companies in Finland.

To conclude: when my girlfriend and I bought this place, we purchased shares of this housing company. And those shares give us the right to control this apartment. This is the key if you want to buy a home in Finland. Remember, this is not the case if you buy a house (omakotitalo).

And with all that said, is it still worth it to buy a home in Finland? Even with this system? Absolutely. This system is excellent and has several pros, and if you’re ever considering buying a home in Finland, it’s worth looking into. Still, it’s good to understand what you’re buying and what your responsibilities are.

Read next: Weird Things in Finnish Homes You Want Too.
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