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New features of the amendment to the housing act(SZ-1F)

In July 2024, the National Assembly adopted the Act on amendments and additions to the Housing Act (SZ-1F), which introduces significant novelties in the field of housing policy.

The amendment SZ-1F[1], which will enter into force and take effect on August 6, 2024, represents the elimination of unconstitutionality and the implementation of the Constitutional Court decision U-I-473/22-11 dated 15 June 2023[2]. In this decision, the Constitutional Court of the Republic of Slovenia ruled that certain provisions of the Denationalization Act (ZDen[3]) and the Housing Act (SZ-1[4]) are inconsistent with Article 33 of the Constitution[5] if they pertain to indefinite-term non-profit rental agreements that were concluded by the obligors of returning housing in denationalization with the former holders of housing rights, and into which the beneficiaries of denationalization or their universal legal successors (heirs) later entered as landlords.

The essential changes and amendments introduced by the amendment SZ-1F include:

  • the possibility for owners of denationalized non-profit housing to claim a rent supplement up to the recognised market rent,
  • verification of ownership and termination of lease agreements for owners of denationalized non-profit housing,
  • strengthening the possibilities of obtaining long-term loans for the acquisition of non-profit rental housing, and
  • Reorganization of the management of the Housing Fund of the Republic of Slovenia (“Fund“).

Below, we present the relevant novelties in more detail.

1. Possibility of claiming rent supplement for owners of denationalized apartments

The amendment SZ-1F addresses the issues of tenants in denationalized apartments highlighted in the decision U-I-473/22-11. Beneficiaries of denationalization, upon the return of the apartment to ownership, by force of law, entered as landlords into previously established non-profit lease agreements for an indefinite period with former holders of the housing right. These lease agreements could be terminated for non-culpable reasons only if the owner provided the tenant with another suitable apartment. After the death of the first tenant, the owner had to, upon the request of the tenant’s family members, accept the continuation of the lease agreement with them.

The state, through an unconstitutional arrangement, significantly infringed on the right to derive profit from one’s property by obligating the beneficiaries of denationalization and their legal successors (heirs) to receive a capped non-profit rent. The previous regulation, besides impairing the contractual freedom of the owner of the denationalized apartment, also negatively affected the value of such real estate and their marketability.

The amendment SZ-1F, in the new Chapter XVI.A[6], corrects the previously unequal balance of rights and obligations between non-profit tenants and owners of denationalized apartments.

One of the means to achieve this goal introduces the new Article 167.d of SZ-1, which allows owners of denationalized apartments, occupied by non-profit tenants, to claim a rent supplement up to the recognized market rent. According to Article 167.d(2) of SZ-1, the rent supplement will be calculated as the product of the actual floor area of the apartment and the difference between the recognized market rent (Article 121.b(3) of SZ-1) and the non-profit rent from Article 115(3) of SZ-1.

The actual floor area of the apartment for calculating the rent supplement will be taken as the usable adjusted (corrected) net floor area of the apartment. The calculation of the latter is determined in Article 2(6) of the Rules on criteria for determining the value of apartments and residential buildings[7]. The exact method and procedure for calculating non-profit rents is stipulated in the Regulation on the methodology for forming non-profit rent and determining the amount of rent subsidies[8]. The amount of recognized market rent is determined in accordance with Article 14 of the Regulation, which further refers to the Rules on conditions, criteria, and procedure for granting subsidies to young families for renting market apartments[9].

The rent supplement is granted to beneficiaries for no more than one year before the month of submitting the claim for the rent supplement. After the expiry of one year from the rent supplement claim, the beneficiary may apply again. The beneficiary may also be entitled to only a proportional part of the rent supplement if the lease agreement ceases to be valid before the end of the calendar year (Articles 167.d(3) and 167.d(4) of SZ-1).

The rent supplement is first due to beneficiaries from 1 September 2024[10]. Owners of denationalized apartments will submit the rent supplement claim to the Housing Fund of the Republic of Slovenia. The Fund will issue a (positive) decision to the beneficiaries and pay the supplement, which will be covered by the state budget (Articles 167.d(5) and 167.d(6) of SZ-1).

Rent supplements cannot be claimed by the state, municipalities, public housing funds, and other public law entities established by the state or municipalities, nor by non-profit housing organizations (Article 167.d(8) of SZ-1).

The rent supplement is treated as rental income for tax purposes in accordance with Article 75 of the Personal Income Tax Act (ZDoh-2[11]). The recipient of the rent supplement, who wishes to claim actual expenses from renting out property for income tax purposes, can claim expenses that exceed the received non-profit rent. This can be done in the same manner as claiming actual expenses from rental income when the payer of the tax calculates the income tax on this income in the tax withholding statement (Article 167.d(7) of SZ-1).

The legislator has introduced special provisions from the new Chapter XVI.A of SZ-1 for a temporary 10-year period, specifically from 1 September 2024, to 31 August 2034 (Article 167.a of SZ-1). After the expiry of this period, the relevant non-profit rents will be freely formed on the market, with the limitation of usurious rents. A rent is considered usurious if it exceeds the average market rent in the municipality for the same or similar category of apartments by more than 50% (Article 119(1) of SZ-1).

With the exception of the provisions on rent amount, the lease agreement between the tenant and the owner of the denationalized apartment remains in force after the expiration of the temporary period. The contracting parties will need to conclude an annex to the lease agreement, agreeing on a new rent amount (Article 167.f of SZ-1). Thus, renting out the denationalized apartment will be subject to market rent, while maintaining the validity of the indefinite lease agreement.

2. Verification of ownership and termination of lease agreements for owners of denationalized non-profit apartments

2.1. New ground for termination

The amendment SZ-1F introduces a new possibility for the verification of ownership and termination of lease agreements by the owner of a denationalized apartment (Article 167.č of SZ-1).

Article 167.č(1) of SZ-1 stipulates as a ground for termination the ownership of another suitable apartment or residential building by the tenant of the denationalized apartment, their spouse, or a person with whom the tenant lives in a non-marital partnership. This ground for termination does not apply if the tenant or their partner owns a property that, under SZ-1, must be leased for an indefinite period and receives a rent supplement from the new Article 167.d of SZ-1.

 2.2. Verification of ownership as an exception to the restriction on access to personal data

According to Article 199(3) of the Land Register Act (ZZK-1[12]), access to the information on whether a specific person owns real estate is limited to a restricted group of entities (e.g., creditors, state authorities, notaries, etc.). Owners of denationalized apartments are not included in this group. Consequently, this would negate the purpose of the ground for termination from the new Article 167.č(1) of SZ-1 – owners would face difficulty in determining whether their tenant or their partner owns another suitable apartment. This issue is resolved by the provision of Article 167.č(3) of SZ-1, which allows owners of denationalized apartments to verify the potential ownership of an apartment by their tenant or their tenant’s partner once a year. The verification must meet the surface area standards as defined by the Rules on the allocation of non-profit apartments for lease[13].

Owners will be able to submit the request to the Housing Fund of the Republic of Slovenia starting from November 6, 2024.[14] The Fund will issue a certificate to the owner containing cadastral information about the property, information about the land registry owner of the property, and details on the apartment’s compliance with surface area standards.

Thus, the new Article 167.č of SZ-1 enables owners of denationalized apartments to easily terminate lease agreements within the temporary period on the grounds of ownership of a suitable apartment and allows them to obtain the necessary information by law for this purpose.

3. Strengthening the possibilities for obtaining long-term loans for acquiring non-profit rental housing

The amendment SZ-1F introduces measures to encourage the acquisition and increase the number of new non-profit rental housing units. Article 148.a of SZ-1 specifies the possibilities for obtaining long-term loans with favourable interest rates for this purpose. The Housing Fund of the Republic of Slovenia will offer favourable long-term loans to i) local communities, ii) public housing funds, and iii) legal entities registered in the register of non-profit housing organizations[15] for the construction, purchase, or renovation of non-profit rental housing.

The Fund will allocate loans based on a public call, which will specify the conditions for obtaining loans, the total amount of loans, the method of securing the loan, the criteria for determining the amount of the loan, the eligible applicants, and the deadline for submitting applications (Articles 148.a(2) and 148.a(3) of SZ-1).

The amendment SZ-1F will thus strengthen the role of the Fund in the allocation of budgetary funds as well.

 4. Reorganization of the management of the housing fund of the Republic of Slovenia

Due to the enhanced role and responsibilities of the Fund, the amendment SZ-1F introduces a reorganization of its management.

SZ-1F introduces a three-member management board and a supervisory board as the governing bodies of the Fund (Article 146.a of SZ-1). Additionally, it specifies the representation and decision-making processes of the management board. The management board will make decisions by a majority of defined votes (Article 146.a(4) of SZ-1). To ensure the effectiveness of the management board, it is stipulated that in the case of a tie, the vote of the president of the board or its deputy will be decisive. The founding act of the Found may provide for matters that the president of the board can decide on individually, or matters that require a different majority. The management board is quorate if a majority of members, each having one vote, are present.

The president of the management board is granted individual representation, while the other two members represent the Fund jointly with the president (Article 146.a(7) of SZ-1).

5. Conclusion

The aim of the amendment SZ-1F is to improve the position of tenants of non-profit housing, implement the decision of the Constitutional Court of the Republic of Slovenia, promote the construction of non-profit rental housing, and strengthen the management of the Housing Fund of the Republic of Slovenia. Additionally, the amendment balances the rights of both parties in the lease relationship – the tenant’s right to continue the lease on the one hand and the right to private property of the owner of the denationalized apartment on the other hand.

[1]     Act on amendments and additions to the Housing Act (in Slovenian: Zakon o spremembah in dopolnitvah Stanovanjskega zakona; Official Gazette of the Republic of Slovenia, no. 61/2024 as amended, “SZ-1F”).
[2]     See Decision of the Constitutional Court of the Republic of Slovenia, case no. U-I-473/22 of 15 June 2023, Official Gazette of the Republic of Slovenia, no 77/2023.
[3]     Denationalisation Act (in Slovenian: Zakon o denacionalizaciji; Official Gazette of the Republic of Slovenia, no. 27/91-I as amended, “ZDen”).
[4]     Housing Act (in Slovenian: Stanovanjski zakon; Official Gazette of the Republic of Slovenia, no. 69/03 as amended, “SZ-1”).
[5]     Constitution of the Republic of Slovenia (in Slovenian: Ustava RS; Official Gazette of the Republic of Slovenia, no. 33/91-I as amended, “Constitution”).
[6]     New Chapter XVI.A of the SZ-1: “Special Provisions on Tenants of Denationalised Housing and Owners of Denationalised Housing”.
[7]     Rules on criteria for determining the value of apartments and residential buildings (in Slovenian: Pravilnik o merilih za ugotavljanje vrednosti stanovanj in stanovanjskih stavb; Official Gazette of the Republic of Slovenia, no. 127/04 as amended).
[8]     Regulation on the methodology for forming non-profit rent and determining the amount of rent subsidies (in Slovenian: Uredba o metodologiji za oblikovanje neprofitne najemnine in določitvi višine subvencij najemnin; Official Gazette of the Republic of Slovenia, no. 153/21 as amended, “Regulation”).
[9]     Rules on conditions, criteria, and procedure for granting subsidies to young families for renting market apartments (in Slovenian: Pravilnik o podrobnejših pogojih, merilih in postopku za dodelitev subvencij mladim družinam za najem tržnih stanovanj; Official Gazette of the Republic of Slovenia, no. 66/07 as amended). See also the Proposal on Act on amendments and additions to the Housing Act, p. 26.
[10]    When Chapter XVI.A of the SZ-1 becomes applicable (Article 167a of SZ-1).
[11]    Personal Income Tax Act (in Slovenian: Zakon o dohodnini; Official Gazette of the Republic of Slovenia, no. 13/11 as amended, “ZDoh-2”).
[12]    Land Register Act (in Slovenian: Zakon o zemljiški knjigi; Official Gazette of the Republic of Slovenia, no. 58/03 as amended, “ZZK-1”).
[13]    Rules on the allocation of non-profit apartments for lease (in Slovenian: Pravilnik o dodeljevanju neprofitnih stanovanj v najem; Official Gazette of the Republic of Slovenia, no. 14/04 as amended).
[14]    Within 3 months after the entry into force of the amendment to the SZ-1F (Article 9 of the transitional and final provisions of the SZ-1F).
[15]    See Article 151 of SZ-1.

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