WG sees possibility to monitor foreign real estate ownership

A working group observed that a number of possibilities could be developed to monitor the real estate ownership of buyers outside the EU member states and the European Economic Area (EEA).

The working group set up to examine further restrictions on foreign real estate acquisitions submitted its report to the Ministry of Defence on Wednesday, said the ministry in a press release.

As the working group, however, opined that it will take years to reform legislation and to build and resource new systems that support the implementation of legislation.

According to the working group, a licence requirement for real estate acquisitions should be required in corporate acquisitions when a party outside the EU or the EEA gains indirect ownership of a real state in connection with the acquisition. In this context, an authority for monitoring acquisitions should be established and the necessary information systems should be built.

However, when monitoring the change of ownership of housing company shares, it should be possible to prevent an artificial distribution of ownership to several buyers to facilitate visa practices.

Similarly, transactions should be made subject to authorisation when a dominant proportion of a housing company shares is transferred in such a way that control over the housing company and any real estate belonging to it is transferred to an individual operator.

As to leasing activities, monitoring could be made more effective in land lease agreements. It should be considered, however, whether monitoring should be done both in advance and retrospectively.

The recording of land lease agreements in a new way would already change the current practices of all landowners and tenants and require new systems and resources.

If the State's right of pre-emption were extended to security of supply assets, the protection of society's vital functions would be strengthened. However, it is not straightforward to define security of supply assets because many assets critical to security of supply are privately owned and their location is not permanent.

The definition of pre-emption zones would make the significance of such companies visible, as the title would remain dormant for four months while the pre-emption consideration is taking place.

Imposing sanctions for dummy companies can be seen to have an important signal value so that the threat against national security in the real estate acquisition is taken seriously in this way, too.

According to the working group, it is difficult to organise unbroken monitoring, but building a more comprehensive situational awareness would help the authorities to strengthen national security.

The current legislation on monitoring real estate ownership enables the authorities to intervene in situations that raise different security concerns because of the real estate ownership. Redemption to ensure national security makes it possible to intervene in rental activities, too. Further measures regarding other possible monitoring methods that the now completed assessment identifies will be decided during the next government term. The planning for this will start in spring 2023.

The working group has used the study on the possibilities to monitor the control over immovable property, published on Wednesday by the Scientific Advisory Board for Defence (MATINE), Aalto University and the National Land Survey of Finland.

The authorities interviewed for the study are mainly satisfied with the effectiveness of the current legislation.

Nevertheless, in addition to direct real estate ownership, special attention should be paid to land rental and corporate restructuring. For example, complex company and rental arrangements make it possible to disguise the actual owner.

According to the study, more attention should be paid to protecting critical infrastructure and more efficient access to information by the authorities.

A comprehensive package of legislation entered into force at the beginning of 2020, the key element of which is that buyers from outside the EU and EEA need a permission to buy real estate in Finland.