The leasehold ceased when the tenant became the owner

Background

In a case between two brothers, T.H. and D.H., the question arose whether a lease agreement from 1992 could continue to apply when the tenant simultaneously became a co-owner of the site right in which the right of use was granted. T.H. had originally agreed with the brothers' mutual mother to rent an apartment in a rental building in Enskede. After the mother's death in 2003, the sons inherited the site right to the property and thus became co-owners. When T.H. later requested that the site right be sold at a public auction, D.H. bought it and became the sole owner, after which he applied for the eviction of T.H.

The district court found that the lease agreement from 1992 had ceased with T.H.'s co-ownership of the site right in 2003, and therefore granted the eviction of T.H. The Court of Appeal agreed with the district court's assessment and rejected T.H.'s appeal.

Supreme Court's assessment

The Supreme Court stated that a valid lease agreement requires that the right of use holder is not the owner of the property being leased. When T.H. became a co-owner, this fundamental condition ceased, which meant that the lease agreement could not stand.

However, the court emphasized in its reasoning that co-owners can agree among themselves that the one of them who previously had a valid lease agreement should continue to use a certain specified part of what is now the common property for compensation. Such an agreement, however, does not constitute a lease agreement or other right of use agreement in the property law sense but is rather seen as an internal management agreement for the co-owned property. This type of agreement is not considered to have legal protection for the user and is therefore generally not valid in the event of a sale of property. The Supreme Court therefore established that the lease agreement from 1992 had ceased to apply in connection with the tenant's co-ownership of the site right.

Summary conclusions

The Supreme Court's ruling means that a person cannot be regarded as a tenant in the property law sense as soon as they also become a co-owner of the property to which the lease right pertains. The ruling illustrates how changes in ownership conditions can lead to unexpected consequences for the parties' rights and emphasizes the importance of clear agreements to avoid ambiguities in connection with co-ownership.