Real Estate Publications

New ruling on preliminary agreements regarding co-operative apartments

On 7 March this year, the Stockholm District Court an­nounced a rul­ing in a case be­tween two in­di­vid­u­als (as claimants) and a hous­ing co­op­er­a­tive as­so­ci­a­tion (as re­spon­dent). The case con­cerned if a pre­lim­i­nary agree­ment be­tween the par­ties was com­pat­i­ble with the Cooperative Housing Act’s (the “Act”) pro­vi­sions re­gard­ing es­ti­mat­ed time for grant­i­ng of the co-op­er­a­tive apart­ment.

In the pre­lim­i­nary agree­ment, it was stat­ed that the pre­lim­i­nary time to grant the apart­ment was “from Q2, 2019 to Q3, 2019”, while the pre­lim­i­nary time for tak­ing pos­ses­sion of the apart­ment was “from Q4, 2019 to Q1, 2020”. The claimants ar­gued that the pre­lim­i­nary agree­ment was in­valid, part­ly be­cause the time of the grant was stat­ed as pre­lim­i­nary, and part­ly be­cause the time was ex­pressed as a time in­ter­val of six months.

The District Court be­gan by stat­ing that the leg­isla­tive his­to­ry for the Act does not pro­vide any an­swers as to whether a longer pe­ri­od, such as six months, is in line with the le­gal re­quire­ment that a “es­ti­mat­ed time for the grant” must be set forth in the pre­lim­i­nary agree­ment and that there is no case law on this mat­ter ei­ther.

The District Court found, in­ter alia, based on a con­tex­tu­al in­ter­pre­ta­tion of the Act, that the term “time” in the Act should not be in­ter­pret­ed too nar­row­ly. The District Court con­sid­ered, in­ter alia, that con­struc­tion projects are ex­ten­sive, ex­tend over a long pe­ri­od of time and are made in stages that in­volve sev­er­al dif­fer­ent ac­tors. The court came to the con­clu­sion that a spec­i­fied time pe­ri­od of six months is in line with the for­mal re­quire­ment “es­ti­mat­ed time for the grant”. The District Court al­so held that the state­ments in the le­gal lit­er­a­ture that the tim­ing of the grant should be stat­ed as a spe­cif­ic date and in any case not ex­ceed a pe­ri­od of a few weeks, did not, in the ab­sence of sup­port in the leg­isla­tive his­to­ry or case law, car­ry a sig­nif­i­cant weight as a source of law.

As re­gards the ques­tion of whether the time of grant can be pre­lim­i­nary, the District Court point­ed out that the Act refers to a “es­ti­mat­ed” time for the grant and that this choice of words, in­di­cates that an un­cer­tain­ty re­gard­ing the time for the grant is ac­cept­able at the time of con­clu­sion of the pre­lim­i­nary agree­ment. Thus, the court held that the pre­lim­i­nary agree­ment was not in­valid on this ba­sis.

The de­ci­sion is in­ter­est­ing in view of the large num­ber of dis­putes con­cern­ing pre­lim­i­nary agree­ments wait­ing to be tried. One of the is­sues in these dis­putes is how spec­i­fied the tim­ing of the grant must be in or­der to meet the re­quire­ments of the Act. Although this rul­ing is not bind­ing on oth­er courts, it is like­ly to in­flu­ence oth­er judges. The rul­ing will prob­a­bly al­so have a cool­ing ef­fect on the will­ing­ness to try to ter­mi­nate pre­lim­i­nary agree­ments on the ba­sis that they do not com­ply with the Act’s pro­vi­sions on the time of the grant.

The au­thors are Nicklas Hansen and Charles Andersson.