Greek Commercial Rent Cap Extended Through 2024
In a move to stabilize the commercial real estate market, Greece extends rent increase cap for small and medium-sized properties.
Jamie Bailey
- 2023-12-28
- Updated 09:19 AM ET
(NewsNibs) - The Greek government has enacted Law N. 5079/2023, continuing the restraint on the escalation of commercial rents by maintaining a 3% cap into the next year. This cap, designed to mitigate the impact of substantial inflation-linked rent increases, will apply to eligible commercial leases until the end of 2024. The regulation affects small and medium-sized properties, including those in listed buildings, which are under constitutional protection. According to the law’s provisions stemming from Presidential Decree 34/1995, lease agreements within this scope are entitled to a permissible increase of up to 3% over the rent of 2023 from January 1, 2024, through December 31, 2024.
Exemptions and Legal Recourse
The statute does provide exceptions for specific types of lessors, including Real Estate Investment Corporations, corporations within Alternative Investment Organizations, large commercial center businesses with a minimum of 15,000 sq.m. in size, as well as companies wholly owned by the state and their subsidiaries. Additionally, should lessors find the indiscriminate application of the cap excessively onerous or abusive, due to unchanged lease conditions persisting for several years, they have the right to request a court to allow the originally agreed-upon rent increase.
Rental Agreement Adjustments and Tax Implications
Under particular circumstances, lessors may achieve rent increments exceeding the 3% cap without resorting to the courts, such as when an initial low rent set to help lessees during their setup period transitions to a higher customary rent, or at the end of a lease’s contractual term when new conditions are freely negotiated. An increase beyond this cap is also permissible through a written agreement between lessor and lessee, with the understanding that the lessee cannot demand excess returns and that it adheres to specific documentation requirements outlined by law. Additionally, any amount above the 3% declared by the lessor for income tax purposes is considered unjust for tenant refund applications as the tax system taxes the declared rent, regardless of the cap, without providing tax adjustment means for the landlord.
Policy Discussion at POMIDA Congress
The regulation will come under discussion at the 41st National Congress of POMIDA scheduled for January 27, 2024. The congress will convene in Athens to deliberate on the rent cap's implications on the commercial property market. The ongoing debate reflects the government's attempt to balance the interests of tenants and landlords in a time of economic uncertainty.
