In Finland, residents of a building may lose their right-of-occupancy payments
In the Finnish city of Saarijärvi, residents of the Omatoimi building may lose their right-of-occupancy payments if the Saarijärvi region right-of-occupancy housing association goes bankrupt. About 20 people live in the building, which is intended primarily for elderly people, and their average age exceeds 80. Individual residents’ payments range from €30,000 to €40,000, YLE News reports.
In Finland, a resident of this type of housing pays a right-of-occupancy payment, which may not exceed 15% of the acquisition cost. After the end of residence, the funds are to be returned with indexation according to the construction index. If the association goes bankrupt, Omatoimi residents may lose these payments.
Debts and vacant apartments
The association that owns the building has nearly €2 million in loans from the municipal financing institution Kuntarahoitus. Due to rising interest rates, annual loan servicing costs have increased by €40,000.
To cover expenses, housing charges had to be raised above market-rate rents, prompting some residents to move out. Five apartments in the 24-apartment building are already vacant, and another three will soon become vacant. The outflow of residents has further worsened the association’s financial situation.
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Searching for a solution
The city council rejected the association’s proposal to restructure the debt and transfer part of the obligations to the city. The authorities explained the decision by legal and contractual obstacles. The association’s board chair, Heikki Kauppinen, said that a solution must be found by mid-October.
Previously, the association proposed selling the building to the city and sought an external buyer. The sale is complicated by the terms of €1.2 million in investment support provided by RAY, now STEA. If the buyer does not meet its requirements, the support may be demanded back.
The latest proposal envisages that the city would buy Omatoimi at a price equivalent to the possible repayment of the support, while the building would be transferred to the city’s rental housing company. Under this option, residents’ right-of-occupancy payments would be preserved. Kauppinen said that this proposal has not yet been discussed with the city. Kuntarahoitus said it is ready for negotiations if all three parties agree on an acceptable solution.
