New rental laws enhance tenant rights in Iceland

New rental laws set to take effect on September 1 aim to enhance tenant rights and improve housing security in Iceland. The reforms, approved by Parliament in June, include measures to minimize unpredictability in rental prices, according to experts from the Housing and Construction Authority.

Key changes prohibit landlords from linking short-term leases to price indexes and require specific conditions to be met before rental price adjustments can be made. Landlords are also restricted from terminating indefinite contracts without justification and must verify if tenants intend to exercise their priority rights.

The changes are designed to encourage the establishment of longer fixed-term agreements or even indefinite leases. This is intended to provide tenants with more clarity regarding their rental obligations. Currently, many contracts are tied to price indexes, making it difficult for tenants to anticipate future rental costs.

Tenants and landlords can request modifications to rental prices after a 12-month period following contract signing under certain conditions. This includes scenarios where a landlord’s operational costs increase or when aligning rental prices with market rates for comparable properties. Non-profit housing associations may also adjust rents to promote diverse community compositions.

Existing tenants with fixed-term contracts will now have the primary right to continue renting after the term’s end, placing the responsibility on landlords to ascertain tenants’ intentions regarding this priority. Tenants will have 30 days to respond once asked by their landlord.

While there are concerns that these regulations might limit rental supply, experts anticipate that the changes won’t significantly restrict the market or deter landlords from renting.