WHO CAN BUY AND WHEN PERMITS APPLY

The starting point under Finnish law is straightforward: there is no general prohibition on foreign ownership of real estate. In practice, however, the acquisition of real estate by a foreign person or entity may be subject to certain restrictions.

EU and EEA citizens and entities may acquire property in Finland without citizenship or residency requirements. They follow the same procedures as Finnish nationals.

Non-EEA buyers, by contrast, are subject to a permit requirement administered by the Finnish Ministry of Defence. The permit system applies to the direct purchase of land and other real property, but not to shares in a real estate company. This distinction is critical for non-EEA buyers: acquiring company shares that indirectly control Finnish real property may not trigger the Ministry of Defence permit requirement, but it may trigger other regulatory reviews under Finland’s foreign-investment screening rules administered by the Finnish Ministry of Economic Affairs and Employment, as discussed below.

ACQUISITION ROUTES: DIRECT PROPERTY PURCHASE VERSUS ACQUIRING A FINNISH REAL ESTATE COMPANY

One key decision in a Finnish real estate transaction concerns deal structure: should the buyer acquire the property directly, or acquire the company that owns it?

Direct Asset Purchase

In a direct purchase, the buyer acquires title to the real estate itself. Under the Finnish Code of Real Estate, the purchase agreement must be in writing and confirmed by an official witness to the transaction. Finland has also introduced an electronic conveyancing system through the National Land Survey, the competent public authority maintaining the land register, allowing certain transactions to be completed digitally. After execution, the buyer must register the title at the National Land Survey’s land register to obtain legal protection against third-party claims.

Real Estate Company Acquisition

The Finnish real estate market has a distinctive feature according to which most real estate transactions between professional real estate investors are structured as share deals. In this model the target of the transaction is a mutual real estate company (“MREC”) that owns the property. An MREC is a limited liability company in which each shareholding entitles the shareholder to possess and use specific premises in the property owned by the MREC. The MREC’s primary purpose is to own and manage the real estate rather than generate profits.

Instead of buying the property directly, the buyer may acquire the shares of an MREC that owns and manages the underlying real estate. The share transfer is governed by contractual and corporate law. For MRECs established on or after 1 January 2019, ownership of the shares is recorded in the share register maintained by the National Land Survey of Finland. For MRECs established before that date, the company itself (through its board) maintains the share register, unless the company has voluntarily transferred its share register to the National Land Survey by amending its articles of association.

The underlying legal title to the real estate remains with the MREC; the buyer gains indirect ownership through its ownership of the shares in the MREC. This structure is common in commercial and portfolio transactions because, in certain circumstances, it produces more favourable tax outcomes than a direct asset purchase.

For foreign buyers, the key practical implication is that acquiring shares in an MREC is not a direct purchase of real estate in the strict legal sense; it is a share transfer subject to separate transfer-tax and registration rules.

Comparison Table: Direct Property Purchase Versus MREC Acquisition

The following table shows the key differences between a direct property purchase and the acquisition of shares in an MREC.

TRANSACTION PROCESS – FROM OFFER TO REGISTRATION

A well-managed Finnish real estate acquisition follows a predictable sequence. The entire process between professional investors, from initial offer to registered title, typically takes four to sixteen weeks depending, among others, on the complexity of the deal, whether it is a company acquisition or straightforward property purchase and the scope and depth of the due diligence review.

Preliminary Agreements

The parties commonly sign a letter of intent outlining the key commercial terms and granting the buyer an exclusivity period for due diligence.

Under Finnish law, preliminary agreements for the direct acquisition of real estate must comply with specific formal requirements to be enforceable. In share deals, the letter of intent is governed by general contract law and is more flexible in form.

Due Diligence Checklist

Thorough due diligence is essential. The legal due diligence review should cover, at a minimum, the following areas:

Contractual Formalities and Witnessing

For direct real estate purchases, the Code of Real Estate requires a written purchase agreement confirmed by an official witness to the transaction. The electronic conveyancing system administered by the National Land Survey offers an alternative digital pathway. Share purchase agreements do not require public witnessing and are typically drafted as private contracts governed by Finnish law.

Registration

After closing a direct property purchase, the buyer must apply for title registration at the National Land Survey. Registration confirms the buyer’s ownership in the public land register and is essential for obtaining protection against third-party claims.

In share deals, the register of ownership depends on when the MREC was established. For MRECs established on or after 1 January 2019, ownership of the shares is recorded in the share register maintained by the National Land Survey of Finland. For MRECs established before that date, the company itself (through its board) maintains the share register, unless the company has voluntarily transferred its share register to the National Land Survey by amending its articles of association — a point that should always be verified for the specific target in due diligence.

FINANCE AND SECURITY: MORTGAGES, PLEDGES, AND ENFROCEMENT

Understanding the Finnish mortgage system is essential for any leveraged acquisition, and particularly relevant for foreign buyers who may face additional lender requirements.

Mortgage Creation and Registration

A mortgage in Finland is a registered charge over real property that secures a debt obligation. Mortgages are created by application to the National Land Survey and recorded in the land register. The mortgage produces a digital mortgage certificate, which is pledged to the lender as security. This system provides lenders with high transparency and legal certainty, as all encumbrances are visible in the public register.

Security Package in Company Acquisitions

When acquiring an MREC, lenders typically take a pledge over the target company’s shares. In larger portfolio deals, lenders may also require asset-level mortgages within the target company, providing direct recourse to the property in addition to the share pledge.

TAXES

Tax structuring is often the deciding factor in choosing between an asset deal and a share deal. The Finnish Tax Administration administers the relevant taxes, and separate tax advice is needed for complex cross-border transactions.

Transfer Tax in Finland

Transfer tax applies to the conveyance of real estate and shares in a real estate company. The buyer is generally liable for payment. The applicable rate and calculation basis depend on whether the transaction involves real estate (land and buildings) or securities (MREC shares). Rates and thresholds should always be verified directly with the Finnish Tax Administration, as they are subject to legislative change.

Other taxes

The sale of real property is generally exempt from VAT under Finnish law and an option-to-VAT mechanism is available for commercial property lettings. For acquirers, a key risk is an unintended VAT liability arising from the reclassification of a transaction, for example if a share deal is treated as a supply of assets for VAT purposes. This area requires careful advance tax review and planning with a tax advisor.

Rental income derived from Finnish real estate is taxable in Finland, regardless of the owner’s tax residency. Non-resident owners are taxed at source on Finnish-source rental income. Capital gains on the disposal of Finnish real estate, whether held directly or through a company, are likewise subject to Finnish taxation. Double-taxation treaties may provide relief, but the specific treaty position must be analysed on a case-by-case basis.

FOREIGN INVESTMENT SCREENING AND MONITORING OF ACQUISITIONS

Foreign investment screening in Finland has become increasingly important, particularly as geopolitical tensions have heightened regulatory scrutiny of non-EEA capital flows into Finnish real estate.

Finnish Screening Rules

Finland operates a screening mechanism for foreign acquisitions that may affect national security or critical infrastructure. The Ministry of Defence administers the real estate-specific permit requirement for non-EEA buyers acquiring property directly. A broader corporate-acquisition screening regime, administered by the Finnish Ministry of Economic Affairs and Employment, applies to share transactions and other corporate acquisitions in sectors deemed strategically significant, including defence, telecommunications, energy, and, in certain cases, real estate proximate to sensitive installations.

Practical Mitigation and Notification Steps

For non-EEA investors, the following approach is recommendable:

CONTRACTS, SELLER DISCLOSURE, AND POST-CLOSING LIABILITIES

Exclusion of Statutory Framework

When a real estate transaction is carried out between professional parties, the statutory framework that would otherwise apply to the transaction, such as the Finnish Code of Real Estate or the Sale of Goods Act, is typically excluded to the extent permitted by law. Instead, the parties’ rights and obligations are determined by a carefully drafted sale and purchase agreement.

In both asset and share transactions, the sale and purchase agreement should allocate risk clearly between the parties. Buyers typically rely on contractual representations, warranties, indemnities, disclosures, limitation periods, and escrow arrangements to manage post-closing exposure.

Seller Disclosure Duties

The sale and purchase agreement typically includes seller’s representations and warranties regarding the object of purchase, whether the transaction is structured as a direct acquisition of property or as an acquisition of shares in an MREC. Contractual warranties and indemnities commonly cover title, environmental compliance, lease matters, disputes, encumbrances, zoning, and, to some extent, building condition. In share deals, additional warranties typically cover corporate-law compliance, tax matters, insolvency-related issues, contractual risks, intra-group liabilities and other company-specific liabilities.

The sale and purchase agreement usually includes deal-specific notice and limitation periods negotiated between the seller and the buyer. The warranty-and-indemnity package together with the notice and limitation periods as well as seller’s limitations of liability form the substantive value protection both in direct property acquisitions and share deals.

CONCLUSION

Finland offers foreign buyers and investors a mature, rules-based real estate market supported by transparent public registers and reliable legal infrastructure. Yet the interplay between property law, corporate structures, tax, and regulatory screening means that every transaction, whether a single property or a multi-asset portfolio, benefits from structured legal guidance. Experienced local counsel can make the difference between a seamless closing and a costly misstep.