Digital housing transactions – a utopia?

Blogs February 1, 2017

“A new way to rent an apartment immediately”, said the large Finnish housing investment company VVO. Customers can select an apartment via a link on the company’s website, complete the tenancy agreement online by paying a month’s rent, and can even move in the next day without paying a deposit. An interesting move, but would the same work for apartment sales?

Large property transactions are already mostly digitalised. Information about the property is entered into a data room and experts then perform a risk valuation of the property based on this information. Could an individual buyer trust in digital brochures, photos, and videos of the property and in the seller’s/landlord’s assurances about the features of the property, and commit to an agreement without any risk?

Provisions of the Housing Transactions Act relating to transactions involving used apartments provide an answer to this. If the buyer, without an acceptable reason, does not take up the seller’s offer to inspect the apartment before the transaction, the buyer cannot later appeal to a defect that should have been detected during the inspection. Therefore, according to the law, the buyer can also solely rely on digital promotional material if the seller does not provide an opportunity to inspect the apartment, but instead wants to complete the transaction based on the digital material alone. Transactions involving new apartments are, in turn, often completed solely based on plans, illustrations, and other promotional material, so digitalising the process would not in itself even change the position of the buyer.

From the seller’s point of view, the situation may be more challenging. Particularly when the seller is an economic operator and the buyer is a consumer, the consumer’s position is more secure. Indeed, when it comes to consumer contractual relations, the seller must ensure that they have informed the consumer of all known factors affecting the contract and any defects in the apartment in particular – and that the consumer fully understands what they are agreeing to. This of course also applies to buyers that are not in a consumer position, meaning that promotional material regarding the property should be carefully prepared.

A fully digitalised sale or rental transaction is of course not completely risk-free. This is the case even if a pre-transaction inspection is arranged. Most housing sale or rental disputes involve hidden defects, which neither the seller/landlord nor the buyer/tenant could have detected when viewing the property. Even though in these cases the buyers had visited the properties, this did not remove the problem, because the defects had not been detected during visual inspection. Preparing good promotional material may therefore even reduce the risk of hidden defects, if, for example, the technical condition inspection was completed more thoroughly and served as a base for the promotional material.

Even if the move to a fully digitalised sale or renting process never totally happens, development that speeds up and enhances processes is always welcome. The law is not an obstacle here, as it ought not to be. The property sector has been criticised as slow to capitalise on digitalisation, but as the example of VVO described above shows, open-minded initiatives are being created.