TALLINN - Rejecting a presidential appeal, the Supreme Court last week ruled that the abolition of rent ceilings for tenants living in restituted houses was legal and did not violate the constitution.
Commenting on the decision, the court stated that "tenants of restituted houses have never and could never have hoped for a permanent establishment of rent limits" and that "the state has repeatedly emphasized the temporary nature of rent limits."
The Supreme Court also ruled that tenants would have enough time to rearrange their lives, since homeowners will have to adhere to pertinent regulations and laws, which exclude a rapid rent increase.
The limits will go into force within 10 days after being published in the State Gazette.
The law, backed by the right-wing forces in Parliament - Res Publica, the Reform Party and the Pro Patria Union - and approved in June, was initially to be implemented on Sept. 1.
However, President Arnold Ruutel addressed the court in August in a last-minute attempt to block the law from taking effect after the Riigikogu (Estonia's parliament) bypassed his veto.
In his letter to the court's justices, Ruutel argued that the law contradicted the constitution. He said the law was vague and did not take into account the dramatic life-adjustments many people would be forced to undergo as a result.
Ruutel added that local municipalities should have the right to set the rent ceiling on residential properties that were returned to their prewar owners after the restoration of independence in 1991.
According to varying estimates, some 2,000 - 7,200 Estonian households belong to the category of so-called forced tenants, meaning residents of houses that have been restituted to their legitimate pre-Soviet occupation owners or their heirs. The forced-tenant status provides more favorable rent conditions, and a rent ceiling on these apartments has been in effect since the homes were privatized. Some municipalities, however, some time ago took the initiative and abolished rent ceilings in their regions.
The Estonian Union of Land and House Owners welcomed the court's decision. The union hopes that the abolition of rent ceilings will allow landlords to increase investments in upkeep of the properties.
Aare Pallin, chairman of the union, said that the law has given property owners the genuine right to own, manage and use their land.
"While the official status of forced tenants was justified in the early years, from 1992 to 1997, and helped ease social tension, the repeated prolongation of this status was neither necessary nor justified," said Pallin, adding that the rent limit must form market conditions such as the price of any other product.
"In connection with forced tenants, a large portion of residential areas has been kept outside the rent market, and there have been some cases when a forced tenant managed to sublet the apartment for a higher price," he said.
"We cannot, of course, rule out the fact that certain groups of tenants may need social aid because of their age, disease or disability, but that is a task for the state and the local municipalities to solve," said Pallin.
He added that the state should develop and implement a formula for compensating higher rent with social welfare allowances to relevant groups.
Vilja Savisaar, chairwoman of the Center Party faction in Parliament, said that if the state financially supported municipal housing projects, the problem of tenants living in restituted houses could have been solved without eliminating rent ceilings.
As she explained, one-third of people living in restituted houses need help with solving their home issues.
The Center Party earlier proposed to allocate an extra 175 million kroons (11 million euro) to the KredEx credit support agency next year to increase funding of municipal housing projects - in addition to the previously allocated 6 million kroons.
In Savisaar's opinion, the rent limit had been set in order to diminish possible cases of injustice between landlords and tenants. "Unfortunately, the state has shifted its responsibility to the landlords, who instead of solving the forced tenants issue, have caused a split in society," she said.
Pallin argued that, judging by the experience of towns such as Tartu and Parnu where rent limits were abolished several years ago, he does not foresee a dramatic, 20 percent - 30 percent increase in rent in the near future.
The most problematic town in connection with the rent limit drop is Tallinn, where about 2,000 families may need help, Pallin said.
He added that his organization calls for a balanced approach to the new situation from both the owners and the tenants.