Commercial Land Increasingly Used for Residential Developments in Tallinn
Tallinn warns that developers are increasingly selling units on commercial land as apartments, misleading buyers. The city urges transparency and notes potential tax and permit issues.
A growing number of real estate developments in Tallinn are offering units marketed as residential space, even though the land is registered for commercial use. The city has warned that this practice can mislead buyers.
Deputy Mayor for Urban Planning Tiit Terik said situations where people believe they are buying an apartment, but the property is legally commercial premises (e.g., for offices or hotels), are unfortunately on the rise. Developers may choose this approach when an existing detailed plan already permits an office building and they do not want to amend the zoning.
"They may describe it as a guest apartment or commercial premises, but their ads often give the clear impression that what is being sold is a home," Terik said. He pointed to the extension of the Oru Hotel on Narva mnt, marketed by developer Metro. "Looking at the adverts, there is little room for interpretation. At first glance, people are clearly led to believe they are buying a home," he noted.
Mait Allas, a management board member at Metro, said the Oru Hotel extension is a commercial building with accommodation units, marketed accordingly. "These are not apartments in the traditional sense. They are intended as accommodation units, and owners can also rent them out for short-term stays," Allas said. He conceded that once sold, the developer cannot control how the property is used, including overnight stays, so such units could end up as permanent residences.
Terik called for developers to be transparent about a building's intended use from the outset. Otherwise, they could face issues, including the completed building not receiving an occupancy permit. However, those who have purchased and moved in before discovering the legal classification cannot be evicted. New owners may face other repercussions, such as different land tax rates. "Land tax for commercial property is different from that for residential property, where owners may even qualify for a partial exemption," Terik said.
If developers use misleading advertising, the city may ask the state to intervene. The urban planning department has also developed a proper approval procedure to legally convert office buildings into residential buildings.
