Sweden is strengthening security protection for real estate transfers

Introduction

The Swedish parliament has decided to amend the Protective Security Act (Sw. säkerhets-skyddslagen (2018:585)) (the "PSA"), meaning that the screening process under the law will include real estate transfers from 1 July 2026 (in accordance with the government bill prop. 2025/26:105).

Operators (Sw. verksamhetsutövare) of security-sensitive activities (Sw. säkerhetskänslig verksamhet) that intend to transfer real estate will need to conduct a specific protective security assessment and a suitability examination, and consult with their supervisory authority prior to completion of such transfer.

Background

The PSA stipulates certain requirements on operators of security-sensitive activities, i.e. activities that are of significance to Sweden's security or covered by an international protective security commitment that is binding on Sweden. 'Protective security' means protection of security-sensitive activities against espionage, sabotage, terrorist offenses and other offenses that may threaten those activities, and protection in other cases of classified information.

An operator of security-sensitive activities has an obligation pursuant to the PSA to conduct a protective security analysis (Sw. säkerhetsskyddsanalys). Based on the analysis, the operator shall plan and take protective security measures that are required due to the nature and scope of the activities, the presence of classified information and other relevant circumstances.

In January 2021, the PSA was supplemented with a screening system for transactions involving security-sensitive activities. This means that an operator of security-sensitive activities, or a seller of shares in a company conducting such activities, has an obligation to first conduct a specific protective security assessment and a suitability examination. If such assessment does not result in a finding that the transfer is inappropriate, the operator/seller shall consult with its supervisory authority prior to any transfer of the business/shares or certain assets.

The authority has the power to prohibit a transaction, making it null and void, if the transfer is deemed inappropriate from a security protection perspective. Further, if the requirements under the PSA have not been complied with, the authority can also impose an administrative fine of up to SEK 50 million.

It should be noted that the PSA applies to all transfers of security-sensitive activities and assets, regardless of whether such transfers involve a domestic or foreign investor. Until now, transfers of real estate have been exempted from the screening system under the PSA.

Transfer of real estate to be subject to the screening system under the PSA

As of 1 July 2026, the screening system under the PSA will also cover certain real estate transfers. This will require owners of real estate to undertake a specific security protection assessment before transferring such property. The real estate owners that will be subject to the law are operators of security-sensitive activities. These owners are, in other words, already subject to the PSA and the existing requirements under the law.

The legislation also extends its scope to transfers of ownership of real estate that occur through property registration (Sw. fastighetsbildning) under the Property Formation Act (Sw. fastighetsbildningslagen (1970:988)). This ensures that such property registrations, which can also involve the transfer of ownership, are subject to the same scrutiny under the PSA. However, transfer of ownership through property registration in violation of the PSA cannot be rendered null and void by the supervisory authority's decision (non-compliance can nevertheless result in administrative fines).

The preparatory works for the law provide a few examples of real property that will be subject to the screening process: buildings that are part of operations critical to the energy supply, real property where infrastructure of importance for Sweden is located, and properties that are significant for the defense of Sweden.

Prior to a transfer of real estate within the scope of the law, the seller must conduct a specific protective security assessment and a suitability examination of the transaction, and thereafter consult with the relevant supervisory authority. The authority may prohibit such transfer if the transfer is deemed inappropriate from a security protection perspective.

Comment

The amendment of the PSA is another example of the changed international security landscape, necessitating stronger measures to prevent real estate from being used in ways that threaten Sweden's security.

Operators and owners of security-sensitive activities, as well as investors, will need to consider the new requirements in their real estate transactions in Sweden going forward, in order to ensure compliance. This adds another layer to take into consideration for real estate transactions, as the PSA applies in parallel with the Screening of Foreign Direct Investments Act (Sw. Lag (2023:560) om granskning av utländska direktinvesteringar).

Transfers of real estate covered by the screening system under the PSA will need to be conditional on approval by the supervisory authority. In particular, the parties involved will need to consider the additional time required for the transaction process due to the consultation obligation with the relevant authority.

If you have any questions regarding the amendment to the PSA or other questions related to real estate transactions, please do not hesitate to contact our legal M&A practice group.

Authors: Karl-Johan Holmér, Senior Manager, Legal M&A, Martin Tenselius, Director, Legal M&A