The Swedish residential rental system and market has been discussed and criticized diligently the past years. A reformed rental law was therefore the 1 stof January 2011 implemented. This has the purpose to better reflect the consumer’s priorities with a more market related rental determination. With this change, it is of interest to compare it to another rental system, with market rents. In the German rental system, free rental setting is allowed in new leases. This thesis aims to evaluate and compare the rental system in Sweden and Germany. The comparison was done after reading several reports, articles and literature as well as interviews with Swedish and German actors. Results show that the reformed Swedish law will not lead to major changes, though it might lead to a more adequate rental determination system. The analysis of the German system, with its free rental setting for new leases show that is better functioning than the Swedish. It is however positive that the new Swedish law incorporates more market related variables, even though the determination of a market rent is quite complex. A free rental setting allocates diversity in the market and contributes to a heterogeneous market, as it is possible to meet different consumers demand. The rental market can be expanded though, with a free rental setting when subletting condominiums. A conclusion from the analysis is that Sweden should strive to adopt a German system with free rental setting in new leases.