Real Estate Law in Denmark

Acquisition of real estate in Denmark is primarily regulated by the uncodified principles of property law, i.e., the freedom of contracts in combination with the Danish Contracts Act (in Danish: aftaleloven).

For residential acquisitions, the Danish Consumer Protection Act on Acquisition of Real Estate (lov om forbrugerbeskyttelse ved erhvervelse af fast ejendom) provides consumers and non-commercial parties with certain rights regarding the purchase and right of withdrawal if the property has been used for residential purposes by the seller, or if the property will be used for residential purposes by the buyer.

Other rights in relation to the acquisition of real estate are regulated by the Land Registry Act (tinglysningsloven), among other things, regarding the protection from rights invoked by third parties.

Restrictions

The Danish Acquisition of Real Estate Act (lov om erhvervelse af fast ejendom) restricts individuals who are not residents of Denmark and who have not previously resided in Denmark for a period of at least five years from acquiring real estate unless the Department of Justice grant permission. The act applies to all types of real estate, although additional restrictions apply to holiday homes under the Holiday Home Act (sommerhusloven).

An exception to the restriction has been made for citizens of the European Union (EU) and for legal entities established within the EU.
For agricultural properties (landbrugsejendomme), there is a requirement of residence according to the Agricultural Properties Act (landbrugsloven). This means that the property in question must be inhabited by a physical person within a period of 10 years from the time of purchase. The person taking residence at the property does not have to be the same person as the acquirer of the property. Thus, the acquirer can be a legal entity if the legal entity ensures that a physical person takes residence at the property.

In Denmark, rights over real estate must be registered in order to be protected against agreements regarding the said property and against prosecution. Registration must be made in the Danish Land Register (tingbogen), which is available online for registration.

This applies not only to the right of ownership, but also for other rights and obligations, such as easements and encumbrances.For ownership of a property to be confirmed, a deed must be registered. Registration of a deed in the Danish Land Register will incur a registration fee. Currently, the registration fee is calculated as a fixed fee of DKK 1,850 (US$261.945*) plus a variable fee of 0.6% of the purchase price.

Registration of easements or the like will currently incur a fixed registration fee of DKK 1,850 (US$261.945*).

In Denmark, notarization is not a requirement in any part of a process regarding the acquisition of real estate.

The responsibilities of the seller are regulated partly by the uncodified rules of property law and partly by the Danish Consumer Protection Act on Acquisition of Real Estate.

In a real estate transaction, it is the primary responsibility of the seller to provide the property in question in a condition corresponding to what is agreed and what is to be rightly expected by the buyer. If the seller fails to do so, they will be in breach of contract and can thus incur liability.

In real estate transactions, the seller can often be liable for defects found in the property. A defect in real estate law is defined as when the property suffers from conditions that should not be found in similar properties of the same age and type.

If the sold property has a defect, the seller can be found liable, and the buyer may have a claim for a reduction in the purchase price. Any deviation from normal construction standards and errors in craftmanship will normally be considered defects. However, the applicable test for what is considered a defect will vary depending on the age, type, and overall character of the property being sold.

Claims for damages from the buyer against the seller can, in certain circumstances be directed towards the previous seller. This could, for example, be the case if the original builder of the property has acted in contravention to normal construction standards.

A property will quite often be subject to hidden defects, and the seller’s liability for such defects depends on a case-by-case assessment. Generally, the seller has a duty to disclose all known material facts of interest to the buyer. By doing so, the seller cannot be liable for defects disclosed to the buyer. Likewise, claims by the buyer cannot rely on defects already known to him or that should have been known to him.

This is linked to the principle of caveat emptor. In the Danish context, the principle of caveat emptor, however, does not apply to hidden defects in a property, as the buyer does not necessarily have the opportunity to discover such defects. The seller of a property can therefore be met with claims for latent defects several years after the sale has been finalized. To minimize both the risk of being met with later claims, and the risk of discovering latent defects, the seller and the buyer can initiate a professional examination of the property with the purpose to disclose any latent or potential defects.

As non-commercial real estate transactions are common among residential owners, the Danish Consumer Protection Act on Acquisition of Real Estate was implemented in 1995 to further regulate and provide legal predictability, thereby protecting the interest of both the seller and the buyer. The act applies to non-commercial real estate transactions between consumers in cases where a property has been used for residential purposes by the seller, or if the property is to be used for residential purposes by the buyer and provides the parties with a solution consisting of a property condition report, an electrical installation report, and a change of ownership insurance. The act also provides the buyer with a right of withdrawal in exchange for a compensation of 1% of the purchase price. This buyer’s right of withdrawal must be invoked no later than six business day after entering into the purchase agreement.

The most common means of financing an acquisition of a property in Denmark is a credit mortgage (realkreditlån). If a credit mortgage is obtained, the mortgage lender will demand that a credit mortgage deed (realkreditpantebrev) be registered on the property in the Danish Land Register.

As other examples of financing the following can be mentioned:

• Owner’s mortgage deed (ejerpantebrev); and
• Mortgage deed (pantebrev).
  

As a general rule, registration of any mortgage deed will incur a registration fee calculated as a fixed fee of DKK 1,850 (US$261.945*) and a variable fee of 1.5% of the mortgage secured amount. However, registration of a mortgage deed is exempt from the variable fee of 1.5% of the purchase price of that part of the mortgage secured amount that does not exceed the registered principal of an existing registered mortgage deed on the same property (stempelrefusion).

Lease of residentials

Lease of residentials is governed by the Danish Lease Act (lejeloven). In general, the Danish Lease Act contains mandatory provisions in favor of the tenant.

Lease of commercial properties

Lease of commercial properties is governed by the Danish Commercial Lease Act (erhvervslejeloven). The Danish Commercial Lease Act contains mostly provisions that can be derogated by the parties. However, the act also contains mandatory provisions, for example, regarding the landlord’s right to terminate a commercial lease agreement that is restricted.

Other commercial leases

Lease of areas that are not defined as rooms or properties, for example, lease of a parking lot, is not governed by the Danish Commercial Lease Act or any other acts except for uncodified principles of property law, i.e., the freedom of contracts in combination with the Danish Contracts Act.

A building permit is required for the construction of a new building and is often also required for modifications to existing buildings. The building authorities issue such building permits. The basis for issuing building permits is regulated in local planning. For several buildings, a commissioning permit is needed before the building can be legally used.

As a general rule, a building must have an energy label (energimærkning) in connection with a transfer or lease of a property. The seller or the landlord must ensure that the energy label is prepared.

Several properties are exempt from the requirement of an energy label. This includes, among others, holiday homes and certain commercial properties.

All commercial and residential property is subject to yearly taxation based on the public value of the property. For commercial properties, the relevant applicable taxes are land value tax and, for certain uses, service charge, while residential properties are subject to land value tax and property value tax if the owner is using the property for residential purposes.

In Denmark, a new real estate valuation system is currently being implemented. The current real estate valuation system has been suspended since 2013, and therefore all Danish properties’ current valuation levels are in the price level of 2012 for commercial properties.

Commercial properties were assessed for the first time using the new valuation system on 1 March 2021. However, the valuations have been delayed due to a delay in the preparation of the valuations as well as technical issues. It is expected that the new valuations will be sent out in 2025-2026. However, there is a considerable risk that the valuations will be delayed further. For 2021, the
real estate taxes for residential properties will be calculated based on the new real estate valuation as of 1 January 2020. In 2022, the real estate taxes for commercial properties will be calculated based on the new real estate valuation as of 1 March 2021.

If there is a discrepancy between the estimated market value and the public valuation of the property, it is possible to appeal the valuation to the Danish Tax Authorities under certain circumstances.

*According to the 10 December 2024 exchange rate

Download: Handbook for Real Estate Transactions