The TerraLex Cross-Border Real Estate Guide provides crucial insights into international real estate law, aiding TerraLex members and clients in understanding the regulatory and operational environments across various jurisdictions. This concise guide covers ownership and registration processes, investment vehicles, taxation, leasing terms, and construction regulations, making it an essential resource for those involved in global real estate transactions.
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In Denmark, rights over and related to real estate are registered in the Danish Land Registry (“Land Registry”). The Land Registry serves as a public register, which is why registering rights related to a property is encouraged.
No rights are required to be registered with the Land Registry. However, it is highly recommended to register rights related to real estate in order to enforce such against bona fide third parties.
In connection with acquisitions of commercial properties in Denmark, the following are considered customary legal steps:
An investor should carefully consider hiring an attorney to assist with the transaction as real estate transactions requires in-depth knowledge of both the Danish real estate market and the public regime related hereto.
It is common that an investor invests through a Danish-based company with limited liability, such as a public limited company (A/S) or a private limited company (ApS). Tax-transparent companies (such as “K/S”), are also commonly used, as there are some tax related benefits linked to this company structure.
Subject to content of the final purchase agreement, all contracts / duties directly related to the property are usually transferred to the buyer, such as lease agreements, contracts regarding supply of utilities, obligation to pay property taxes, etc.
The owner of a property must always pay property taxes. Failure to do so will have economical consequences for the owner.
It is recommended to carry out a specific due diligence exercise to cover specific risks related to the property.
No. However, certain properties cannot be acquired by non-resident individuals and entities.
Yes.
Yes. There are several ways to finance an investment in a real estate project, e.g. bank loans, mortgages, private equity financing etc. The special Danish mortgage model, which is a very unique system, offers one of the lowest interest rates to borrowers across Europe.
No.
No. However, certain legal requirements must be fulfilled to develop a project, e.g. planning permission, construction permits, etc.
No.
Yes.
An owner of a property must pay real estate taxes deriving from the ownership of the property.
Additionally, a transfer tax of 0.6% of the purchase price must be paid when ownership of the real estate changes and the transaction is structured as an asset purchase agreement. In the capital region of Denmark, it is common practice that the buyer carries the transfer tax. In other parts of Denmark, the tax payment is usually split even between the buyer and the seller.
Yes. If a property is acquired through a share deal, the transaction will not trigger a transfer tax.
Additionally, capital gain taxation will apply with respect to any profits.
Yes. A transfer tax of 1.45% of the nominal loan value must be paid upon registration of mortgages in the Danish Land Registry.
Commercial leases are characterized by a high level of contractual freedom between the landlord and the tenant. The Danish Business Lease Act contains a detailed regulation of tenancies, but can to a great extent be deviated from by contract between the parties.
Commercial lease agreements usually contain clauses regarding term, termination, rent payment and adjustment, security deposit and breach of contract.
Personal lease agreements, unlike commercial leases, are largely subject to mandatory legislation that cannot be deviated from by contract in favor of the landlord.
Personal lease agreements often contain the same group of terms as the commercial lease agreements.
Under Danish business lease law, the landlord’s termination rights are very limited and only allowed in specific circumstances, including, inter alia, in case of renovation/demolition of the lease, if the landlord wishes to use the premises, etc.
Lease agreements can – of course - also be terminated with immediate effect if the tenant has materially breached the lease.
Specific terms and conditions are usually regulated in the lease agreement. It is often seen that the agreement contains a non-termination period, termination notice period, etc.
Termination of a personal lease agreement is subject to a variety of regulations that are generally in the tenant's favour. Often it is required that the landlord either needs to use the leased space itself or that the tenant has materially breached the lease.
The tenant’s liabilities may vary depending on the lease agreement. The primary liability is to pay rent and other expenses related to the operation of the property and utilities. Additionally, the tenant is usually responsible for the interior maintenance of the property during the lease.
Yes.
No.
Yes.
No.
Property taxes are paid by the owner of the property. However, often the landlord includes taxes in the rent (or to be paid in addition to the rent).
No.
Yes.
No. Leases can be open ended with no fixed termination date.
No. However, specific rules may apply to short term rentals.
In general, commercial leases are subject to a high level of contractual freedom, which is why market deviating rent increases can be agreed between the parties. However, commercial lease agreements are comprised by the Danish Contracts Act after which particularly onerous terms can be declared invalid.
Residential leases are subject to much stricter regulation on rent increases, which includes particularly tenant-friendly protectionist rules. Tenants may also ask the rent control board any agreed rent.
Construction projects are usually priced through a fixed price. However, this may vary depending on what the parties agree to.
Construction risks are thoroughly regulated in AB18, a Danish standard agreement used in the majority of all construction projects in Denmark.
Construction is subject to a variety of regulations, covering both public requirements for the design of construction projects and rules for contracting between private parties.
Usually, yes. However, the extent of the developer’s liability is subject to negotiation in the respective construction contract.
Yes.
Yes.
No. However it is usually agreed that developers take out certain insurances. AB18 contains a standard clause, which obligates the developer to take out certain insurances.
Disclaimer: This guide contains summaries of general principles of law. It is not a substitute for specific legal advice and should not be relied upon in relation to the application of the law or subject matter covered.
