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Country - Denmark
Sale and Purchase
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A. ACQUISITION OF REAL ESTATE
Applicable legislation
The transfer of real estate is mainly governed by the Contracts Act, the Purchase of Property Act, the Registration of Property Act and by tax law.
Is the purchase of real estate assets by foreign investors subject to restrictions?
Non-Danish companies and individuals need permission from the Minister of Justice to buy real estate in Denmark.
Do different legal regimes apply to the transfer of title to different kinds of real estate (commercial, residential, manufacturing)?
No.
Do mandatory pre-emption rights apply to the sale of real estate assets?
Municipalities may in some cases have registered a right to repurchase properties at a certain time and specified price.
Is expropriation (compulsory purchase) possible?
If so, under what conditions?
Yes. Expropriation is possible under section 73 of the Constitution. Expropriation of property must be in the public interest and full compensation is made to the owner. Other rules relating to expropriation can be found in other Danish legislation (for example, the Urban Renewal Act and the Electricity Supply Act).
Is real estate registered?
If so, is this official information made available to the public?
Yes. Almost all properties are registered in the land register. Denmark has a very complex, nationwide land registration system with land registers in each judicial district. All information in the registers is available to the public.
Is transfer of title recorded?
Yes, all transfers of property are normally registered in the land register and it is the duty of the parties concerned to ensure that this happens. When a right to a certain property has been entered in the land register, it cannot be terminated by a buyer or a mortgagee.
It is possible to register a conditional sale, but this registration will be subject to a time limit for final acquisition of title to the property.
Do buyers usually carry out due diligence?
If so, what due diligence is typically conducted and what is its timing (i.e. before or after contract execution)? Is there any protection for the buyer during the due diligence period (for example, an exclusive right to negotiate or buy)?
Investors will typically conduct technical and legal due diligence before purchase. Legal due diligence includes an investigation of title, easements, encumbrances, leases and all documents relating to the property.
Timing depends on the agreement made between the buyer and seller. Due diligence can take place before or after the contract's execution.
The parties can make an agreement providing protection for the buyer during the due diligence period.
Is title insurance available?
The Danish Financial Supervisory Authority, which issues authorisations to undertake insurance business in Denmark, has no knowledge of title insurance being offered.
How are deals typically structured?
Deals are structured either as a direct acquisition of the real estate (asset deal) or as an acquisition of the company holding title to the property (share deal). The choice between the two structures is mostly tax-driven.
B. STRUCTURE OF THE CONTRACT
Are there formal requirements regarding the content and structure of the sale and purchase contract?
Contracts vary depending on the specific transaction but all agreements are concluded in writing.
What is a typical contract like?
The content of the contract is negotiable. However, essential elements include: an indication of the price; how payment is to be made; the identity of the property; information about building permits; and rules regarding the allocation of risk and benefits associated with the property.
Are special consents required for certain transactions (for example consent by a spouse)?
Generally consents are not required but may be necessary in special circumstances. Owners may, in some cases, need to obtain consent from a spouse before a transaction can proceed.
What seller’s warranties are provided under statute (for example the state of the building, asbestos, etc.)?
Can they be excluded or varied by contractual agreement? Is there a deadline for claims to be made?
The seller warrants that he has title to the property, that the property is free from any third party rights and that the property is free from any defects or lack of essential qualities that might prejudice the intended use of the property or might have a negative effect on its value.
The seller is usually liable for defects in buildings for 20 years.
What are the buyer’s remedies against misrepresentation by the seller?
In the event of a defect, a buyer can claim compensation, a proportionate reduction of the purchase price or can terminate the contract of sale with immediate effect.
Are there any interests in real estate other than exclusive ownership?
If so, what are they?
Partnership shares (Interessentskaber), shares (Anparter eller aktier) or limited partnerships (Kommanditselskab/KS).
Where partnership shares exist, the real estate is directly owned by a number of partners.
When real estate is owned by a limited company (aktieselskab eller anpartsselskab), the company shareholders are the indirect owners of the real estate.
A limited partnership consists of a general partner and a number of limited partners. The general partner can have unlimited or limited liability. All the limited partners have limited liability. Where real estate is owned by a limited partnership, it will own the property but all the partners will be indirect owners.
C. PUBLIC LAW ASPECTS RELATED TO THE ACQUISITION OF REAL ESTATE
What are the most important areas of public law for an investor to consider when purchasing real estate?
An investor should always investigate the planning regulations. Planning regulations for land in Denmark comprise a Planning Act and regional, municipal and local plans. The Planning Act deals with the hierarchy of the planning system, in line with which countries address regional and municipal issues, prepare municipal plans and more specific local plans for each area. Local plans must comply with municipal plans, and municipal plans must comply with regional plans. All plans must ultimately comply with the Planning Act.
As a general rule, a local plan will cover a small area of a municipality, and, in some cases, only covers a single title number. Among other things, the local plan will include: the use of the area; measurements and delimitation of the property; and the location, use, measurements and design of buildings.
An investor should also check whether any contamination has been registered against the property according to the Contaminated Soil Act.
Is the buyer of a real estate asset responsible for soil pollution or contamination of the building even if it is not caused by him?
No. The polluter is normally responsible for the pollution.
How can a buyer ascertain the possible uses of an area under the applicable zoning or planning laws?
Can uses be changed?
Applicable planning regulations are often registered as burdens in the land register in relation to affected properties. Municipalities can change the planning regulations, but a change in local planning regulations will only apply to future decisions within a specific area.
Is it possible to enter into specific development agreements with relevant public authorities in order to facilitate a project?
Can public authorities make a charge for this?
It is unusual to enter into specific development agreements with public authorities to facilitate a project. If a developer wants to change the use of a property, they can cooperate with the municipal authority on the preparation of a new planning regulation for the specific area.
D. TAXES RELATED TO ACQUISITION OF REAL ESTATE
Are there transfer taxes or sales taxes?
Profit on the sale of investment property is taxed as capital gains in Denmark. For corporate owners (resident or non-resident) the rate is 28%. For individuals, capital gains are taxed at a rate of up to 59%, depending on total income.
Capital gains on residential property are not taxed if the seller has used the property for his own residential purposes.
The fee for the registration of a title document is DKK 1,400 plus 0.6% of the purchase price or the public land assessment, whichever is higher. Agency fees are usually between 2% and 4% of the value of the property.
What are the normal transaction costs?
The cost of professional advisers.
How are transaction costs shared by the buyer and seller?
This depends on the agreement between the buyer and the seller. Normally the buyer pays the registration fees and the transfer taxes.
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