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Country - Norway
Commercial Lease
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A. SOURCES OF LEASE LAW
Applicable legislation
The Norwegian Act No. 17 of 26 March 1999 relating to lease agreements (Lov om husleieavtaler) regulates both business and residential leases. In most cases it is possible to agree on a wide range of different terms for business leases.
There is also a prior (repealed) Act (Act No. 60 of 16 June 1939), which still regulates fixed-termed contracts entered into before the law of 1999 came into force.
Do any specific rules apply to commercial leases?
When leasing commercial premises, agreements may, with some exceptions, deviate from the provisions of the Act.
These provisions will, however, often be relied on, or used as guidelines, where the contract is silent.
Do different regimes apply to leases of commercial premises depending on the use of the premises by the lessee (offices, warehousing, industrial, retail)?
No, different statutory regimes apply. However, in practice the leases will be drafted differently.
B. DURATION AND TERMINATION OF LEASES
Is there a minimum or maximum obligatory term?
No. Leases are commonly granted for five years (with a right for the tenant to renew for another five years) or for 10 years. A lease may be entered into for either a fixed or an indefinite period. If no expiry date is stipulated, the lease is valid for an indefinite period and cancellation has to be done with reference to the provisions of the Act relating to leases.
Does the lessee have a right to renew the lease upon expiry of the initial contractual period?
There is no automatic right to renew where the lease term is fixed. Any such right has to be stipulated within the lease.
Do lessees enjoy security of tenure (i.e. the right to remain in occupation after their lease expires)?
There is no legislation in Norway conferring security of tenure.
Do leases involve a lengthy procedure for the effective recovery of possession?
Commercial leases usually contain provisions for recovering possession by legal enforcement without prior court proceedings, typically in cases of non-payment of rent or other material breaches of contract. The lessor must obtain a court order if the contract does not contain such provisions.
The lessee has a right to receive a prior warning, and the opportunity to rectify the breach before losing possession. The time taken by the eviction process varies depending on the workload of the Execution and Enforcement Commissioner.
Can government/local authorities require the compulsory termination of a lease?
No. Where a leased property is compulsorily purchased it is necessary for the lessor to negotiate with the lessee for possession.
Is there a preferential right of acquisition?
Preferential right of acquisition is not common in Norwegian leases, although the parties may agree on such terms.
C. RENT AND COSTS
Are variable rental agreements common?
Rents for office leases are often adjusted annually in line with the Consumer Price Index. Adjustment to market level usually only occurs when a lease is renewed. In retail leases the rent is sometimes linked to the lessee's turnover.
Most common indexation
The Consumer Price Index from Statistics Norway.
Who usually pays the common expenses?
Lessees will normally pay part of the common expenses, based on their proportion of the rentable space. Which expenses the lessor passes on to the lessees as common expenses, and which are covered by the rent, may vary. The lessor's part of the common expenses is normally limited to typical "owner" expenses.
The common expenses may be capped, particularly if the space being let is not a new building.
Are there any other expenses connected with the lease?
Services such as electricity, water, heating, lighting, ventilation, cleaning etc are usually agreed directly between lessees and suppliers.
Which indirect taxes are applicable?
The lessor can choose to be registered as a VAT company or have the property registered for VAT purposes. This entitles it to recover VAT on its expenses, but the lessee must then pay VAT on the rent and on common expenses. The VAT rate is currently 25 per cent.
D. OBLIGATIONS OF LESSOR AND LESSEE
Who is responsible for the different works on the premises?
Unless otherwise agreed, the lessor is obliged to maintain the property in the condition to which the lessee is entitled under the agreement. This normally includes maintaining the exterior of the building and any technical appliances that the lessor is responsible for providing, such as elevators, ventilation plants and the fire protection system, etc.
Unless otherwise agreed, the tenant must normally maintain the interior of the building, including all furniture, fittings and equipment that are not part of the immovable property.
Can the lessee alter or improve the premises?
The lessee is normally entitled to alter and/or improve the premises with the lessor's written consent. Structural alterations are normally not allowed. The parties must agree on whether or not the premises should be restored at the end of the lease period, and how costs and benefits related to the alterations and improvements should be allocated.
On termination, the lessor may require the tenant to remove any improvements in order to avoid having to pay the lessee compensation.
What restrictions are there on the lessee's right to use the premises?
Leases normally stipulate the permitted use of the premises. Specific activities which may cause a nuisance are prohibited. The lessee will also be restricted by planning law.
Is there a right to transfer the lease?
The lease can normally be transferred with the lessor's consent.
Is there a right to sub-let the premises?
The lessee does not normally have a right to sub-let, or otherwise transfer its right of use to others, without the prior written consent of the lessor. The lessor is, however, normally obliged to give this consent if there are no objective grounds for withholding it.
If the lease has been entered into for a fixed period, the tenant may, with the lessor's consent, sub-let for the remainder of the lease period. If consent is refused, and no circumstances surrounding the sub-letting constitute objective grounds for objection the lessee may terminate the lease with a three-month notice period provided the lease does not stipulate otherwise.
What are the usual guarantees?
One of the most common forms of guarantee is that the lessee deposits an amount (usually limited to a maximum of six months' rent) as security for rent, damage to the property, costs connected with eviction and other claims arising for the lease.
An alternative is for the lessee to provide an appropriate guarantee as security. The guarantee amount is also usually six months' rent. The guarantee is typically given from a parent company, a bank or another financial institution.
E. PARTICULAR TYPES OF LEASE
Do office leases have any particular characteristics?
They will generally not contain pre-emption rights or turnover rents, but will otherwise correspond with the characteristics set out above.
Do retail leases have any particular characteristics?
They may have turnover rents where all or a part of the rent is determined by the profits of the store.
They may have provisions enabling the lessor to maintain a suitable mix of lessees, for example, pre-emption rights and exclusive rights to sell particular products.
Retail lessees may be subject to obligations which exist for the benefit of the shopping centre as a whole. For example, an obligation for the lessee to open and trade during specified hours and to contribute towards marketing the centre.
Although the lessor will maintain the structure and exterior of the premises, a retail lessee may be given the right to maintain its own shop front in its usual trading style.
Do hotel leases have any particular characteristics?
Hotel leases are similar to office leases, except where they are located in shopping complexes where they may have more of the characteristics of a retail lease.
Hotel leases often contain detailed provisions relating to the management of the property. Alternatively, details of management may be set out in a separate document with a dedicated hotel management company.
There are several variations for dividing the initial investment costs connected with, e.g. inventory.
Leases can be of a "bare-house" type, and the lessee also covers the costs and assumes responsibility for outdoor maintenance, technical installations and more.
The rent is most often turnover based, with a specified minimum rent, and the leases are long term.
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