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Country - Norway
Sale and Purchase
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A. ACQUISITION OF REAL ESTATE
Applicable legislation
Norwegian law number 93 of 3 July 1992 relating to transfer of property (Lov om avhending av fast eigedom); the Alienation Act which regulates the transfer of proposed and completed properties between individuals and between organisations. Organisations may opt out of the regulations stipulated under The Alienation Act.
Is the purchase of real estate assets by foreign investors subject to restrictions?
There are no specific restrictions for foreigners investing in real estate in Norway. Anybody intending to buy Norwegian real estate, of whatever nationality, must apply for a concession from the local authority, but this formal requirement very rarely constitutes a problem for investors.
There are also broad exemptions from this requirement, including:
- the purchase of developed land which does not exceed 100 decares; and
- the purchase of plots for the construction of residential or holiday homes, provided the size is less than two decares.
Do different legal regimes apply to the transfer of title to different kinds of real estate (commercial, residential, manufacturing)?
No. The Alienation Act normally regulates the transfer of title to all different types of real estate, although organisations may contract out of the Act.
Contracts, such as for the proposed construction of a building, are not regulated by the Alienation Act. For individuals such contracts are wholly regulated by Norwegian law number 43 of 13 June 1997 (Bustadoppføringslova).
For organisations entering into contracts, including for the transfer of title to a plot and for the proposed construction of a building on the plot, transfer of land is regulated by the Alienation Act, but the construction element of the contract is only regulated through the building contract.
Do mandatory pre-emption rights apply to the sale of real estate assets?
In some specific cases, yes. If a property is subject to co-ownership or is part of a housing cooperative, then the co-owners or members of the cooperative have a pre-emption right. When restructuring ("sectioning") an apartment building, lessees may also claim pre-emption rights.
Is expropriation (compulsory purchase) possible?
If so, under what conditions?
The authorities, or a private developer with the assistance of the authorities, may expropriate property for the purpose of building roads, schools, transport facilities, playing fields etc. This right is subject to restrictions: a property can only be subject to compulsory purchase after an overall evaluation of the advantages and disadvantages has been carried out by a court of appraisal. The buyer must pay market value for the expropriated property, and this is settled by the same court.
Is real estate registered?
If so, is this official information made available to the public?
All real estate is registered in the "GAB" (real estates, addresses, buildings) register. This contains information about each property and building in Norway. Where a property is divided or there has been a boundary adjustment, this new information is also recorded in the GAB. The information in the GAB is available to the public, but it does not provide protection against third parties claiming rights etc. Deeds of transfer are also usually filed with the Land Register, which does protect against claims from third parties.
Is transfer of title recorded?
Can other related deeds (for example preliminary sale agreements) be recorded?
Even though it is not a legal requirement, deeds of transfer are usually filed with the Land Register (Tinglysingen) to protect against claims by third parties and avoid potential conflicts with subsequent buyers. All property transactions, including sales and purchases, mortgages, easements and rights of use, as well as any pending disputes, can be registered. Any interested person may have access to the Land Register, which is organised by title and land number.
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 usually carry out technical and legal due diligence on title, building permits, leases and contracts related to the property. This is normally carried out before purchase, but may also be done during the brief period after signing the contract if this is specified as a condition of the contract.
Is title insurance available?
Not applicable.
How are deals typically structured?
Either as direct acquisition of the real estate ("asset purchase") or as acquisition of the company holding title to the property ("share purchase"). The choice between these structures is mostly tax driven. The transfer of shares instead of real estate assets allows payment of registration tax to be avoided.
B. STRUCTURE OF THE CONTRACT
Are there formal requirements regarding the content and structure of the sale and purchase contract?
A legally binding acquisition agreement can be made either in writing or verbally. Often an estate agent or attorney will draft the contract for the sale and purchase.
The transfer is effective immediately after the signing or verbal acceptance of the agreement, without any further activity being necessary (such as handover or the registration in the Land Register).
What is a typical contract like?
The content of the contract is negotiable.
Organisations often opt to contract out of the Alienation Act. Some elements of the Alienation Act are mandatory if the buyer is an individual.
The essential elements of the contract comprise: an indication of the price; the exact identification of the property; details of the building; and rules concerning the transfer of liabilities and benefits relating to the property.
Are special consents required for certain transactions (for example consent by a spouse)?
A spouse or registered partner cannot transfer the title, mortgage, or lease of their common home without the other party’s approval.
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?
According to statutory law the seller may disclaim responsibility for the property by selling it as seen, often referred to as "sold as is". Even if the contract includes such a clause (which it often does), sellers will still be held responsible if: they have given inaccurate information about the property; have failed to provide important information of which they are aware; or the property is in a substantially worse condition than could be expected.
This responsibility may not be negated by a contractual agreement with the buyer.
Between organisations it is common for specific warranties to be negotiated.
The buyer must notify the seller within a reasonable time if circumstances are discovered which may constitute a breach of contract.
What are the buyer’s remedies for misrepresentation by the seller?
In the case of a material breach of contract, the buyer is, in some cases, entitled to terminate the contract (with an associated right to the refund of the purchase price and receipt of damages). In other cases, the buyer may ask the seller to repair the defects, or to reduce the purchase price.
Are there any interests in real estate other than exclusive ownership?
If so, what are they?
Interests in real estate similar to exclusive ownership can be classified under Norwegian law as follows:
- "Renting land" (tomtefeste) gives the right to build and maintain a house on a third party's property. Such a right is granted for a certain period of time and when this expires the owner of the house often has the right to buy the property, pursuant to Norwegian law number 106 of 20 December 1996.
- "Easement" (servitutt) gives a restricted right to enjoy part of a third party's property for a certain period of time, pursuant to Norwegian law of 29 November 1968.
- "Right of renting/leasing" (husleie) gives the right to use another person's property for a certain period of time, pursuant to Norwegian law number 17 of 26 March 1999.
- "Joint-property" (sameie) gives the right to own a property together with others in co-ownership, pursuant to Norwegian law number 6 of 18 June 1965.
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?
The following areas should be verified by the buyer:
- The development plan: each municipality develops a plan for its local area. This provides a description of the uses allowed in different areas of the municipality.
- Building permits and licences: the right to develop a property depends on being granted a building licence by the local authorities. The buyer should verify that any construction has been carried out with the local authorities' prior approval and that the property has been built in accordance with the building permits granted (according to the description provided in the designs and plans attached to the permits).
- Fitness for use: all property must be provided with a "fit for use certificate" (Brukstillatelse) attesting that certain health and safety requirements have been met.
- Fire prevention provisions: according to Norwegian law number 20 of 14 June 2002 the buyer must ensure that the building complies with safety regulations.
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?
This situation is normally governed by the "polluter pays" principle, though the seller is free to disclaim responsibility in the contract. However, if pollution is discovered, the owner of the building may be held responsible by the authorities regardless of any contract which exists. If, according to the contract, responsibility for the pollution rests with the seller, the buyer may then subsequently claim restitution from the seller.
How can a buyer ascertain the possible uses of an area under the applicable zoning or planning laws?
Can uses be changed?
The development plan provides a description of the uses allowed in different areas of a municipality. Local authorities may make further adjustments to the plan. Interested persons can contact the local authority for access to the development plan.
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 common for larger contractors to enter into a development agreement with the relevant public authorities to facilitate a development project. Under such an agreement the developer would normally undertake to carry out certain public works, such as building roads, public parking spaces, green areas etc.
D. TAXES RELATED TO ACQUISITION OF REAL ESTATE
Are there transfer taxes or sales taxes?
Where deeds of transfer are filed with the Land Register, registration is normally subject to a transfer tax of 2.5% of the purchase price. There are exemptions from this where property is transferred between married couples, where the transferred property is a unit in a housing co-operative or where companies are merged or demerged. The documentary charge is paid by the buyer.
The seller must pay income tax on the profits of the sale.
What are the normal transaction costs?
Agency fees are usually between 1% and 3% of the purchase price. These are normally paid by the seller unless otherwise agreed. In addition there is a charge for having the title deeds officially registered, as well as any mortgage deeds, for reasons of security. These charges are paid by the buyer. In the case of an ordinary sale and purchase, costs will generally amount to at least NOK 3,500.
How are transaction costs shared by the buyer and seller?
Usually the estate agent's fees are paid by the seller, while the documentary and registration costs are paid by the buyer.
In the case of other costs, such as legal fees etc., each party pays its own expenses.
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