The types of security typically entered into by an investor are mortgages, pledges, charges and assignments and these types of security can be combined. The most typical one created by an investor who is borrowing to acquire or develop real estate, is a mortgage in the real property which must be registered in the Danish Land Register. The security package often also includes an absolute guarantee/suretyship.
Last modified 13 Mar 2025
As a general rule, the security over real estate includes the land and the buildings that are erected on the land.
The security doesn't include moveable objects at the property. The security only includes fixed fittings, such as wires, heating systems or similar which are installed in the building or on the land/property.
Last modified 13 Mar 2025
The concept of a trust is not recognised under Danish law.
Last modified 13 Mar 2025
As a general rule under Danish law, a change of lender (creditor), does not require the debtor’s consent. However, if the debt is traded between lenders, the transfer of the debt must be perfected by notification to the debtor. If the loan is secured by the most typical type of security in real estate financing; a mortgage, the change of the mortgagee must be registered in the Danish Land Register.
Last modified 13 Mar 2025
There are no restrictions on granting security to foreign lenders.
Last modified 13 Mar 2025
Fees must be paid to the Danish Land Registration Court on registration of a mortgage. The fee is DKK 1,825 plus 1.45% of the amount of money secured.
The security is enforced by applying for sale by foreclosure auction. The Danish enforcement court will be the one handling the foreclosure sale. The fee for applying for a foreclosure sale is DKK 1,500.
Last modified 13 Mar 2025
Under Danish law, there are both financial assistance rules and corporate benefit rules which must be complied with.
The Danish Companies Act chapter 13 contains rules regarding financial assistance by a limited liability company. The rules on financial assistance in the Danish Companies Act prohibit a company from (directly or indirectly) providing security for the acquisition of its own shares or the shares of its parent company. These rules must be complied with when financing and refinancing acquisitions.
It is therefore unlawful for a company to provide security in the company’s real estate assets for a third party’s acquisition of shares in the company or its parent company, unless certain conditions are met. First of all, it must be approved at a general meeting where a written report on the matter is submitted. Secondly, it must be financially advisable, and thirdly the security must be provided on arm’s length terms. Financial assistance must always be prudent taking the company’s capital resources into account, and the company may only provide financial assistance if the total amount is less than or equal to the company’s statutory distributable reserves. With that being said, this lawful procedure is rarely used in Denmark.
The rules about corporate benefit also apply under Danish law, and states that agreements etc. entered into by a company must be in the company’s own interest. In the absence of corporate benefit, members of the board of directors and/or the executive management will be at risk of liability for damages. Under Danish law, it may be assumed that the requirement for corporate benefit can be at least partially fulfilled by reference to the interests of the group to which the company belongs.
Last modified 13 Mar 2025
There are no restrictions on payments made to foreign lenders under a security document or a loan agreement unless the foreign lender is subject to financial sanctions imposed by the Kingdom of Denmark due to foreign policy or by obligation to international duties.
Last modified 13 Mar 2025
There are some cases where it is possible for existing debt to become postponed, but this would normally be in such cases where the lender fails to register the mortgage in the Danish Land Register, or if the mortgage is not registered or filed for registration (and later on refused for registration) at the same time (interpreted strictly) as the debt is incurred. If the latter, the mortgage is subject to a hardening period of three months, and all newly created mortgage that is registered in the Danish Land Register in good faith will take priority over the previous (un)registered mortgage. The same applies for any unregistered mortgage. If the lender has duly registered the mortgage in the Danish Land Register, newly created debt secured by mortgage can only take priority over existing mortgage if the existing mortgagee agrees to this.
In some cases, the loan document can also provide for newly created debt to take priority over existing debt.
Please note that according to the Danish Land Registration Act, certain taxes, duties and contributions to fire insurance that rests with the property have priority right regardless of any already registered rights. The same goes for certain payments due to supply measures carried out by or on behalf of a public authority.
Last modified 13 Mar 2025
If the lender and borrower agree to make foreign law applicable, local courts will recognise and apply this.
The enforcement of the claim must always be under Danish law.
The parties may agree that foreign law is applicable to loan and security agreements as between themselves, but the act of perfection in relation to real estate in Denmark must be compliant with Danish law. A mortgagee’s position in relation to any third party, e.g. in the event of the borrower's bankruptcy, will also be subject to Danish law.
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If the security has not been validly perfected, the security will be extinguished if the borrower enters into insolvency proceedings. Any security interest that has not been validly perfected may also be set aside by extinction by a third party in good faith.
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A secured lender is not liable for environmental damages unless the pollution is caused by the lender.
Last modified 13 Mar 2025
If the borrower is in default, the lender must send a reminder to the borrower and inform the borrower that a failure to pay will result in the termination of the loan and further costs for the borrower. Subsequently a letter of termination must be sent to the debtor/borrower.
If the borrower is still in default after the reminder and the letter of termination, the lender can use the reminder to obtain an execution at the Danish enforcement court.
It usually takes about one to three months to obtain an execution over the property at the Danish enforcement court.
When the lender has obtained an execution over the property, the lender is able to sell the property by foreclosure sale.
A sale by foreclosure auction usually takes from three to five months to obtain.
Last modified 13 Mar 2025
In Denmark debtors have the option of entering into restructuring. The rules, which replace the previous rules on the suspension of payment and compulsory arrangements with creditors, were incorporated in the Danish Bankruptcy Act and came into force on 1 April 2011 with later amendments.
Either the creditors or the debtor can request restructuring proceedings be initiated. The debtor must be insolvent. When restructuring proceedings are commenced, the bankruptcy court will appoint an administrator (usually a lawyer). The bankruptcy court will also appoint an accountant if requested.
The administrator must draw up a restructuring plan (on how to make the debtor solvent, on what type of final restructuring proposal will be put forth later, etc.). Until the restructuring plan is adopted by the creditors, the debtor can secede from the restructuring (at the latest eight weeks from the beginning of the restructuring). If the debtor secedes from the restructuring, the creditor can proceed to file for bankruptcy.
After this point, the restructuring proceedings will end with either the adoption of a final restructuring proposal or a bankruptcy.
If the proceedings end with an adoption of the restructuring proposal, the business is reorganised, either through a compulsory composition (on reduction or cancellation of debt) with the creditors and/or a business transfer.
There are certain time limits that must be complied with:
Mortgagees are not entitled to enforce their security during the restructuring proceedings.
Under the Danish Bankruptcy Act, a compulsory arrangement in restructuring does not cover mortgage claims to the extent that the mortgage provides coverage. Determination of the value of the real estate will be made either by the administrator, the accountant or the bankruptcy court (if applied for by the debtor).
However, a mortgagee will be bound by the compulsory settlement in respect to the portion of its security that is not covered by the value of the mortgaged property.
In addition to the rules on restructuring, there are rules on preventive restructuring. It requires that the debtor is insolvent or, owing to financial difficulties, is likely to become insolvent. Thus unlike the restructuring rules, preventive restructuring does not necessarily require insolvency.
The purpose of the rules on preventive restructuring is to give a debtor in financial difficulties an opportunity to reach an overall arrangement with its creditors.
The debtor can request an enforcement restriction order. This means that creditors cannot enforce their claims through the bankruptcy court. However, this requires that the company informs all its creditors accordingly and that an administrator be appointed. Alternatively, the company may choose not to request an enforcement restriction order, and then wait to inform the creditors until a restructuring proposal is made. In that case, it is not mandatory to appoint a restructuring administrator.
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Generally, the onset of an insolvency procedure (both bankruptcy and restructuring) does not affect a security interest, although in the first six months of bankruptcy proceedings only the trustee of the estate can implement the enforcement of the security. If the trustee has not applied for the sale of a charged property by foreclosure auction within six months, the lender can demand that the trustee applies for such public auction without further delay.
If the security has not been validly perfected, the security will be extinguished when the borrower enters into insolvency proceedings.
During the insolvency procedure the security may be made void if the security is provided for ‘old debt’. The Danish courts interpret this very strictly, and a security will therefore be void if it is not provided against a new debt. In addition, the act of perfection must be made without undue delay. In both cases, the security can be set aside if it is created and perfected less than three months before the reference date.
Transactions that unduly favour one creditor at the expense of other creditors can be set aside.
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The fundamental view of bankruptcy is that all creditors are to be treated equally according to the respective amount of their claims. However, this general view is modified significantly as creditors are divided into six classes according to the nature of their claims.
The order of priority of creditors is as follows:
Claims in a higher class must be paid in full before creditors in a lower class can be paid. Creditors in the same class receive payment relative to the amount of their claims.
Bankruptcy proceedings allow for special rights and properly perfected security interests held by creditors. The net proceeds of sale of the charged asset are distributed to the secured creditor in full.
When real estate is sold, the lender will receive payment according to their priority standing in the property as stated in the Danish Land Register.
Last modified 13 Mar 2025
Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?
As a general rule under Danish law, a change of lender (creditor), does not require the debtor’s consent. However, if the debt is traded between lenders, the transfer of the debt must be perfected by notification to the debtor. If the loan is secured by the most typical type of security in real estate financing; a mortgage, the change of the mortgagee must be registered in the Danish Land Register.
Last modified 13 Mar 2025