All questions

Real estate ownership

i Planning

Planning in Denmark is governed by the Danish Planning Act. The planning authorities in Denmark are the Danish Ministry of Industry, Business and Financial Affairs and below that the Danish municipalities, of which there are 98.

According to the Planning Act, each area of Denmark is labelled either as rural, urban or as a holiday-house area, and the possible land use depends primarily on this label. The options for building in rural areas are largely restricted to buildings and other facilities necessary for the farm units in the area. Similarly, the options for building in holiday-house areas are restricted to primarily holiday houses.

Each municipality must develop a 'municipality plan', which must be updated at least every 12th year. The municipality plan must include a framework for the infrastructure in the municipality and the purpose and building density of each sector of the area. A local development plan, detailing the geometry and use of buildings under the municipality plan, will normally be required for land development and the erection of new buildings. Such a local development plan will be prepared by the municipality, often in cooperation with the developer or investor owning or being willing to purchase the area to undertake the development works. However, political approval is in any case required, and final approval cannot take place until a public hearing has been held.

To protect the urban environment in the city centres and support a diversified supply of shops, the Planning Act includes restrictions on the development of shopping malls outside the city centres and on the size of shops. To protect an open and accessible coastline, the Act also includes restrictions on construction on and along the coast.

The use of property, including buildings, can – as far as the Planning Act is concerned – be changed within the limits set by the relevant municipality plan and, if such a plan exists, the local development plan for the area. To achieve changes beyond these limits, an addendum to the municipality plan or a new local development plan is required.

Besides the restrictions stated in the Planning Act, limits for land use are stipulated in a number of other acts, including the Nature Protection Act, the Forestry Act and the Act on Agricultural Property.

As to planning, see also Section VII, below.

ii Environment

Under the Act on Contaminated Soil, the Danish regional administrations map contamination and possible contamination of land on the basis of available information on the use of the land – both in the past and in the present – and on the basis of field studies. Field studies are, however, only carried out on land likely to be so heavily contaminated or so located that public health, including drinking water, or the environment is endangered. The registrations made are publicly available.

The Environmental Protection Act lays down the 'polluter pays' principle, which is detailed and expanded in the Act on Contaminated Soil. The principle implies that the polluter is liable to carry out, and pay the costs of, all measures necessary to prevent, limit, analyse and clean up the pollution.

On the other hand, no one but the polluter can be ordered to pay for the above measures. This also goes for a subsequent purchaser of contaminated land or buildings. However, if such a subsequent purchaser wants to build on the land or make use of the building, he or she may have to carry out and pay for analysis, decontamination or measures to encapsulate the pollution to fulfil requirements in the building or use permit. Such requirements are normal in building permits for residential buildings, institutions or other buildings in which people will have longer stays, or with surrounding areas to be used as playgrounds or the like.

iii Tax

No transfer tax or stamp duty applies to the purchase of real estate or real estate financing.

However, all substantial rights in Danish real estate should be registered in the land registry, as such a registration made in good faith extinguishes existing, non-registered opposing rights, and protects the registered rights against future opposing rights.

To register rights in the land registry, the following registration duties must be paid:

  1. Registration of title to the property: 1,660 Danish kroner plus 0.6 per cent of the highest of the purchase sum for the property and the public valuation of the property.
  2. Registration of mortgages on the property: 1,660 Danish kroner plus 1.5 per cent of the principal of the mortgage deed. However, if mortgage deeds previously registered on the property are cancelled simultaneously, the registration duties paid on such mortgage deeds can be deducted. The same goes for registration duties represented by 'duty' mortgage deeds.
  3. Other rights, including rights of use: 1,660 Danish kroner.

When purchasing building land or new buildings, VAT, at 25 per cent, on the purchase sum must normally be paid.

iv Finance and security

In general, financing of real estate is achievable in Denmark at lower costs than in other countries through the Danish mortgage credit associations. Moreover, these associations normally offer a wide variety of loans, enabling the real estate investor to choose (1) duration (up to 20 years and in some cases up to 30 years), (2) short, medium or long-term interest rate, and (3) repayment profile (loans can be offered with grace periods of 10 years and in some cases longer). Margins will normally be between 0.6 and 1.5 per cent depending primarily on the seniority of the mortgage, the assessed creditworthiness of the borrower, and the quality of the property. The loans are granted against mortgage security in the property, normally first mortgage. Mortgage credits can be granted up to a certain percentage of the market value of the property depending on the type of property: 40 per cent for land, 60 per cent for commercial buildings, and 80 per cent for residential buildings. However, for credits beyond 60 to 70 per cent of the value, the margins will be substantially higher than for credits below this level.

In view of the low prices and wide selection of loans, Danish mortgage credit loans are the preferred source of financing for real estate in Denmark. Accordingly, most security granted over Danish real estate is first mortgages with Danish mortgage credit associations.