Market spotlight

Trends and prospects

What are the current trends in and future prospects for the real estate market (both commercial and residential) in your jurisdiction?

Over the past few years the Danish real estate market has been very active and on the rise with regard to both commercial and residential real estate. The players are predominantly institutional investors (Danish and non-Danish), real estate funds and property developers.

The market has generally been seen as very attractive in recent years for both local and foreign investors and the fundamentals are strong – particularly in the larger cities, with Copenhagen still being the main focus for most foreign investors. The hotel segment has been very active, with many new rooms being added to the market and currently under construction. The same applies to the residential markets, with many new projects being completed over the past few years in a market with a clear upward trend. The logistics segment is also characterised by high activity and the office segment currently sees low vacancy rates (and thus potential investment opportunities). The outlook for the coming years remains excellent, with considerable investor interest also being directed at the segment for student and senior housing.

Rights and registration

Rights

What types of holding right over real estate are acknowledged by law in your jurisdiction?

In Denmark, freehold and leasehold are acknowledged as holding rights over real property.

Properties subject to either freehold or leasehold interests may be:

  • traditional real property (a full plot with its unique title number including any buildings thereon);
  • owner-occupied flats or condominiums; or
  • buildings on leased land.

Such properties and the holding rights pertaining thereto are registrable in the Danish land register, which is available and operated digitally. 

Are rights to land and buildings on the land legally separable?

As a rule, it is not possible for a land owner to grant separable rights to the land and to buildings on the land. The land and the building are considered to be one legal entity.

However, it is possible to register a building on leased land on a separate sheet in the land register, provided that the owner of the land is different from the owner of the building (this will be fulfilled in case of a land tenant erecting a building on the leased land). It is a prerequisite for such registration (and for the pledge of the building as security) that the rights to use the land (typically by way of a written ground lease) are established and exist. It is customary that ground lease rights be registered in the land register.

Once the rights to use the land cease to exist (ie, when the ground lease is terminated – whether for breach, convenience or expiry at a pre-agreed date), the ownership rights to the building will (if not removed by the tenant at the end of the lease) pass to the landlord without any consideration being payable. That being said, it may be agreed in the ground lease agreement that consideration for the building should be paid by the landlord at the end of the lease and it will often also be agreed in the ground lease agreement that the landlord may demand the demolition of the building at the cost of the tenant.

Any security rights in the building granted by the tenant during their ownership of the building will not be protected at the end of the ground lease, since the landlord is free to demolish the building without any duty owed to the creditor having been granted security rights by the tenant.

A ground lease tenant may demand registration of their rights under the ground lease in the land register.

Once the land use rights have been established, the owner of a building on the leased land will similarly have a right to demand registration in the land register of their ownership right to the building and the landlord must loyally cooperate in that regard.

Once the registrations are in place, this will provide the basis for the rights to register security rights over the ground lease rights and the ownership rights to the building.

A key issue for any person to whom security is granted over rights under ground leases and buildings on leased land – apart from the remaining (non-terminable) period of the ground lease – is whether the pledgee has any cure and step-in rights, which the landlord is obliged to accept. Under Danish law, a landlord has no obligations towards third parties in terms of cure and step-in rights, but such rights are often agreed in ground leases.

Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?

Non-Danish citizens who have not previously been domiciled in Denmark for an aggregate period of at least five years can purchase real property in Denmark only with the permission of the Ministry of Justice. The same goes for companies and associations that are not domiciled in Denmark.

However, EU citizens, citizens of European Economic Area (EEA) countries and EU companies may purchase real property in Denmark without the ministry’s permission where certain requirements are met, but only if the property is intended to serve as a necessary permanent residence for the purchaser, or where the purchase is a prerequisite for operating the purchaser’s own business or supplying services. These more extensive rights follow from Executive Order 764 (18 September 1995).

Holiday residences may be purchased by non-Danish residents only with the permission of the ministry, which rarely grants such permits.

Non-Danish citizens and companies may hold and exercise lease rights over real estate. However, long-term lease agreements may be considered as circumvention of the rules on ownership.

How are rights, encumbrances and other interests over real estate prioritised?

The priority of rights, encumbrances and other interests is set by the time of registration in the Danish land register. 

Registration

Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?

Real estate rights must be registered in the Danish land register in order to obtain protection against third parties' rights over the same property. The legal effect of the registration is that if the registered holder of the right is acting in good faith in respect of any unregistered conflicting rights of third parties, such registered holder is not obliged to respect the unregistered right and cannot be met with any objections as to the validity of the registered right, except where the land register has become incorrect due to extreme circumstances (eg, submission of forged documents or documents signed under the threat of violence or by persons without legal capacity). 

What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?

Electronic registration takes place at the website www.tinglysning.dk, where the rights holder submits an application for title deed. The applicant must have a NemID (a Danish key-card to electronic signature) or have issued a power of attorney to, for example, their lawyer. Persons who do not have a Danish social security number and companies who are not registered in the central business register must issue a power of attorney.

What information is recorded in the national real estate register(s) and to what extent is such information publicly available?

The Danish land register includes information regarding the property, including the size of the area, information about ownership, mortgaging and easements. The land register is publicly accessible at www.tinglysning.dk.

Is there a state guarantee of title?

Registration in the land register is an act of perfection whereby the holder of the right secures their right to the property against other rights.

Where the land register has become incorrect due to extreme circumstances (eg, submission of forged documents or documents signed under the threat of violence or by persons without legal capacity), a person tentatively acquiring a right in good faith and in reliance on the land register and subsequently losing it due to such extreme circumstances is entitled to compensation from the state for not obtaining the right (see Section 31 of the Land Registration Act). 

Sale and purchase

Brokerage

How are real estate brokers regulated in your jurisdiction (eg, through caps on commission or disclosure obligations)?

In Denmark, real estate brokers are governed by the Act on Procurement of Real Estate, which includes detailed rules and requirements, including mandatory provisions protecting consumers with regard to real estate brokers.

The real estate broker is typically the representative of the seller and thus acts solely in the seller’s interests. The buyer is usually recommended to seek legal assistance in relation to the purchase agreement.

There are no legal caps on the commissions of real estate brokers.

Due diligence

What due diligence should be conducted before conclusion of a real estate sale contract?

Real estate due diligence would normally consist of legal due diligence and often also commercial, financial and technical due diligence, depending on the type of property.

Legal due diligence typically includes:

  • confirmation of title;
  • review of easements and encumbrances registered on the property;
  • review of zoning issues;
  • review of environmental issues (often in cooperation with a firm conducting the technical environmental due diligence);
  • review of lease agreements and other third-party rights;
  • review of any ongoing disputes; and
  • review of issues pertaining to real estate tax.

Preliminary agreements

Are any preliminary agreements typically entered into before conclusion of a sale contract?

In real estate transactions, parties do sometimes agree to a letter of intent or exclusivity, sometimes granting the buyer an exclusive right to conduct a due diligence.

However, it is more customary that a sales contract is quickly entered into and signed by both parties. Such sales contract may typically include conditions to be relied on within a specified timeframe (eg, regarding satisfactory legal and technical due diligence being completed and/or financing being obtained).

Contracts

Must sale contracts be concluded in writing? If so, must they be notarised?

Under Danish law it is theoretically possible to convey a real property by way of a verbal agreement, although some legal scholars consider that a real estate transaction is so complex that in fact a written agreement is required. In any event, registration of the transfer of ownership does involve digital signing and it is rare to come across claims that real property has been transferred by way of a verbal agreement.

Denmark has no notary system with respect to real estate transactions. 

Can sale contracts be concluded electronically?

Yes, in principle the buyer and seller can fill in the terms of the sales agreement in the land register and sign digitally.

What provisions are usually included in a sale contract?

A sale contract typically includes the following provisions:

  • names and addresses of the buyer and seller;
  • purpose;
  • completion date and completion deliverables;
  • information about the property and the general terms on which the property is taken over;
  • purchase price, including adjustment mechanisms;
  • payment terms;
  • insurance obligations;
  • the parties' warranties and specific indemnities;
  • requirements as to the operation of the property until the completion date;
  • provisions regarding completion statement preparation;
  • value added tax (VAT) issues (including the seller’s assumption of any VAT adjustment obligation);
  • confidentiality;
  • responsibility for transaction costs (legal costs and stamp duty costs);
  • various notices to public authorities and third parties;
  • assignment and transfer; and
  • governing law and conditions.  

Obligations and liabilities

What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?

The seller is subject to the general obligation under Danish law to loyally disclose any matter which may be of importance to a buyer when deciding whether to conclude an agreement to purchase the property in question. During any due diligence, the seller must also loyally cooperate and answer any questions truthfully. It suffices for the seller to fairly disclose to the buyer documents from which such matters may be derived during the buyer's due diligence. The buyer conversely has an obligation to carry out reasonable investigations (caveat emptor).

Where the seller has failed to adhere to its disclosure obligations, the general remedies for breach – depending on the severity of the breach and subject to any agreements on de minimis, basket and caps – will be available to the buyer, including pro rata reduction of the price and compensation. A termination right on the part of the buyer would require the breach to be material.

What contractual warranties are usually given by the seller?

The seller always warrants that the seller is the sole title holder of the property. Besides this, the warranties given by the seller depend on the parties' negotiations, the nature of the transaction and the parties involved. Bankruptcy estates and private equity sellers will be reluctant to offer more than very basic warranties. In recent years the use of warranty and indemnity insurance has become increasingly popular in transactions relating to Danish properties.

Standard warranties include:

  • free and full title;
  • absence of unregistered third-party rights;
  • absence of disputes (unless disclosed);
  • issues pertaining to lease agreements, including no termination or breach by the tenants; and
  • absence of unfulfilled obligations with regard to the authorities, including taxes relative to the period prior to the transfer date.

Are there any other obligations on the buyer, aside from paying the purchase price?

Usually, the buyer must send the application for title deed to the land register. The buyer is generally under an obligation to loyally cooperate with a view to complete the transaction on the terms and conditions set out in the sales agreement, including by signing the digital deed and signing other documents (eg, in connection with the buyer's assumption of any VAT adjustment obligation).

Taxes

What taxes are payable on the sale and purchase of real estate? Are any exemptions available?

Registration of a sale of property in the land register is subject to a registration tax of 0.6% of the purchase price of the property, plus a standard fee of Dkr1,660.

The sale of shares in a real estate company does not attract any registration tax.

In larger commercial transactions, one or more properties are often dropped down into a special purpose vehicle (SPV) (contribution in kind of the property or properties) and the shares of the SPV are subsequently sold. Holding period restrictions apply, depending on the methodology adapted. 

Other structures are also adopted in larger transactions, including demerger of properties in conjunction with the parcelling out of properties from a larger property. 

Transfer of title

When does title in the property transfer?

The title to a property is transferred to the buyer at the time agreed between the parties, but conditionally on the purchase price being deposited by the buyer. The title must be registered in the land register as a perfection act to ensure protection against third parties' (unregistered) conflicting rights. The final registration procedure and release of the purchase are completed after the title transfer date by the lawyer in charge of the completion of the transaction.

Timeframe

What is the typical duration of a sale transaction?

The duration depends on the complexity of the transaction, the scope of due diligence and the level of negotiations between the parties. A typical property transaction would be finalised within a couple of months.

Leases

Contracts

Must a lease agreement be concluded in writing?

Lease agreements must be in writing if it is required by either the tenant or the landlord.

Are there any regulations setting out mandatory or prohibited provisions in lease agreements?

The level of mandatory protection for residential leases is considerably higher than that for commercial leases. With respect to residential leases, restrictive and mandatory rent control rules apply, although rent control provisions securing relatively low rent for tenants (rent being adjusted on the basis of costs and limited return) apply to a declining part of the overall residential market (modernised and newly built flats not being affected by the most restrictive rent control regimes). The Business Rent Act provides tenants with a high level of mandatory protection in the contractual relationship with the landlord (eg, with regard to restrictions on the landlord's right to terminate the lease for convenience).

What provisions are typically included in lease agreements?

A business lease agreement typically includes the following provisions:

  • names and addresses of the landlord and tenants;
  • rental property address and details;
  • permitted use;
  • effective date;
  • termination (notably, the earliest time for the landlord and tenant to submit notice of termination);
  • rent and deposit;
  • provisions governing sub-lease and assignment rights;
  • the tenant's obligations over and above the basic rent to pay utility accounts, property accounts and other costs and expenses;
  • rent indexation and market rent adjustment;
  • maintenance and renewal;
  • amendment to lease terms;
  • house rules;
  • liability and risk;
  • vacation and delivery up of leased premises;
  • value added tax; and
  • right to register the lease.

What are the standard forms of lease agreement used in your jurisdiction?

Residential leases are often entered into using a format lease, whereby special conditions must be added in a special section at the end of the lease in order to be valid. The Ministry of Transport, Building and Housing has authorised a set of standard forms of residential lease agreements, which are often used. The Danish Association of Real Estate has also prepared various standard forms of lease agreements, although in general commercial lease agreements are individually prepared and negotiated, typically with the landlord providing the initial draft.

Length of term

Are there any regulations on minimum and maximum terms of leases?

Lease agreements are usually made for an indefinite term. Fixed-term lease agreements are subject to mandatory restrictions and are rarely used. Lease agreements made for an indefinite term may usually be terminated by either party giving six to 12 months' prior notice, unless the parties have agreed on specific periods of non-terminability.

However, even in respect of commercial leases, the landlord's right of termination is restricted by the Business Rent Act, which provides that the landlord is entitled to terminate for convenience only in a few instances.

In order for a lease right to land to be registered in the land register, the period of the right should not exceed 30 years. However, a lease with a termination notice period of 30 years complies with the restriction.

Are long-term tenants accorded any special rights as to extension or renewal of leases?

In principle, no. However, where the reasonable interests of the landlord and tenant are weighed against each other (eg, the landlord's termination for the purpose of own use), the length of time that the tenant has occupied the leased premises will be one of the factors considered.

Rent

What regulations (if any) govern rent increases?

In residential leases, there are various categories of flat which determine whether a given lease is subject to strict rent control mechanisms or is essentially restricted only by the rent achievable in the market. Detailed rules govern the ability to increase rent based on improvements carried out by the landlord.

In commercial leases, the landlord and the tenant are free to agree on the fixing of rent and the parties will generally be bound by such an agreement. However, their freedom of contract is subject to certain restrictions.

Unless the parties have agreed otherwise, both the landlord and the tenant will be entitled to demand that the rent be reviewed every fourth year if the rent paid under the lease agreement is considerably lower or higher than the existing market rent for the leased premises in question. The market rent is based on a comparison of the rent paid for similar leased premises in the relevant area.

The tenant and the landlord often agree to an annual index adjustment of the rent, sometimes with a minimum and/or maximum annual adjustment.

What regulations (if any) govern rent security deposits?

The tenant must pay a deposit only if the landlord and tenant have agreed to it. A deposit does not carry interest (unless specifically agreed) and the landlord need not keep the paid deposits separate from their other funds. There is thus a considerable cash-flow advantage to a landlord flowing from deposits being paid. There are statutory limitations on the size of the deposit payable by residential tenants.

Can the tenant withhold rent payments on any legal grounds?

A tenant is in principle entitled to offset legally valid claims against claims from the landlord, provided that the general conditions under Danish law for set-off are fulfilled (ie, that the opposing directed claims should be between the same parties, of the same nature (money claim against money claim), and that the tenant's claim must be due and not time barred).

However, it is a risky proposition for the tenant to offset their claims against the rent; Danish case law has several examples of a tenant being evicted on the basis of the tenant's failure to pay rent in full when due, because an alleged right to set off was considered insufficiently clear and not meeting the requirements. 

Sub-letting

Under what circumstances is sub-letting typically allowed?

In residential leases, the tenant is generally restricted to sub-letting only for shorter periods (up to two years) in case of special circumstances (eg, being relocated to a position abroad or far away on a temporary basis).

In commercial leases, there is no right to sub-lease unless agreed between the parties. Tenants will often push to obtain a right to sub-lease, particularly in leases with a long non-termination period resting on the tenant. 

Obligations and liabilities

What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?

In residential leases, the landlord’s obligations are generally much wider than in commercial leases and often extend to repair and replacement of white goods and other installations, on top of external maintenance.

In commercial leases, the landlord is usually responsible for all external maintenance of the leased premises. Where the leased premises are not in the state of repair which the tenant is entitled to demand in accordance with the lease agreement, the tenant is entitled to have the defect remedied at the landlord's expense.

The tenant is entitled to demand a proportionate reduction in the rent for the duration that such defect impairs the value in use of the leased premises to the tenant. Further, the tenant is entitled to claim damages where the leased premises are damaged at a later stage because of the landlord's neglect or in the event of obstacles or inconvenience to the tenant's right of use because of matters for which the landlord is responsible.

Where the leased premises are defective and the landlord does not remedy such defect immediately on a request made to this effect, or where it cannot be remedied within a reasonable time, the tenant is entitled to terminate the lease agreement where the defect can be considered material or the landlord has acted fraudulently.

What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?

In commercial leases the tenant is usually responsible for all internal maintenance of the leased premises, and to the extent required to keep the leased premises in a good state of repair corresponding to that on the effective date. The consequence of breach is that the landlord can immediately demand repair.

In residential leases, the landlord's obligations are generally wider and the tenant's obligations correspondingly less onerous (eg, with respect to repair and replacement of white goods and other installations).

Taxes

Are any taxes payable on rental income? If so, are any exemptions available?

Yes, rental income is to be included in the taxable basis and is therefore taxable.

In respect of commercial rental activities carried out through corporations, the corporate tax rate applies. The general corporate tax rate in Denmark is 22%, applied to the company's profit. 

Special rules and caps apply for private persons’ rental income from their own properties, including by letting out through Airbnb and similar services. 

Insurance

Are the landlord and tenant bound by any insurance requirements?

The landlord must insure the building as such.

Pursuant to Section 40 at the Business Rent Act the tenant is liable for any damage caused by the installations, conversions or alterations made by the tenant. The landlord is entitled to demand that the tenant provide adequate security by means of insurance or in another manner to comply with their liability in damages.

Termination and eviction

What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?

The landlord is generally restricted in their right to terminate a lease for convenience. This applies for residential leases even more than for commercial leases. That being said, for commercial leases (with the exception of ground leases and certain special leases at amusement parks and airports, among others), the Business Rent Act limits the landlord's rights to terminate for convenience to the following situations:

  • If the landlord wishes to make use of the leased premises. However, this applies only if the landlord does not carry on business within the same industry as the tenant. Further, it should be noted that such termination must be deemed reasonable based on an assessment of the affairs of both the tenant and the landlord, and therefore the landlord will often need to put forward very good arguments for terminating the lease agreement.
  • If the landlord provides documentation that, as a result of demolition or rebuilding of the leased premises, the leased premises must be vacated. If the premises are to be re-let after the rebuilding, the landlord must offer the tenant a lease for new premises similar to the vacated premises.
  • If, despite reminders from the landlord, the tenant fails to observe good practice in respect of the leased premises, including any non-observance of house rules, and if the tenant causes inconvenience to the other tenants of the property.
  • If the landlord has strong reasons for being released from the lease agreement. The scope of whether strong reasons exist is very narrow.
  • If the landlord and the tenant have agreed that Section 14 of the Business Rent Act is to apply to the lease agreement. According to Section 14, the landlord may terminate the lease agreement eight years after entering into it if the tenant and the landlord are unable to reach an agreement to change the terms of the lease agreement. Section 14 is an innovation which came into force on 1 January 2000. Further, Section 14 applies only if the parties agree. It is rarely used in commercial lease agreements. If agreed by the parties, the landlord will be entitled to request a change to the terms of the lease agreement unilaterally after eight years from the commencement date of the lease. The landlord may, for example, wish to increase the rent or reduce the term of the lease. If the tenant does not wish to accept the landlord's request for a change to the term, and negotiations do not result in an amicable agreement, the landlord will be entitled to terminate the lease agreement.

If the landlord can terminate for convenience, the tenant will generally be entitled to compensation and in respect of certain commercial leases and in respect of loss of goodwill (notably retail leases, where the location of the leased premises is key).

If the landlord is entitled to terminate and has properly followed the formal termination procedure (including adherence to mandatory notice requirements, whereby notices must meet certain formal requirements depending on the breach/reason for termination), and the tenant does not vacate the premises despite being legally obliged to do so, the landlord must pursue eviction proceedings through the bailiff court.

Finance

Finance providers

What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?

Typically, real estate financing is provided by the local mortgage institutions or by local or foreign banks. There are laws regulating both types of lender.

Financing structures

What are the most common structures used to secure real estate financing and how are these security interests perfected?

Traditional mortgage loans are provided by mortgage institutions and are bond-backed financing on generally favourable terms, in terms of both interest and conditions. The Danish system has existed for more than a century and has proven very stable, albeit complex.

Loans from banks and financial institutions will also generally be secured by the registration of a mortgage against the property in question. 

What covenants are typically made in financing agreements?

The traditional mortgage loan is secured by a first priority mortgage being registered on the property without any Loan Market Association (LMA) type covenants, but with a cap of 60% of the property value for commercial properties and 80% of the value for residential properties. No loan-to-value covenant applies for such traditional mortgage loans after the mortgage loan has been granted and the traditional mortgage loan is subject to few covenants (due insurance must be maintained, but no ongoing business information is to be supplied during the term of the loan).

In terms of loans offered by banks and other financial institutions, the covenants will typically be comprehensive LMA-type covenants, including requirements as to:

  • provision of certain financial information;
  • loan-to-value requirements to be maintained;
  • debt-service coverage ratios;
  • lease arrangements; and
  • compliance requirements (eg, environmental). 

Enforcement of security

How are security interests enforced in the event of default?

In addition to mortgages registered in the land register, security interests pertaining to real property include:

  • pledge over lease agreements;
  • step-in rights in lease agreements;
  • mortgages registered on buildings erected on leased land;
  • pledge of rental income; and
  • pledge of shares in the company owning the real property.

In case of mortgage security interest, ultimately a mortgage holder who has not been duly paid will have to demand that the property is being auctioned off through the intervention of the court system. In case of other security interests, enforcement depends on the type of security. In case of pledge of rental income, the enforcement will be notification to the tenants to the effect that the rent may be paid only to the pledgee’s account.

What is the typical timeframe for the enforcement of security?

In case of mortgage security, provided that the mortgage properly allows for submission directly to the courts, a timeframe of four to six months is normal.

Investment

Investment climate

What is the general climate of real estate investment in your jurisdiction?

The real estate investment climate is generally favourable, with low transactional costs and relatively little red tape. In recent years Copenhagen has topped the list of most attractive European cities to invest in.

Investors

Who are the most common investors in real estate?

The players are predominantly (Danish and non-Danish) institutional investors, real estate funds and property developers.

Are there any restrictions on foreign investment in real estate?

Non-Danish citizens who have not previously been domiciled in Denmark for an aggregate period of at least five years can purchase real property in Denmark only with the permission of the Ministry of Justice. The same goes for companies and associations that are not domiciled in Denmark.

However, EU citizens, citizens of European Economic Area (EEA) countries and EU companies may purchase real property in Denmark without the ministry’s permission where certain requirements are met, but only if the property is intended to serve as a necessary permanent residence for the purchaser or where the purchase is a prerequisite for operating the purchaser’s own business or supplying services. These more extensive rights follow from Executive Order 764 (18 September 1995).

Non-Danish residents may purchase holiday residences only with the ministry’s permission, which is rarely granted.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

The structures used depend on the complexity of the transaction in question. Major cross-border real estate transactions can be structurally very complex.

Apart from the straightforward purchase of real estate, it is becoming increasingly common for real estate to be transferred by way of the sale of the shares in the company owning the property in question. The sale of shares does not attract capital gains tax or transfer tax and generally no withholding tax is payable on the sale of the shares. 

Planning and environmental issues

Planning

Which government authorities regulate planning and zoning for real estate development and use in your jurisdiction and what is the extent of their powers?

The Planning Act delegates responsibility for planning between the minister of business and industry and the municipal councils. The purpose of the Planning Act is to ensure a unified planning system that protects nature and the environment and creates the grounds for growth and development.

The Danish government is responsible for national planning interests, while the local councils are responsible for spatial development plans and the planning of towns (ie, preparation of local plans). For example, larger real estate development projects usually require adoption of a new local plan of the area.

What are the eligibility, procedural and documentary requirements to obtain planning permission?

When applying for a building permit, the authorities will check whether a given project is within applicable planning parameters. If not, dispensations may be sought or it may be necessary to seek to get a new local plan adopted. In principle, any developer may seek to convince the authorities to adopt a planning foundation that permits the project and usage in mind. However, ultimately it is a political decision as to whether a proposed local plan is adopted. A new local plan is often drafted in close cooperation between the developer and the planning and technical departments of the municipality in question.

Can planning decisions be appealed? If so, what is the appeal procedure?

Local plans may be appealed to the Danish Planning Committee in regards to legal questions. The complaint must be submitted at least four weeks after the decision regarding the local plan has been announced.

What are the consequences of failure to comply with planning decisions or regulations?

The municipalities are responsible for ensuring that a constructed building complies with building regulations. The requirements for the construction of a building as set out in the Building Act and the planning requirements will usually be stated in the municipality's building permit. Where the municipality becomes aware of illegal circumstances, the municipality must seek to have the building legalised. Violation of the Building Act may incur fines and ultimately the removal of (the illegal parts of) a building.

What regime governs the protection and development of historic and cultural buildings?

The Act on Building Preservation governs the protection of buildings that are worthy of preservation. According to this act, the minister of culture may preserve a building of substantial architectural value or culture-historical value under certain circumstances. The Agency for Cultures and Palaces manages and maintains state-owned palaces, castles, gardens and cultural properties and is responsible for listing historic buildings and for the protection of ancient sites and monuments.

The municipalities are also required to protect Danish cultural heritage when undertaking local planning by reflecting this in the local planning guidelines.

Further, a citizen can submit a proposal for the listing of a building with the Agency for Culture and Palaces, which will assess whether the building fulfils the listing requirements.

Where a building is listed as worthy of preservation, it may not be demolished unless special permission has been obtained from the relevant local authority.

Government expropriation

What regime applies to government expropriation of real estate?

According to the Planning Act, the municipal council may expropriate private property if doing so is materially necessary to realise local planning objectives. The municipal council will inspect the property to be expropriated with at least four weeks' notice. An expropriation proceeding will thereafter be initiated with at least four weeks' notice given to the owners, users and others with a cause of action, who will be able to comment on the expropriation. The municipal council will offer compensation to the property owner. If the owner disagrees with the amount of compensation offered, they may ask the valuation authorities to decide on compensation. The valuation authorities' decision on compensation may be brought before the valuation commission.

If the Danish government wants to conduct expropriation in order to (for example) complete larger infrastructure projects, normally a construction law will be adopted for the project which sets the guidelines for expropriation. The authority responsible for the project will then ask the minister of transportation to conduct the expropriation. The minister refers the case to an expropriation commission, which summons the owners to an inspection of the properties with at least four weeks' notice. When the commission has decided on the extent of the expropriation, the owners will again be summoned to an inspection with at least four weeks' notice. After this inspection, the commission will suggest the amount of compensation. If the owner disagrees with this amount, the commission will decide on the compensation. The decision may be brought before the valuation commission.

What is the required notice period for expropriation and how is compensation calculated?

The required notice period is at least eight weeks. In many cases the land owner will be given even longer notice. Compensation in case of expropriation is calculated by the municipal council or the expropriation commissions. The decisions may be brought before a valuation commission.

Environmental issues

What environmental certifications are required for the development of real estate and how are they obtained?

No environmental certifications as such are required for the development of real estate.

The environmental requirements can be divided into those relating to the planning and construction phases and those relating to the business operations undertaken in the building once constructed. During the construction phase, environmental requirements set out in the building permit, the local plan and laws and regulations in general must be adhered to, including (for example) preservation requirements and rules for the proper handling of polluted soil.

Once the building is taken into use, the nature of the business activities undertaken at the property will determine which environmental certifications are required. If such activities are governed by the Environmental Protection Act, the company in question must obtain an environmental permit that sets the requirements for such activities. A company may also be governed by other similar environmental legislation in Denmark, which entails that the public authorities may inspect the company's activities undertaken at the property in relation to contamination, emission, noise and waste handling, among other things.

If the user of the property is not the owner of the property, the user will generally be responsible for the fulfilment of the environmental requirements directed at the business operations. 

What environmental disclosure obligations apply to real estate sales?

The seller is generally subject to the obligation under Danish law to loyally disclose any matter which may be of importance to a buyer when deciding whether to conclude a purchase agreement. During the course of any due diligence, the seller must also loyally cooperate and answer any questions truthfully. It suffices for the seller to fairly disclose documents to the buyer, from which such matters may be derived during the buyer's due diligence. The buyer conversely has an obligation to carry out reasonable investigations (caveat emptor).

What rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?

Danish environmental laws and regulations generally reflect (with certain exceptions) the ‘polluter pays’ principle.

According to the Soil Contamination Act, a ‘polluter’ is any party who:

  • for commercial or public purposes operates or operated the enterprise or uses or used the plant from which the pollution originated; or
  • has caused pollution to occur through reckless conduct or by conduct which falls within stricter liability rules under other legislation.

The legislation expressly states that the pollution or part thereof must have occurred in the said period of operation.

The registration of soil pollution at V1 or V2 level (V1 referring to expected/likely pollution and V2 referring to known pollution) does not imply a liability or an obligation to clean up the contaminated areas, nor does it restrict the continued current use of the area.

Thus, registration pursuant to the Soil Contamination Act primarily has the effect that a changed and more sensitive use of the area (eg, for residential purposes or a public playground) requires a special permit from the authorities, and that removal of soil from a registered area requires prior notification to the authorities.

Are there any regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?

In Denmark, energy labelling of buildings is mandatory and entails that buildings are labelled in accordance with their energy usage. The labelling is based on an inspection of the building conducted by an energy consultant.