20 | Investor Guide to Europe 2014
ment and even less so if the targeted property is a holiday home
or the like. Mainly due to these restrictions investors generally
choose to establish a Danish legal entity to hold the property in
question. This may be done even if the Danish company/subsi-
diary is established only with the purpose of acquiring the Danish
property in question.
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negotiations
•
In most transactions only the real estate agent, the parties and
the parties’ finance providers and lawyers would be involved.
A heads of terms agreement and a non-disclosure agreement
may be negotiated and concluded. This is unusual for smaller
deals, though.
•
Having identified the targeted property the prospective pur-
chaser receives a bundle of property related documents from
the real estate agent or the seller’s lawyers. Often, the parties
already informally agree om main terms such as price, hand-
over date etc. at this early stage. The prospective purchaser, its
lawyers, and other relevant advisers conduct a due diligence
investigation and request relevant additional information. The
purchase agreement is negotiated between the lawyers of the
parties taking into consideration the findings of the due dili-
gence investigation, and the purchase agreement is concluded.
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Conditional purchase agreements
•
A conditional purchase agreement is drawn up instead of an
absolute agreement if certain conditions remain unsettled
before the transfer can be completed. A conditional title deed
can be registered with the Lard Registry.
•
A conditional purchase agreement provides for the terms
and conditions of the sale whereas the final transfer remains
subject to the fulfilment of certain conditions.
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Payment of purchase price
•
Typically when the purchase agreement is signed the purcha-
ser makes an escrow deposit or provides a bank guarantee
for the full purchase price. In deals involving larger, financially
sound purchasers it may be agreed that no deposit or gua-
rantee needs to be made or issued. Instead the purchase price
is paid in full on the hand-over date.
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Deed of sale
•
Is the title deed according to which the ownership of a property
is transferred from the seller to the buyer.
•
The seller and the purchaser digitally sign the absolute title
deed. The deed will be submitted to the Land Registry for
registration. A conditional title deed is drawn up instead of
an absolute title deed if certain conditions remain unsettled
before the transfer can be completed.
•
In general all sales are registered with the Land Registry, and a
sale must be registered in order to be protected against third
party rights. The seller clears mortgages and other registra-
tions as agreed.
CoMMERCIaL LEaSES
The Danish Business Lease Act governs most aspects of busi-
ness lease agreements (leases of buildings used for commercial
purposes). As for business lease agreement entered into before 1
January 2001 certain exemptions apply.
The Act is generally considered well balanced, though a number
of sections in favour of tenants are mandatory.
Most provisions of the commercial leases may be freely agreed by
the parties, such as the initial rent (which can be fixed or variable)
and the duration. However, commercial leases must comply with
some mandatory rules (e.g. clauses relating to the landlord’s
termination).
In case of material breach of contract the injured party may
terminate without notice and demand compensation for losses
suffered.
A purchaser of a property with leaseholds should ensure a right
to hold the seller responsible, in case the tenant at a later stage
puts forward claims stemming from the seller’s ownership period.
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Duration : term of the lease
•
In Denmark, business premises are generally leased on a
minimum term during which the lease is non-terminable unless
the contract is breached. The period of non-termination varies
a lot depending on the type of leasehold and the investment
made by the landlord to prepare the leasehold for the tenant,
but is typically twice as long for the landlord as for the tenant.
•
Unless otherwise provided, the tenant may terminate the lease
with a 3 months’ notice, and unless otherwise provided there
is no automatic termination of a commercial lease: it may only
be terminated by notice of termination in accordance with
the mandatory rules in the Business Lease Act or with the
agreement.
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Transfer of business
•
Under the Business Lease Act the tenant may assign the lease
agreement to a third party within the same line of business,
unless the landlord has weighty reasons to object to such assi-
gnment, e.g. due to the third party’s lack of experience or its
financial situation. Subleases are not permitted. The sections of
the act about assignments and subleases are mostly deroga-
ted by agreement.
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Energy Label
•
Since 1 July 2009: in case of any new commercial lease
agreement, the landlord must provide an Energy Label and an
Energy Plan to the tenant. These documents contains informa-
tion on the property’s current energy status, energy consump-
tion (e.g. water and heat), and sets out objectives for improving
the building’s environmental performance.
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Evolution of the rent during the lease
•
Most often an indexation clause has been agreed between
the parties, so the rent increases every year according to the
net price index, but with a minimum increase of, say, 2 or 3 %.
Sometimes, a maximum increase is also agreed. Apart from
that the landlord is practically always allowed to increase the
rent proportionally with increases in taxes or utilities, or other
costs paid by the landlord with relation to the leasehold.
