Rent determination in new properties

Student thesis: Master thesis (including HD thesis)

  • Sebastian Frederik Juhl
4. term, Laws, Master (Master Programme)
The purpose of this thesis is to investigate when the rule on free rent determination in properties taken into use after 31 December 1991, cf. Danish Rent Act section 53(3) is applicable.
The concepts of “taken into use” and “property” are essential in this assessment.

According to case law, a building is “taken into use” when the tenants physically move in, regardless of whether a building permit for the whole building has issued granted yet. If one apartment has been “taken into use” before 31 December 1991, the Danish Rent Act section 53(3) is not applicable regarding all apartments in the building. In case the old building has been demolished in full, the cadastral legally can change its status from “taken into use” before 31.12.1991, to now being “empty”. As a result, The Danish Rent Act section 53(3) is applicable if a new building is being constructed on the land. However, building parts from the old building cannot be reused, except for miner parts of the foundation (how much is a specific assessment).

The purpose of the Danish Rent Act section 53(3) was to incent investors and developers to construct more new and better buildings for residential purposes. Hence, the rule is meant to apply if the new building is creating more residential leases. However, the legislature has decided to merge the Danish Rent Act and the Danish Housing Regulation Act into one legislation. In regard of the possibility to fix the rent in accordance with the principle of free rent for new buildings, the legislature states in the legal remarks, that the rule does not apply if another building which has been taken into use before 31 December 1991 is also placed on the cadastral. If that is the case, it is not in every situation possible to fix the rent in accordance with the principle of free rent, even if the new building is creating more residential leases (which was the purpose). This is therefore conflicting. The Danish High Court has in one specific case reached an understanding of “property”, according to which a “property” must be interpreted as a “building”. Thus, each building can be taken into use on individual dates, and all buildings placed on the cadastral do not have the same occupation date. However, the decision regards another rule in the legislation. The Danish Rent Act section 53(3) is an exception to the standard rent determination regime, which allows the landlord exceptionally to determine and fix the rent in accordance with the principle of free rent. Without certainty, in the legal remarks and case law, it is therefore most likely that the same interpretation is not possible in regards of the Danish Rent Act section 53(3), which must be interpreted restrictively. Also, case law regarding the Danish Rent Act section 53(3) must be interpreted as the cadastral plot. This thesis therefore concludes that it is most likely that the wording “property” must be interpreted as the cadastral property concept in every situation in accordance with the legal remarks prior to the “new” lease legislation. However, no certainty can be given on the topic as the Danish courts have not ruled in a similar case related to the Danish Rent Act section 53(3).

The intention of the Danish Rent Act section 53(3) would be diluted if it was not possible to apply the Danish Rent Act section 53(3) with respect to a building constructed on a separate cadastral plot which has been a part of a former cadastral plot comprising an old building. Therefore, it has been investigated when it is possible to divide a “contaminated” (because of a building taken into use before 31 December 1991 placed on the cadastral) property into a separate cadastral and applying the Danish Rent Act section 53(3). No case law has ruled in this specific situation. However, based on the investigation in this thesis it is concluded that it is most likely that the essential time is when the new building is taken into use. It is therefore most likely that the landlord can apply the Danish Rent Act section 53(3), if the property is parceled out, and therefore is placed on a not "contaminated" (new) cadastral when the tenants move in.

Because of the lack of case law related to the applicability of the Danish Rent Act section 53(3), the applicability can in some of the investigated scenarios only be described as “most likely” and not with certainty.
LanguageDanish
Publication date24 Mar 2022
Number of pages128
ID: 465889978