Bill on amendment of the obligation to offer vacated units to tenants, etc. sent out for consultation

On 27 June 2023, the Ministry of Social Affairs, Housing, and the Elderly sent a bill amending the Rent Act for consultation.

A key aspect of the bill is its aim to tighten the obligation for landlords to offer vacated units to tenants.

Under the provisions of the Rent Act, landlords must offer tenants the opportunity to purchase the property on a cooperative basis before selling it to a third party. However, this only applies to residential properties with at least six leases or to mixed-use properties with 13 or more units. The obligation also extends to property transfers as part of a transfer of shares involving a change in the majority voting control of the property company.  

The Danish Supreme Court's widely discussed "Six Pack judgment" (U.2020.2342) clarified that this obligation does not apply when shares in a property company are transferred to three companies in such a way that no individual buyer gets a majority of votes in the property company.

The court reasoned that the rules are particularly far-reaching and could not be extended beyond their clear intent and wording. This established that an obligation to offer vacated units to tenants is not triggered under the current rules as long as a single buyer does not obtain a majority of voting rights, and that the legislator wishes to change this state of the law.

In future, the obligation will be triggered when a majority of votes in a company are surrendered, and the individual buyers do not necessarily obtain a majority of such votes.

Last year, the previous Danish government sent a bill for consultation, proposing to expand the rules on the obligation to offer vacated units to tenants with an intent to trigger the obligation by a so-called "change of control" principle, which implied that largely all types of direct and indirect transfers of residential properties would be subject to the obligation.

However, the new bill entails a far less radical change than the one previously presented. It will not affect the "double-holding method", which entails that an obligation to offer vacated units to tenants is not triggered if you indirectly acquire a property by acquiring shares in the parent company of a property company.

Additionally, the bill addresses an unintentional drafting error in the second sentence of section 6(1) of the new Rent Act, which,  since 1 July 2022, has prevented landlords from agreeing to annual rent adjustments based on Statistics Denmark's net price index for leases where the rent is determined under the rules on market-based rent, or where thorough modernisation has been carried out.

According to the bill, the provision will have retroactive effect from 1 July 2022, but the provision can only be enforced when the bill has come into effect, which is expected to be on 1 January 2024.

This means that for leases agreed upon after 1 July 2022, landlords cannot enforce agreements on net price index adjustment of leases having a market-based rent, or were thorough modernisation has been carried out. Instead, the agreement may be enforced after 1 January 2024, and adjustments will be temporarily suspended until the bill becomes law, but the agreements will remain valid.

Finally, the bill introduces an amendment allowing landlords to include reasonable costs for third-party services related to monthly consumption measurements in the property's consumption accounts.

Read more about the bill sent for consultation at Høringsportalen (in Danish)