Tightening of the rules relating to co-operative dwellings

A broad political majority has entered into an agreement introducing more rigorous requirements for cooperative housing associations. The purpose of the agreement is to ensure that cooperative housing associations do not get into financial trouble in the future. The new rules are expected to enter into force on 1 July 2018.

The new agreement on cooperative housing associations is based on a number of recommendations made by a task force appointed by the Danish government and includes 16 specific initiatives for creating the background for an economically more sound and sustainable cooperative housing sector.

Players in the cooperative housing sector should dedicate resources to ensure compliance with the rules as soon as they enter into force.

The most important new initiatives

  • In future, when a cooperative housing association is established, a 15-year maintenance plan for the cooperative housing association's property will have to be drawn up and is to be updated on a regular basis.
  • In future, the initial budget is to cover a minimum period of 15 years (compared to the current 10 years).
  • The lending limit for loans subject to payment of interest only in connection with the establishment of a cooperative housing association is limited to 40% of the loans secured on the property, and a three-year waiting period from the date of establishment is introduced with respect to such interest-only loans. Accordingly, a cooperative housing association cannot convert its loans to interest-only loans until three years after the date of its establishment at the earliest.
  • In keeping with the rules on financing of the acquisition of owner-occupied dwellings and second homes, a requirement for self-financing of a down payment of minimum 5% of the purchase price is introduced.
  • Initiatives will be launched to protect members of cooperative housing associations against paying premiums, and to ensure more accurate property valuations.The duration of the professional liability of financial undertakings, accountants, administrators and attorneys is extended from three years to six years.

In addition, the amendments must be expected also to impact the landlord's obligation to offer the property to the existing tenants on a co-operative basis before disposing of the property to a third party.

It is intended that the initiatives in the agreement are mainly to be implemented into the Danish Act on Cooperative Housing Associations. The bill will be introduced during the 2017/2018 parliamentary session and is expected to enter into force on 1 July 2018.

Read the agreement (in Danish) "Mere robuste andelsboligforeninger"

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