Victory for tenants
Although it seemed like many months of negotiations were going into the sink, it was announced last night that an agreement has been reached on a housing proposal which applies to all rentals in Denmark. The new agreement is, among other things, meant to stop foreign capital funds’ purchase of cheap rental properties in Denmark, and at the same time put an end to rent increases as a result of “5.2 improvements” in general. The agreement is expected to come into force on July 1st, 2020.
Key points of the agreement
- no more speculation
A waiting period is introduced. After the acquisition of a rental property and a thorough modernization of a property, the landlord must wait five years before the rent may be increased in accordance with the Housing Regulations Act. 5(2).
According to current practice, the landlord may charge a rent which is up to ten per cent higher than the value of the rental. With the new agreement, it will only be possible to set the rent in accordance with the maximum value of the rental.
- Prohibition of “moving money”
In the future, it will be prohibited for the landlord to offer the tenant money to terminate or vacate the tenancy.
In order to discourage scam modernizations, where the landlord replaces newer installations only so it may meet the value requirements for a rent increase. The landlord will now be required to conduct an inspection of the tenancy with a representative from the Danish Rent Committee. A report which documents the condition of the rental must be made in relation to the inspection.
- Green energy requirements
A stricter green energy requirement is introduced so improvements only can be implemented in accordance with Housing Regulations Act. 5(2) when the property is raised to energy class C or the property’s energy class has been raised at least two levels.
- Green incentive
The five-year waiting period mentioned above lapses if a property’s energy class is raised by at least three levels or improved for at least DKK 3000 per square meter.
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What does this mean for tenants?
First of all, this means that there will be put an end to foreign capital funds buying up cheap rental properties in order to make a quick profit. They are prohibited from offering tenants money to move out, and with the waiting period of the five years, they must also, as a starting point, wait 5 years before they can raise the rent as a result of the improvements.
There will also be put an end to scam modernizations, where the rent is increased. The lease must be inspected before the modernization is made, so that the rent can be ascertained and compared with the value of the rental after the modernization. This way, it becomes more transparent whether the renovation requirements in the Housing Regulations Act. 5(2) are actually met.
In addition, the requirements to have the rent reduced has been loosened. In the future, the rent must not “substantially” exceed the value of the rental. This means, that in cases where the rent indeed exceeds the value of the rental, but not significantly (less than ten per cent) – the tenants will be entitled to a rent reduction anyway.
Lastly, it will be examined how the Rent Committee’s case management can be made more efficient and uniform. This means that hopefully they will find a way to shorten the processing time, which is current up to 6-12 months, so that tenants will get a ruling faster.
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