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Eversheds Global Estate Management

Norway

Real Estate Guide

Principles of ownership

Principles of ownership

Freehold/Ownership - common in Norway.

Leasehold - not applicable.

Common hold/Usufruct - a long-term lease of land is quite common in Norway. The lessee owns the buildings.

Condominium ownership - common structure in Norway.

Utilisation right - the owner is entitled to use the property within the boundaries of zoning plans and other public rules and regulations.

Joint/Co-ownership - common structure in Norway.

Registration - title is evidenced by registration in the cadastral register managed by The Norwegian Mapping and Cadastre Authority (Nw. Kartverket).

 

Restrictions on foreign ownership

Restrictions on foreign ownership

Excluding farm land, everyone from within the EU is subject to the same restriction as Norwegians. For investors from outside the EU, there are some additional restrictions.

 

Title to real estate

Title to real estate

p>Investigation of title - not applicable.

Transfer of title - beneficial title passes immediately on transfer but when it is possible to register the transaction, legal title only passes on registration.

Registration - the Cadastral Register comprises ownership, easements, mortgages and all kinds of rights and obligations related to real estate.

Another part of the register includes information regarding the property as such.

Information on register - not applicable.

Commercial leases - not applicable.

 

Structure of a real estate transaction

Structure of a real estate transaction

Negotiation of terms/Agreement - the basis for a deal is usually established through an offer and a bid. From a legal point of view this is sufficient in order to establish a binding agreement, but through reservations and conditions the parties are usually making a binding deal subject to financing, due diligence, contract negotiations, board approval, etc. For larger deals it is common to agree upon a LOI or term sheet, but there is no material legal difference between this and the offer/bid tradition. The contract becomes binding when the parties agree that the contract shall become binding. The usual situation is that the parties sign the agreement after having finalized negations following a completed due diligence, but this varies from deal to deal.

Heads of terms – not applicable.

Investigation of title - not applicable.

Purchase deed - is only executed and registered in the Cadastral Register when the property is acquired directly, (asset deal).

Contracts - as the Norwegian market is quite small and transparent, there is a quite common understanding of what is market practice and market terms for the different types of real estate deals. Although the contractual documents may differ with regard to style and lay-out, one will find that most contracts use the same clauses.

Completion/closing - completion takes place when the parties have executed the transfer, and the balance of any monies due has been paid.

Post completion - as most deals are done as corporate deals (purchase of shares), the title holder remains the same before and after the completion of the deal. The shares are registered in the target company’s share holder register or in the Securities Registry. For clean asset deals (purchase of real estate), the title is registered immediately following completion.

Leases - the terms and conditions for commercial leases in Norway are quite standardized / generally agreed upon. The standard lease agreements issued by The National Federation of House Owners in Norway and others are often referred to as an example of the current “market terms” for commercial leases.

Transfer of ownership of leased property (alienation) - it is not very common, but in some cases the tenant is entitled to right of first refusal. Right of first refusal has to be agreed upon explicitly in the lease agreement.

Language requirement – not applicable.

Governance of lease signature/administration – not applicable.

 

Usual commercial lease terms

Usual commercial lease terms

Summary of available lease types - land lease, offices, part of a building, whole building etc.

Alterations/modifications - the tenant is not normally compensated for improvements.

Assignment and sub/under letting - commonly the landlord’s proper written consent is required if the tenant wishes to sublet or assign the lease agreement. In some cases the landlord must have a “reasonable cause”, in order to deny subletting.

Destruction/reinstatement - the tenant is obliged to reinstate any alterations at the end of the term.

Disposal/return of the premises - commonly the tenant shall return the premises to the landlord in accordance with the repairing covenants.

Duration of lease - for commercial leases a lease period of five or ten years is common. The parties are not entitled to terminate the lease during the lease period.

Forfeiture/irritancy - a irritancy clause where the landlord is entitled to terminate the lease agreement if there is breach of any material condition or failure to pay rent or comply with any material condition of the lease agreement, is very common.

Insurance - the parties may agree upon anything, but the usual structure is that the landlord insures the building.

Rent deposit/bank guarantee - guarantee or deposit equalling six – 12 months rent is common.

Service Charges - not applicable.

Rent review - apart from the yearly indexation of the rent, the rent levels stay fixed for the whole lease term.

Repair/decoration/furnishing - commonly the tenant must reinstate any alterations at the end of the term. The tenant is not normally compensated for improvements.

Tenant’s duties - the maintenance obligation regarding the leased premises is normally the tenant’s. The landlord’s maintenance obligation is limited to the outside of the building and to change technical equipment etc not suitable for further maintenance. As this is based on the parties’ agreements, one must expect variations.

Termination/break clauses - such clauses may be negotiated.

 

Increasing covenant strength

Increasing covenant strength

Lease deposit - not applicable.

Surety - not applicable.

Warranty - not applicable.

Rent deposit/bank guarantee - guarantee or deposit equalling six – 12 months rent is common.

 

Taxes

Taxes

On sale/acquisition of real estate - capital gains tax 28%. However limited liability companies are 97% tax exempt on gains on sales of shares / corporate deals.

Immovable property tax - when a new title holder is registered in the property register, a stamp duty of 2.5% of the property’s market value will apply.

Income tax - 28% income tax for commercial entities.

Land tax - no land tax, (there is property tax in some municipalities).

Lease tax - no lease tax.

Local tax - there is property tax in some municipalities, 0.7% of the estimated tax value.

Mortgage - immaterial registration fees.

Other taxes - not applicable.

Property lease tax - not applicable.

Value added tax - 25%.