Regulations on the amount of rent
Establishing rent: how much rent can you be charged?
Whether your rent can be freely set by your landlord or is centrally regulated depends on when your residence was constructed and what kind of residence you’re renting.
Landlords and their tenants can freely negotiate the amount of rent for all privately leased residences constructed after 1991.
Meanwhile, a number of regulations apply to privately leased residences constructed before 31 December 1991. The key factor is whether or not the residence lies within a municipality where the Danish Housing Regulation Act applies. The municipal government decides whether or not the Housing Regulation Act applies; in most of the country’s municipalities, it does apply. You can read about the regulations imposed by the Housing Regulation Act below. In those municipalities where the Housing Regulation Act does not apply, rent is set according to “the value of the leased property”.
Rent is calculated in relation to the operating expenses associated with the property. Typical operating expenses include taxes, fees, cleaning, administration, insurance, and maintenance. The landlord may also factor in a “return on capital”, normally equal to 7% of the property’s public value, according to the 15th general assessment of 1 April 1973.
An amount may also be added for any improvements made to the property. Details about how rent increases for improvements are calculated are given in the section on improvements.
The landlord prepares an operating budget for the entire property. The expenses are distributed among the individual residences. This distribution is performed according to the residences’ relative values. If these relative values are considered to be roughly equal, the distribution may instead be performed according to the floor area of the residences.
If the property includes spaces rented for commercial purposes, the budgeted expenses are distributed between the residences and businesses according to the floor areas of the spaces in these categories.
Rent is set based on operating expenses
When you enter into a lease agreement, your rent is set based on the operating expenses at the time the most recent rental budget was prepared for that property. If operating expenses later increase, the landlord can increase your rent after giving three months’ notice, such that the total rent collected on the property once again covers the expenses. The rent may be increased as soon as such an increase occurs, but typically, rent increases occur once per year, on 1 January.
The landlord is not obligated to decrease your rent if the operating expenses decrease — this is only required if there is a decrease in the taxes and fees which the rent covers.
The landlord is not obligated to decrease your rent if the operating expenses decrease — this is only required if there is a decrease in the taxes and fees which the rent covers. The rent on the expense-based leases, as indicated above, must not exceed the value of the leased property, which is the upper limit for the amount of rent regardless of operating expenses, improvements, reserves, and profits.
Modernised residences: so-called “§5, item 2” leases
A special system applies to residences where the landlord has undertaken comprehensive modernisation. If the landlord has made improvements costing more than 2213 DKK per square metre, or more than 253,064 DKK in all (at 2017 levels), and these improvements have brought about a marked increase in the useful value of the residence, then when it is next leased, the rent may be set based on the “value of the leased property” principle, rather than basing the rent on expenses. This system may only be applied to leased spaces located in properties which have achieved an energy rating of A-D by the time they are leased; and leased spaces in properties where, over a period of 2 years, the landlord has undertaken and borne expenses relating to energy efficiency improvements for the portion of the property used as residences, with a value of at least 400 DKK per square metre of gross floor area for that part of the property. The “value of the leased property” principle is described in greater detail below.
Special rules apply when setting rent for small properties — those properties which, as of 1 January 1995, comprised seven or fewer residences. Generally, landlords do not need to prepare a rental budget for these properties.
Instead, rent is set according to what is known as the value of the leased property. The value of the leased property is determined by researching what is being paid for equivalent residences in the area, of similar quality and characteristics in terms of (e.g.) size, location, equipment, and state of maintenance. In doing so, only the rent paid for residences in large properties can be considered. In other words, properties comprising seven or more residences.
The rent on residences in small properties cannot be increased more frequently than every other year, and no sooner than two years after a tenant moves in.
Also, for commonhold flats and co-owned residences in pre-1991 properties, these rules are typically used to set rent when leasing or subletting unless the property previously had rent set under other rules as a rented property. However, there are exceptions to this rule.
Properties in which, as of 1 January 1980, more than 80% of the floor area is used for non-residential purposes — typically commercial use — are called 80/20 properties. Special rules apply to residences in these properties. For example, they are exempt from the rules on setting expense-based rent. Instead, rent is set according to the rules that apply to properties located in municipalities where the Housing Regulation Act does not apply. These rules are described in greater detail below.
The value of the leased property
In municipalities where the Housing Regulation Act does not apply, only the Danish Rental Act applies. That means that the rent is set according to the “value of the leased property” rules.
The Rental Act does not contain special rules regarding the amount of rent at the time the lease agreement is concluded, but since the tenant can always demand that the rent be reduced to the value of the leased property, it can be expected that the agreed-upon amount is set in accordance with this value.
For a residence, the value of the leased property is found by comparing typical rent amounts for other residences in the neighbourhood or area. Only the rent for comparable residences may be considered, in terms of location, type, size, quality, equipment, and state of maintenance.
In general, the comparison may only include other residences covered by the “value of the leased property” rules.
Payment for shared antenna, internet, etc.
The rules regarding payment for shared antenna facilities and so-called electronic telecommunication services (internet access, telephone, video on demand, and similar services) can be found in chapter VII A of the Rental Act.
Its provisions state that if the landlord has entered into an agreement with a tenant to provide a shared signal, then the landlord has a right to be reimbursed by the tenant for necessary and reasonable expenses incurred in this regard. Expenses for a shared antenna are normally distributed equally across all leases on the property. Expenses for a shared antenna, etc. cannot be included in the rent, but must instead be charged separately. The result is that payments for TV services, etc. are not considered in calculations for housing benefits.
These rules cover landlord-owned shared antenna facilities, as well as externally supplied programming, such as that from an external shared antenna facility, from a so-called city facility, or from a hybrid network.
Because of regulations in the Radio and Television Act, the tenant may request to be disconnected from the shared antenna facility’s programming, and thereby exempted from related charges. The regulations that govern the option to refuse such programming came into effect on1 July 2016, but because of transitional provisions, there may be tenants for whom these regulations do not take effect until a later date.