Home with a tenant: what applies when a let property changes hands?

The tenancy agreement is tied to the home, not to the person who owns it. If you sell a home with a tenant, the tenancy continues with the buyer from the handover date, and the tenant's terms remain unchanged, regardless of who owns the address.

On a change of ownership, the buyer as a rule steps into the seller's rights and obligations towards the tenant. The tenant is neither better nor worse off because there is a new owner. Rights and duties go with the home, exactly as set out in the agreement.

The tenant must be told about the change of ownership and that the rent is to be paid to the new owner from now on. This information ensures that the payment goes to the right place from the handover date.

This article goes through the statutory framework you need to know when a rented-out home changes hands. You get an overview of which documents must be produced in the sale, the seller's duty of disclosure, the rules for terminating a tenancy, the duty to offer the property first to the tenants when selling rental properties, and what applies to viewings.

The article is purely informational and describes only what the law lays down. Specific assessments in an individual case are a matter for a lawyer.

How the buyer steps into the existing tenancy agreement

From the handover date, you as the buyer take over the role of landlord and are bound by the tenancy agreement, even if you did not know about it when the sale was agreed.

The Danish Lease Act (lejeloven) provides that the buyer steps into the previous landlord's obligations towards the tenant without the tenant's consent. The tenancy agreement is protected as regards the right of use, even if it is not registered in the land register. There is no register where you, as the buyer, can check whether a tenancy agreement exists at the address. The agreement applies whether or not it is registered anywhere.

Nor does the tenant need to sign a new contract. A new contract or changed terms require the tenant's acceptance, and without acceptance you can change the rent or other terms only if the Lease Act allows it, for example a rent increase under the rules of the Act. The tenancy continues as agreed with the previous owner.

If you as the buyer did not know about the tenancy agreement, you still step into it. You are bound by the agreement regardless of what you knew or did not know when you bought. The two questions must be kept apart. Stepping into the tenancy agreement does not depend on what you knew, while any remedies for defects are directed at the seller. If the seller concealed the tenancy, you can pursue remedies for defects against the seller. That does not change the fact that the tenant still has their rights against you as the new owner.

Deposit and prepaid rent: who is liable to the tenant?

Deposit and prepaid rent are two amounts that the tenant has typically paid on moving in, and each can be up to three months' rent. The limits are set out in section 59 of the Lease Act, and under section 17 the amounts are protected against you as the buyer without registration when together they do not exceed half a year's rent. There is also no register where you can look up whether a deposit or prepaid rent has been paid. The protection follows from the law, not from registration.

The deposit must be accounted for between seller and buyer in connection with the sale. It is a settlement between the two parties. That arrangement does not affect the tenant's claim. On moving out, the tenant can claim the deposit back from you as the new owner, regardless of how the seller and buyer have settled up between themselves. If the seller and buyer agreed that the seller keeps the deposit, or that the buyer takes it over without receiving the amount, it does not change the tenant's right. The claim is directed at whoever is the landlord when the tenant moves out.

As the buyer, you take over the existing tenancy agreement's provisions on deposit and prepaid rent. You cannot demand a new or additional deposit unless you and the tenant agree to it. If a rent increase is carried out under the rules of the Act, however, you can require the deposit and prepaid rent to be adjusted in line with the new rent (section 60). New ownership does not reset the terms.

The tenant's rights under the Lease Act also apply against you without registration. If the tenant has been granted more extensive rights by agreement, for example protection against termination or a right of assignment, the tenant can require the agreement to be registered (section 17(3)). Such special terms are secured against a new owner only if they are registered.

The money and the terms thus follow the home in the same way as the rest of the tenancy agreement. You are liable to the tenant regardless of what you knew and regardless of what you and the seller agreed between yourselves.

The tenant's rights on a sale: what can the tenant insist on?

A change of ownership does not give the buyer the right to worsen the tenant's position. The right to stay on the same terms remains even though the property has a new owner. It is the same agreement that continues, now simply with a different landlord at the other end.

A clause in the tenancy agreement saying that the tenant must move out on a sale is invalid. The tenant can disregard it, and the sale does not change the tenant's right of use.

The tenant can also have the tenancy agreement registered. Registration is not necessary for the tenancy agreement to apply, but it affects which terms the tenant can hold a new owner to.

There is a difference between the right of use and the special terms. The right of use of the tenancy itself is protected without the agreement being registered. The tenant can stay whether or not there is a registration.

Special rights that depart from the Lease Act are protected against a new owner only if they are registered. This applies, for example, to an agreed rent adjustment or protection against termination. If registration is missing, the buyer can question whether the special terms still apply. It is not the tenancy itself that is in doubt, but the terms that go further than the ordinary rules of the Act.

Conversely, the tenant can as a rule terminate the tenancy agreement freely without giving a reason, unless otherwise agreed. The notice period is normally 3 months. A buyer cannot require the tenant to stay if the tenant wants to move out.

The landlord's options for termination: why a sale is not a ground for termination

A sale of the property does not entitle the landlord to terminate the tenancy. The landlord's options for termination are narrow and follow the Lease Act's exhaustive list of when a tenant can be given notice. The decision to sell is not in itself a ground for ending the tenancy.

The main grounds for termination in the Lease Act are:

The landlord wants to live in the property themselves.

The building is to be demolished, or the tenant must move out because of rebuilding work in the special cases the Act mentions.

The tenant has breached good conduct and order so seriously that the tenant needs to move. In the case of material breach, for example non-payment of rent, the landlord can instead cancel the tenancy agreement.

If the landlord wants to use the property themselves, the notice must be reasonable based on an assessment of both parties' circumstances, and the rule cannot be used to give notice in order to sell afterwards or to let an acquaintance move in.

The landlord's notice period is 1, 3 or 12 months depending on the grounds. The notice is 1 month for single rooms in the landlord's own home, at least 1 year when the landlord wants to live in the property themselves, and otherwise 3 months (section 175).

The Act also lays down the formal requirements. The notice must be in writing, state a specific reason and inform the tenant of the right to object. The tenant must send a written objection no later than six weeks after receiving the notice. If this does not happen, the right to contest the notice lapses.

The seller's duty of disclosure: which documents must be produced, and why concealment is serious

If you are selling a home that is let, you have a duty to inform the buyer about the tenancy. Concealing a tenancy agreement is a serious problem in the sale, because the buyer must be able to see what comes with the home before the agreement becomes binding.

The sales documents should therefore include:

• The tenancy agreement as it stands when the sale is agreed.

• The most recent rent invoice.

• The deposit that has been paid.

• Any prepaid amounts.

• Pending disputes and orders relating to the tenancy.

Concealing a tenancy agreement can constitute a defect in the sale. If the buyer has bought a property with a tenant without having had reason to know about it, the buyer can pursue remedies for defects. The seller's duty of disclosure for tenancies is therefore not merely a formality.

Standard purchase agreements for private homes often contain a warranty that the property is sold free of tenancies. If a tenant lives there, the seller must say so, both to avoid liability for damages and to avoid the buyer cancelling the sale.

The buyer can claim damages for losses if the seller concealed the tenancy. This could be, for example, increased costs of living elsewhere until the tenant moves out, less the ongoing rental income from the tenant.

The house inspection scheme (huseftersynsordningen) relieves the seller of liability only for the physical condition of the building. This requires the seller to provide a condition report and an electrical installation report, together with an offer of change-of-ownership insurance, and to promise to pay half of the premium if the buyer takes it out. A concealed tenancy agreement is not a physical defect, so the exemption does not apply here, and the change-of-ownership insurance does not cover it either.

Selling a rental property: when does the duty to offer it to the tenants apply?

The duty to offer follows from the Lease Act and means that the tenants in certain residential rental properties must be offered the chance to take over the property on a cooperative basis before it is transferred to anyone else. The rule does not apply to every rental property, and the conditions are important to know if you have a property with several tenancies.

• The duty to offer covers purely residential rental properties with at least 6 residential flats and mixed residential and commercial properties with at least 13 residential flats.

• The duty to offer does not apply when the acquirer is the state, a municipality, an existing co-owner or a close relative of the owner, and properties below the thresholds are not covered at all. This includes, for example, a rental property with fewer than 6 residential flats, or a mixed property with fewer than 13.

• The tenants must have at least 10 weeks to decide whether to buy the property as a cooperative housing association, and the weeks in July do not count towards the deadline.

• At least 60 per cent of the residential tenants must be members of the cooperative housing association that takes over the property.

• The offer must be made to all tenants on the same financial terms as in a sale to a third party. In the case of a gift, merger or exchange, an expert assessment (syn og skøn) must determine whether the price and terms correspond to the property's value as a rental property.

The rules are in chapter 24 of the Lease Act, and the requirement that at least 60 per cent of the residential tenants must be members is in section 2 of the Cooperative Housing Act (andelsboligloven).

Viewings of a let home during a sale: the tenant's right to be left in peace

Under the Lease Act, as the landlord you have a right of access to the let home when circumstances require it (section 102), and a sale can be such a situation. The access is not unrestricted, however. The tenant must be given notice in good time before you and an interested buyer turn up at the door.

The Lease Act has a specific rule for viewings when a tenancy has been terminated: the tenant sets the time, but must give access for at least 2 hours every other weekday at a time that is convenient for an inspection (section 186). The rule was written for re-letting, but it gives an indication of what you can expect in a sale. You cannot demand access at whatever time suits you.

How often the tenant must give access in a sale is not stated directly in the law, so the specific assessment is a matter for a lawyer.

If the tenant refuses access without good reason, you can seek the help of the bailiff's court (fogeden) or take action against the tenant for breach of the tenancy. Whichever route you take, it must stay within the law and always respect the tenant's right to privacy. Access is a right to enter and show the home, not a right to do as you please in the tenant's home.

Checklist for seller and buyer: clarify these matters before signing

Before anything is signed, both seller and buyer need to be on top of the same points. This checklist helps you get the paperwork in place in good time, so that nobody discovers anything for the first time after the handover.

Seller

• Gather the tenancy agreement, the most recent rent invoice, documentation of the deposit and prepaid rent, and details of any pending disputes or orders relating to the tenancy.

• State clearly in the sales material that the home is let.

Buyer

• Obtain and go through the tenancy agreement, including the agreed rent, the notice period, the deposit, agreements on improvements and any registered special rights, so that it is clear what comes with the home.

• Clarify before signing whether the tenant is to stay, which termination options apply (for example at least one year's notice if the landlord wants to live in the property themselves), and how viewings are to be handled in future.

Both parties

• Check whether the duty to offer applies to the property. It covers purely residential rental properties with at least 6 residential flats and mixed residential and commercial properties with at least 13 residential flats. Properties below the thresholds fall outside it, and transfers to, for example, the state, a municipality or close family are exempt.

• If in doubt about an individual case, the parties should seek legal advice. The content here sets out only the statutory framework and is not a recommendation for any specific transaction.

The tenancy continues unchanged on a change of ownership, regardless of what seller and buyer agree between themselves. It is therefore the tenancy agreement and the other documents that determine what the buyer takes over, and the specific provisions can be looked up in the Lease Act (lov om leje).