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Denmark

Law and regulation of rental agreements in Denmark during Covid-19

Table of contents
  1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?
  2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?
  3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?
  4. What kind of security is generally provided by a tenant in connection with a lease, a bank guarantee, a deposit or otherwise?
  5. Could a lessee consider other legal options, such as a lease termination, not paying rent at all or other options as a result of COVID-19?
Denmark
Updated on 23.03.2020

1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?

Under Danish law, the lessee is as main rule not entitled to rent reduction or to terminate the lease agreement due to COVID-19, unless explicitly agreed  in the lease agreement. 

2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?

The lessee may close the premises on its own initiative, unless a duty to operate is agreed in the lease agreement. As mentioned above, the lessee is not entitled to claim a rent reduction if the lessee decides to close. For the lessee to be able to claim a rent reduction would require that the premises consist of a "defect" which can be blamed on the lessor.

3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?

According to Danish case law, it is proved in 2 previous cases from 1938 and 1942 that it is the lessee who shall carry the risk for e.g. restrictions/prohibitions, as a result of the general developments in society. Please note that the above-mentioned decisions are, however, historic. Naturally, case law is incomplete in this matter.

However, it is our assessment that the decisions give a certain indication that it is the lessee who carries the risk, and consequently the lessee is not entitled to terminate the lease agreement or claim a rent reduction.

As a result, the courts will probably reach the same decision, such that the lessee will carry the risk that the premises cannot be used for their purpose due to the prohibition due to COVID-19. However, this must be determined on the basis of a specific assessment of the individual circumstances, and the contract terms in the specific lease agreements.

4. What kind of security is generally provided by a tenant in connection with a lease, a bank guarantee, a deposit or otherwise?

Generally, bank guarantees and deposits are provided.

As mentioned above, it is the lessee who carries the risk in relation to the use of the premises during the period of a prohibition against gathering due to COVID-19. It is likely that the lessee will not be entitled to claim a remedy for breach of the tenancy agreement. This is because COVID-19 is not considered as a defect but rather as an external event i.e. force-majeure, which cannot be blamed on the lessor.

However, the risk assessment may be different in relation to shopping centres, although generally this is determined by the specific assessment of the circumstances and the tenancy agreement.

Authors

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Portrait of
Ann Frølund Winther
Lundgrens Law Firm
Portrait of
Michala Ring Gale
Lundgrens