Real estate finance law in Norway

Yes, security over property can be granted to a foreign lender.

Norwegian law does not make a distrinction between mortgages over land and bulidings on the land, and a mortgage will therefore comprise both land and buildings on the land from time to time. Builidings which are not permanent, for instance temporary barracks at a construction site, will not be included.  The mortgage will also include certain accessory rights and items, such as equipment required by law to be kept on the property and permanent furnishings, and equipment either permanently installed or specially adapted to a building.

A mortgage certificate (or its electronic equivalent) must be issued in a specific monetary value, but the mortgagor may freely specify the currency.

Only a minor registration fee is payable per mortgage certificate regardless of its stated amount. The registration fee is NOK 500 (as of November 2024).

Although mortgage certificates can be issued in the form of negotiable promissory notes, they are commonly issued as simple registration forms (in paper form or through electronic registration). In either case the security interest created through registration is transferable by the mortgagee.

Second ranking security can be taken over a property. It is registered in the same manner as any prior ranking security interest. Unless the prior ranking creditor has registered a restrictive covenant in the land registry, there is no requirement for the consent of the prior ranking creditor.

Encumbrances over a property will rank in the order they are received by the administrator of the land registry. A second ranking security will automatically step up in priority if the prior ranking security is discharged. No priority deed is registered in the land registry.

Yes, unless the mortgagee has registered a restrictive covenant, the mortgaged real estate can be transferred to a third party in good faith without the lender’s consent.

Certain claims have preference with respect to the distribution of liquidation proceeds, including salary claims and tax claims.

Certain municipal charges relating to the property will have a statutory lien over the property and will rank ahead of a mortgage in favour of a lender.

Notably, the bankruptcy estate of a mortgagor will have a statutory lien ranking ahead of a prior existing mortgage. Such lien can only be utilised for the purpose of covering necessary expenses incurred during bankruptcy proceedings and is limited to the lower of 5% of the estimated sales proceeds of the property and 700 times the court fee (as of November 2024, one court fee is NOK 1,277). This statutory lien also applies to a lender providing a loan for the purpose of financing the ongoing business operations of a mortgagor during reconstruction negotiations or for financing such negotiations.

An “all monies” mortgage can be taken under Norwegian law.

A landlord can charge or assign its monetary claims against the tenant to a lender by way of security. Such security can be created either as a fixed charge over any individualised rental contract or as a floating charge over all of the landlord’s accounts receivable from time to time. The former requires a notice to the relevant tenant, the latter a registration against a nominal fee in the Norwegian Register of Mortgaged Movable Property.

Security over bank accounts is regularly taken as part of the security package. The security is perfected by serving a notice to the account bank specifying the relevant bank account. It is not necessary to block or otherwise restrict the use of the account. Domestic lenders usually do not restrict access to charged bank accounts except where a cash sweep arrangement is part of the loan terms.

A transfer of land is registered in the Norwegian land registry by sending a title deed to the registry’s administrator, the Norwegian Mapping Authority. Similarly, a security interest is perfected by registration of a mortgage deed in favour of the secured party in the land registry.

If an ownership interest or a security interest is not registered in the Norwegian land registry, such interest is not protected against competing third party rights or against a transferor’s or chargor’s bankruptcy estate. If a security interest is not registered without undue delay after the secured debt is incurred, a hardening period of 3 months may be triggered.

Security over a property is created by a security agreement between the chargor and the lender or a unilateral declaration by the chargor in favour of the lender. There is no requirement for any notarial acts to ensure the validity of the security agreement. The security interest must be perfected by the registration of a mortgage certificate in the Norwegian land registry. The registration fee is NOK 500 (as of November 2024).

The concept of a trust is not recognised under Norwegian law. It is, on the other hand, common for lenders to use a security agent to hold security for the benefit of the lenders.

As a general rule under Norwegian law, unless otherwise agreed, the transferee to secured debt will enjoy the benefit of the security securing the debt. No new security has to be signed and no new registration needs to be made when using a security agent.

For both residential and commercial leases, the tenant is not entitled to transfer the lease without the landlord’s consent. Unless otherwise agreed, the landlord is free to refuse transfers for any reason.

The Norwegian Tenancy Act contains special provisions for residential leases. If the tenant dies, his or her spouse living in the rented property has the right to enter into the agreement as a tenant. The same applies to children living with the tenant at the time of death or during the last 6 months of the tenant’s life. The tenant’s spouse also has the right to become a tenant in the event of separation, if the tenant moves out.

Office/industrial lease

For commercial leases, the standard lease agreement that is normally used in the Norwegian market contains specific regulation of transfers. The term “transfer” is normally understood to mean the replacement of one tenant by another. The standard lease agreement contains a change of control clause, which interpretes “transfer” to include changes in the tenant’s corporate structure. A change of control of a tenant during the lease term is usually considered to be a transfer of the lease. This includes situations where the tenant is part of a merger or division. The purpose of this provision is to protect the landlord from ownership changes which could weaken the landlord’s position, for example where the new owner is in a worse financial position than the previous owner. The change of control clause in the standard lease agreement therefore explicitly gives the landlord the right to refuse transfers in such situations for any reason.

Retail lease

See above.

Norwegian law allows for contracting parties to commercial contracts to freely submit to the jurisdiction of a foreign court or arbitral tribunal. Provided the submission has been made expressly by the parties in writing, the Norwegain courts will give effect to the choice of jurisdiction and will defer disputes to the relevant court or arbitral tribunal.

Provided the parties have made a valid and express choice of foreign jurisdiction (either a court or an arbitral tribunal), the Norwegian courts will recognise as a valid judgement, and will enforce, any final civil judgement or arbitral award (as the case may be) obtained in a competent court or arbitral tribunal without further re-examination of the merits of the case unless its recognition and enforcement would be contrary to Norwegian public policy.

With respect to a mortgage over property, the lender cannot agree on the enforcement method with the security provider prior to the occurrence of an event of default in respect of the secured debt. Unless such agreement is made after an event of default, enforcement must be made through the Norwegian enforcement authorities (the local court of first instance) following a 14-day notice period, allowing the security provider to settle the defaulted debt obligations.

The lender does not control an enforcement process through the court and is not entitled to appoint any receiver or liquidator or conduct a private sale. The sale of real property is normally done through a broker appointed by the court and the lender is allowed to make a bid for the property. The broker has a duty to consult with the court and the other parties involved (including the secured parties) in matters of importance.

The lender is not responsible for the maintenance or insurance of the real estate after an event of default unless expressly agreed by the lender, although the lender may step in to ensure maintenance and pay the insurance premium in order to protect its security interest. Such reasonable expenses will be covered by the lender’s security interest over the property. In an enforcement through a court, the court will take necessary steps to ensure the property is adequately insured and basic maintenance carried out through a court-appointed assistant (usually the broker responsible for the sale of the property). The costs of such insurance and maintenance will be recovered from the sales proceeds.

Following the occurrence of an event of default which entitles the lender to an early termination of the loan, the lender may enter into a voluntary agreement with the security provider on the enforcement method which may include the lender acquiring the property at appraised value. It is not, however, possible for the lender to secure a right of foreclosure prior to an event of default. If no agreement is reached with the security provider, the lender will have to follow the statutory enforcement process which is lead by the court.

In a bankruptcy, if the secured debt significantly exceeds the value of the property, the administrator may decided to transfer the property to the secured lender subject to the lender’s consent. The appraised value of the property will in such case be set off against the secured debt.

N/A

Yes, security over shares can be granted to a foreign lender.

Second ranking security may be taken over shares in a Norwegian company. The security is created and perfected in the same way as a first priority security. In lieu of an agreement between the secured parties, the ranking is determined by the order in which the security is perfected.

The security is registered in the same manner as first ranking security:

• company-registered shares: registration is made in a company’s shareholder registry (the shares are not registered in a central securities depository or CSD)
• CSD-registered shares: if shares are registered in a CSD, security is registered over the securities account in which the CSD-registered shares are held.

Security over company-registered shares is perfected by notice to the company and registered in the company’s shareholder registry.

For CSD-registered shares, perfection is achieved upon registration of the security interest over the securities account in which the CSD-registered shares are held. At present there is only one central securities depository in Norway, Verdipapirsentralen ASA (owned by Euronext).

The perfection act for company-registered shares is completed by notice to the company and is not dependent on the actual registration. However, prompt registration of the security interest in the shareholder registry is a mandatory requirement for the company and serves as evidence of perfection.

For CSD-registered shares, failure to register means the security has not been perfected, and other creditors may attach prior ranking encumbrances over the shares. In a bankruptcy, the security interest will be disregarded. Further, if registration is not made without undue delay after incurrence of the secured debt, the lender may have to contend with a 3-month hardening period.

There are no formalities requirements in connection with creating security over shares except for the notification or registration requirements for perfection purposes. If, however, shares are to be pledged as financial collateral, the enforcement provisions must be in writing. No fees apply, although there may be a nominal fee payable for registration in the central securities depository.

No.

Statutory enforcement of share security is done by the Norwegian enforcement authorities through an appointed investment firm which will sell the shares in a regular sales process which could involve an auction. The process is similar in a bankruptcy although the administrator may choose to transfer the shares to the secured party (subject to its consent) if the secured claim is higher than the expected net sales proceeds. It is not possible for the secured party to appoint a receiver/liquidator.

If the security provider is a legal entity (i.e. not an individual) and the security holder is a financial institution or falls within certain other categories of security holders, shares may be pledged as financial collateral and the parties can agree on another method of enforcement in a security agreement. The agreement can stipulate private enforcement, including the secured party’s appropriation of the shares. The realisation, appraisal and calculation of the financial (secured) liabilities must be made on commercially reasonable conditions.

Shareholder loans are not subordinated by law. A subordination of such loans must be contractually agreed between the shareholder and the borrower. It is common to take security over shareholder loans together with a pledge of shares and to enforce both securities in an enforcement scenario. 

The Norwegian Tenancy Act makes a distinction between residential and non-residential leases, the latter including, for example, offices, shops, warehouses, parking and other facilities. There are no typical lease terms for either type, although business leases are usually fixed (e.g. for exactly 5 or 10 years). In the case of business leases, an option to extend the lease for a further fixed term is often included in the lease.

There are no maximum lease periods under Norwegian law, regardless of the type of lease.

For residential leases, the term of the lease is regulated by the Norwegian Tenancy Act. Non-fixed residential leases continue until terminated by one of the parties. The Tenancy Act states that the tenant is free to terminate the lease on 3 months’ notice, but the parties may agree other terms of termination. For residential leases, the landlord must provide a justifiable basis for termination. Fixed residential leases must be for at least 3 years, unless the landlord lives in the property or has a justifiable basis for a shorter fixed term.

There is no minimum term for business leases, either fixed or variable.

The Norwegian Tenancy Act does not contain any controls or obligations in relation to renewals, but it does regulate certain aspects of terminating a lease.

A right to renew a lease is not an automatic right and must be agreed between the parties.

Under the Norwegian Tenancy Act, only non-fixed leases must be terminated by notice. Fixed leases expire at the end of the agreed lease term.

Termination by the landlord must be in writing and must meet certain conditions (e.g. the reason for termination must be explained). There are no such requirements for terminations by the tenant under the Norwegian Tenancy Act, but the lease contract may contain conditions.

If the tenant continues to use the property after the fixed term has expired and the landlord does not give the tenant written notice to vacate the property within 3 months, the contract is deemed to be non-fixed from that point and is subject to the normal termination rules under the Norwegian Tenancy Act. In other words, the landlord must take certain steps when a fixed contract expires to avoid the contract becoming a non-fixed lease subject to termination.

For fixed-term residential leases, the landlord must inform the tenant in writing that the contract cannot be terminated during the fixed period. The information can be given in the contract, or in a written document. If the tenant is not duly informed, the tenant is free to terminate the contract. Other than this, the tenant cannot break a fixed-term lease.

For fixed-term non-residential leases, the landlord must inform the tenant in writing that the tenancy cannot be terminated for the duration of the term. The information can be included in the contract or in a separate written statement. If the tenant is not properly informed, the tenant is free to terminate the contract. Otherwise, the tenant cannot break a fixed-term tenancy agreement.

N/A

The parties are free to agree the terms of payment. Unless otherwise agreed, the landlord may demand payment 1 month in advance.

Once a year, either party can demand that the rent be adjusted in accordance with the consumer price index (CPI), giving 1 month’s notice. In addition, after 2 years and 6 months have elapsed without any change in the rent other than an adjustment to the CPI, either party can demand that the rent be adjusted to the current rent level for similar rental properties.

The basis of review is the CPI, or – if no other change of rent has been made for two years and six months – the current rent level for similar rental properties.

For housing leases, there is no upwards-only limitation. Thus, both the CPI and current market rent can result in lower rent. This cannot be altered in the agreement between the parties where the tenant is a consumer.

For business leases, market practice is that rent adjustments cannot be lower than the agreed price.

The courts can try adjustments both to match the CPI and to match the current level of rent for similar objects. If the court disagrees with the landlord, the court will decide the correct level.

For residential leases, the tenant is normally responsible for internal maintenance, decorations and repairs. This includes locks, taps, toilets, sockets and switches, water heaters and other items that are not permanently fixed to the property.

For non-residential leases, the parties usually agree in each lease which party is responsible for internal maintenance, decorations and repair. Usually the landlord maintains the common areas and installations (corridors, elevators, etc.), while the tenant is responsible for the maintenance of the tenant’s exclusive areas.

The landlord is responsible for external maintenance, decorations and repairs unless agreed otherwise between the parties.

The landlord is responsible for structural repairs unless the parties agree otherwise. If the repairs are made to remedy or prevent damage caused by the tenant’s negligence, the tenant may be held liable for damages equal to the cost of the repairs.

The parties normally agree to insure their own interests. The tenant cannot rely on the landlord to insure the tenant’s property and vice versa. If the tenant leases an entire building, the parties will usually agree that the tenant is solely responsible for obtaining the necessary insurance.

Sales and leases of real property are not subject to VAT. The landlord or seller should therefore not charge VAT on the sale or lease as a starting point. As the sale/lease is outside the scope of VAT, the landlord is not entitled to deduct or otherwise recover input VAT on costs incurred for the purposes of the sale or lease. 

However, in the case of non-residential leases where both parties are business entities, the landlord may ‘voluntarily’ register for VAT to the extent that the tenant uses the premises for business activities which are subject to VAT. If the landlord makes such voluntarily registration, the landlord should charge VAT on invoices to the tenant. In such cases, since leasing is considered to be an activity subject to VAT, the lessor is entitled to deduct VAT on the costs incurred for the leasing activity. The lessee, on the other hand, should be entitled to deduct VAT on invoices issued by the lessor.

In the case of property leased in a chain, it is necessary for all the parties involved (i.e. the owner of the property and any sub-lessees) to be registered for VAT purposes on a voluntary basis in order for the lease to be subject to VAT. The main argument for voluntary VAT registration is to avoid VAT being a final cost to the business subject to VAT. Voluntary registration entitles the landlord to deduct input VAT on all costs, including construction and maintenance costs, associated with the property covered by the VAT registration.

There are no exemptions for the sale of real property and therefore such sale is not subject to VAT. In the case of rental of housing, VAT is only applicable if the rental is “similar” to the rental of hotel rooms according to the Norwegian VAT Act. According to administrative practice, these are typically “apartment hotels” and other leases where there is a sufficient service element. In addition, the leasing of cabins and other objects intended for leisure purposes is subject to Norwegian VAT.

There are special “adjustment rules” that may apply if the VAT-liable use of the property increases or decreases within 10 years after the costs relating to the construction or alteration work have been incurred.

The landlord is responsible to the authorities for covering rates.

For residential leases, the landlord must include rates in the rent if they are to be covered by the tenant.

For non-residential leases, the parties may agree that rates are included in the overheads/service charges charged to the tenant in addition to the rent. If the parties do not agree, the landlord is responsible for covering rates and cannot pass them on to the tenant. Normally the lease contract will state that the landlord is entitled to pass on all or part of the rates to the tenant(s).

For residential leases, the landlord must include other outgoings in the rent if they are to be covered by the tenant.

For non-residential leases, if the parties have not agreed that other outgoings are to be paid by the tenant, the landlord is responsible for the outgoings. Normally, the parties will specify in the contract which expenses the landlord is entitled to pass on to the tenant by including them in the overheads.

The ability to recoup landlord outgoings depends on the agreement between the parties.

Are terms of leases/contracts recognised and supported by case law in the jurisdiction?

Terms of leases are recognised and enforceable by Norwegian courts as long as they are not contrary to mandatory provisions of the Norwegian Tenancy Act.

Appraisals are usually carried out by professional realtors or surveyors, but this is not a requirement for an appraisal to be accepted as evidence by the courts. There are professional organisations for surveyors and appraisers that certify professionals in their fields and develop and maintain standards for the profession, but this is not a formal requirement for the courts to accept a report as evidence. However, the courts do not usually give much weight to appraisals carried out by non-professionals.

Certain environmental professionals prepare environmental reports for landowners in connection with property development or transactions.

The property owner is normally responsible for violations of environmental legislation. The Norwegian Pollution Act states – in a nutshell – that the owner of the land causing the pollution is responsible for the pollution. This has been a problem for current owners of land previously occupying petrol stations or landfills, where the authorities have issued clean-up orders to the current owner for pollution caused by previous owners long ago.

Some mortgage loans have ESG clauses, which provide somewhat more favourable interest rates for lenders who meet certain environmental or emissions standards.