The main sources of real estate law are:

• the Alienation Act (Avhendingsloven);
• the Planning and Building Act with regulations (Plan- og bygningsloven med forskrifter);
• the Tenancy Act (Husleieloven);
• the Joint Property Act (Sameieloven);
• the Condominium Act (Eierseksjonsloven);
• the Cooperative Housing Act (Borettslagsloven);
• the Easement Act (Servituttloven);
• the Ground Lease Act (Tomtefesteloven);
• the Prescriptive Right Act (Hevdsloven);
• the Neighbour Act (Naboloven);
• the Land Register Act (Matrikkeloven); and
• the Land Registration Act (Tinglysingsloven).

Several other laws and regulations are also fully or in part relevant in real estate law, depending on the circumstances.

The commercial real estate market in Norway reached a record-breaking EUR17 billion transaction volume in 2021, with logistics and office as the leading segments. There were also signs of increasing investor appetite for hotel and retail as COVID-19 restrictions were gradually lifted. Foreign buyers and sellers accounted for approximately 20% of the total volume, a relatively low share presumably partly caused by the entry regulations in place in the first half of the year. The most significant deals were Entra’s EUR1.4 billion acquisition of Oslo Areal and Balder’s purchase of Asset Buyout Partners for close to EUR1 billion.

Norway is at the forefront of Europe when it comes to the use of digital solutions in commercial property. The pandemic has certainly contributed to increasing the real estate market’s focus on, and interest for, proptech, blockchain and other disruptive technologies to accommodate for, among other things, flexible office solutions and ESG strategies.

We expect this trend to continue as demands and expectations from occupiers and investors continue to grow. In a survey in the property sector from 2018, almost all of the respondents said that digitalisation and technology would have an impact on their business; however, only one-third had a strategy and a vision for the implementation of such changes. Although there is reason to believe these figures have improved significantly since then, there is still a long way to go.

There are no major proposals for reform at this point in time that would significantly affect real estate investment, ownership or development in Norway.

Full Ownership

Full ownership is the most complete and comprehensive right over real estate. However, it is important to note that the use of the property may be limited by public laws and regulations, planning regulations and private third-party rights. Ownership of the property includes title to all of the constituent parts of the property, including any structures erected on the property, the airspace above the property and those areas beneath it.

The property may be owned in full by one or more persons, companies and/or other legal entities. Co-ownership (sameie) of property is subject to special laws and regulations pertaining to the use and sale of the co-owned property.

Ground Lease/Leasehold

The ownership of a property usually includes the ownership of the buildings/structures erected on the property. It is not uncommon in Norway, however, for the ownership of the property and the buildings/structures erected on it to be separated by way of a ground lease (tomtefeste) with the separate parts to be owned by different parties. The Norwegian ground lease model is based upon the lessee essentially leasing the ground from the owner of the property by entering into a ground lease agreement. The lessee may then erect buildings/structures on the property, and ownership of these buildings is held by the lessee. Ground leases are therefore usually entered into for long periods of time, typically 50 to 100 years and, in many cases, include a right to extend the lease for an additional period(s).

The lessee under a ground lease agreement will usually be allowed to transfer ownership to the buildings, along with their title as the lessee, to a new owner of the ground lease.

Ground leases are governed by the Norwegian Ground Lease Act (Tomtefesteloven) and widespread case law.

Units

A special kind of ownership for shared premises is established through the Property Unit Ownership Act (Eierseksjonsloven). A property with a building erected on it may be divided into units (eierseksjoner), such as apartments and premises for business purposes, which are owned by individuals or legal entities. The common parts of the property, such as the structure of the building, staircases and entrances, are then jointly owned by the collective group of independent unit owners.

For housing purposes, the ownership of such units can also be structured as a housing cooperative (borettslag).

The Alienation Act (Avhendingsloven) regulates the transfer of planned and completed properties between individuals and/or between professional parties (companies, etc). Professional parties may opt out of the regulations imposed under the Alienation Act.

New buildings, including contracts for the proposed construction of a building, are not regulated by the Alienation Act.

In the case of individuals, such contracts are regulated by Norwegian law number 43 of 13 June 1997 (Bustadoppføringslova), but for professional parties there is freedom of contract.

In the case of professional parties entering into contracts, including those for transfer of title and for the proposed construction of new buildings, land transfer is regulated by the Alienation Act, but the construction elements are regulated through the building contract.

No special laws apply to the transfer of any specific types of real estate. The Alienation Act normally regulates the transfer of title to all types of real estate, although professional parties (companies, etc) may contract out of the act.

Once the purchase agreement is concluded, the transfer of ownership takes effect at law. The purchaser must subsequently apply for a concession from the local authorities within four weeks from the transfer date. Even though it is not a legal requirement, a deed of transfer is also usually filed with the Land Register (Tinglysingen) to establish legal protection against claims by third parties and to avoid potential disputes with subsequent buyers.

All property transactions, including sales and purchases, mortgages, easements and rights of use, as well as any pending disputes, can be registered.

Title insurance is in principle available, but is not common except in events where there are specific risks related to the legal title, typically due to a preceding split and separate transfer of the formal and beneficial ownership to the property respectively.

As digital solutions for document management have come a long way in Norway, the COVID-19 pandemic did not trigger any significant changes for Norway.

Investors usually carry out technical, environmental and legal due diligence before purchase, but it may also be done during a short, specified period after the contract is signed, if agreed between the parties in the contract.

Asset Deals

It is highly advisable for the buyer to carry out due diligence on all aspects of the property before completion of a property transfer agreement. Such due diligence should cover:

• all legal aspects such as title to property, easements, encumbrances, agreements with neighbouring owners, environmental aspects, planning/zoning law aspects, building/construction law, previous contracts and any lease agreements;
• specific environmental aspects, which will be investigated by specialist environmental investigators;
• the physical state of existing buildings by specialist technical investigators; and
• any permissible future development by architects/real estate advisers, especially if future development is a key factor in the purchaser’s decision to buy the property.

Share Deals

Due diligence undertaken before a share deal should, in addition to the points mentioned in paragraph 4.1, cover the following issues:

• all legal aspects relating to the shares in the company owning the property, such as pre-emption rights, encumbrances, articles of association, etc;
• annual accounts of the company;
• income tax forms and VAT reports for the company;
• debts and risks of the company;
• all contractual rights and obligations, whether written or oral, that bind the company; and
• whether the property company has employees and any associated liabilities.

The COVID-19 pandemic did not have a significant effect on the commercial real estate transaction market in Norway, neither in relation to the way transactions were carried out nor in volume, as Norway actually reached a record-breaking EUR17 billion transaction volume in 2021.

An increasing trend in Norway is for the buyer to take out warranty and indemnity insurance (W&I insurance). Usually the insurance is structured as “buyer side” cover, where the purchaser is insured under the policy, and the coverage is based upon the purchaser’s knowledge. The insurance premium is usually around 1-2% of the insured amount, but can be higher depending on the known risks that are insured. If W&I insurance is to be a part of the transaction, it should be considered before completion, at some point between due diligence and the conclusion of the share purchase agreement.

According to statutory law, the seller may disclaim responsibility for the property by selling it as seen, often referred to as “sold as is”. Even if the contract includes such a clause (which it often does), sellers may still be held responsible if they have given inaccurate information about the property, failed to provide important information they are aware of, or if the property is in a substantially worse condition than expected.

This responsibility may not be fully disclaimed in a contractual agreement with the buyer.

It is common for professional parties (companies, etc) to negotiate specific warranties.

The buyer must notify the seller within a reasonable timescale if circumstances are discovered that may constitute a breach of contract.

Buyers should consider the following issues.

• The municipal master plan and the zoning plan for the relevant area. This provides a description of the possible land use of an area.
• Building permits and certificates of completion, as this will state the actual permitted use of the building and that the building application process is completed.
• It is important to be aware that a certificate of completion or a provisional permission to use does not guarantee that all technical or health and safety requirements have been met; an additional technical inspection is often necessary.
• Fire-prevention provisions, since it is the buyer’s responsibility to ensure that the building complies with safety regulations after the purchase.

This situation is normally governed by the “polluter pays” principle, although the seller can disclaim responsibility in the contract. However, if any pollution is discovered, the owner of the building may be held responsible by the authorities regardless of any contract that exists. If, according to the contract, responsibility for the pollution rests with the seller, the buyer may then subsequently claim restitution from the seller.

Any interested party can contact the local authority to get access to the municipal master plan and zoning plan, as well as relevant building permits.

It is possible to enter into development agreements with the municipality, although this cannot be required by either the municipality or the private developer.

The authorities, or a private developer with the assistance of the authorities, can expropriate property for the purpose of building roads, schools, transport facilities, playing fields, etc, although this right is subject to restrictions. The process involves both a decision by the municipal council to determine the actual expropriation/compulsory purchase and a court-decided compensation. The buyer must pay the market value for the expropriated property, as decided by the court of appraisal.

Where deeds of transfer are filed with the Land Register, registration is normally subject to stamp duty at the rate of 2.5% of the purchase price, or the market price if this is higher. There are exemptions from this where property is transferred between married couples, where the transferred property is a unit in a housing cooperative (borettslag), or where companies are merged or demerged. The stamp duty is paid by the buyer.

The seller must pay income tax on any profit from the sale.

Agency fees are usually between 1% and 3% of the purchase price. These are normally paid by the seller unless otherwise agreed. In addition, there is a charge for the registration of the title deeds, as well as any mortgage deeds. These charges are paid by the buyer. In the case of other costs, such as legal fees, etc, each party normally pays its own expenses.

When buying real estate in Norway via a share deal, the agency fees are usually between 1% and 3% of the purchase price. These are normally paid by the seller unless otherwise agreed. In addition, there is a charge for registering any mortgage deeds, which is paid by the buyer. In the case of other costs, such as legal fees, each party normally pays its own expenses.

No stamp duty applies to share deals.

Specific tax rules apply to the taxation of limited liability companies.

There are no specific restrictions on foreigners investing directly in real estate in Norway. Anyone – of any nationality – intending to buy Norwegian real estate must apply for a concession from the local authority, but this formal requirement needed to obtain title in the Land Register rarely constitutes a problem for investors.

Real estate finance involves financing or refinancing of acquisition or development of real property secured against the value of the property and serviced by rental income. Real estate finance is provided by banks, private investors and debt funds. For sizeable deals, the Norwegian bond market offers an alternative source of finance.

The most common forms of security when financing real estate consist of share pledges, real estate mortgages (which includes statutory co-insurance), bank account charges, floating or fixed charges over rental payments, charges over hedging claims, SPA claims and intra-group loans and group company guarantees.

The security package may be limited to mitigate adverse tax consequences for the borrower due to limitations on the tax deductibility of interest on loans.

There are no relevant restrictions of general application on making payments or granting security to foreign lenders. From 2021, Norway introduced withholding tax on interest, royalties and certain lease payments that go from a Norwegian company or branch to foreign-related entities in low-tax jurisdictions. The standard withholding tax rate is 15%. However, it can be lower if the recipient is resident in a country that has a tax treaty with Norway.

No stamp duties or notary fees apply to creating security normally granted in financing real estate, but there is a nominal fee (NOK585 as of March 2022) for registration of security over real property in the Norwegian Land Registry and similarly (NOK1,516 as of March 2022) for registering a floating charge over accounts receivable.

Norwegian companies law provides for that any security granted by a limited liability subsidiary for the benefit of a group company must in general be granted on arm's-length terms.

A Norwegian limited liability subsidiary may grant financial assistance by granting security over its real estate assets (or any other asset) for the benefit of a limited liability holding company or another group company to the extent the limited liability holding company directly or indirectly controls such subsidiary or other group company. In addition, the subsidiary has to comply with a whitewashing procedure that, inter alia, requires the subsidiary to draft a board report in respect of the financial assistance that sets out the subsidiary’s interest in the financial assistance and further requires that the financial assistance is approved by the general assembly.

The ability for a limited liability company to provide financial assistance outside of any group company is in general limited to its net assets after any liabilities have been accounted for. In addition, any recourse claims must be sufficiently secured and whitewashing procedure must be complied with.

Once an event of default has occurred, a secured party may, following a two-week notice period, demand a compulsory sale of the security assets. The statutory enforcement regime is mandatory and enforcement must be effected by the enforcement authorities unless the security provider agrees on a different procedure after (and not before) the occurrence of the event of default.

The enforcement request must be presented to the court, which will decide on the most appropriate form of realisation. A sale could be made by way of eg a public auction, brokerage or allowing the security holder to take possession over the relevant assets.

For the special case of security over financial collateral (such as limited company shares) granted to a financial institution, the parties may agree to a different enforcement procedure when the security is granted. Market practice for share pledges is invariably to agree on enforcement outside the statutory enforcement regime.

No restrictions exist on foreclosure or realisation of assets post-COVID-19.

A creditor can agree to subordinate its loans and security interests to that of another creditor at any time. If registered security is to be subordinated, the subordinated creditor will often cede priority by registration in the relevant registry (unless the parties only rely on agreed waterfall provisions).

There is a statutory, preferential lien in favour of the bankruptcy estate as security for costs of the bankruptcy proceedings. The lien is attached to all assets of the bankrupt entity at the time of commencement of the bankruptcy proceedings and other assets provided as security for the obligations of the debtor at that time. The lien is maximum 5% of the value of the asset, but never to exceed 700 times the court fee (NOK1,223 from 1 January 2022) for each asset registered in an asset register (eg, real property, ships, aircraft). The lien takes priority over other statutory liens and all other encumbrances but will only cover the necessary costs and only if there are no other available (unencumbered) assets to cover these costs. Under the new act of restructuring, the reconstructor may use certain of the assets of the company (excluding real estate), to finance the reconstruction.

A lender will not become liable for environmental damage merely for holding security over real estate.

However, care must be taken if such security is enforced by taking possession because owners of land that operate, use or possess the land can be liable under strict liability rules for environmental damage relating to the property even if the owner did not cause the damage and even if there has been no fault or negligence on the part of the lender or owner.

Security that is perfected before the commencement of bankruptcy or composition proceedings will be recognised in insolvency, assuming that the security agreement is valid.

An administrator may void such security if it was created later than three months before the opening of bankruptcy proceedings for debt incurred before creation or perfection of the security. This also applies to security created upon incurring the debt but where perfection was not established without undue delay thereafter.

Security interests may further be reversed if the security unfairly favours one creditor at the cost of the others at a time when the financial situation of the debtor was weak or became materially weaker after the security was granted. Such security can be reversed within ten years.

Most commercial property financing in Norway is made in Norwegian kroner, which is usually borrowed with NIBOR as the benchmark rate. For those who borrow in currencies with reference to LIBOR, the consequences and approach to risk management are similar to those borrowing in other markets with the same reference rate.

Norwegian strategic planning/zoning is governed by a combination of statutory law and governmental policy. The main legislative framework is the Planning and Building Act (Plan- og bygningsloven), along with appurtenant regulations.

The law allows the state, county and municipality to regulate land use within their area of responsibility. The responsibility for regulating the development and use of property lies with the county and municipal authorities. A certain amount of national political influence also exists by way of guidelines and statements contained within government White Papers.

The municipalities have an obligation to control local urban development by creating municipal master plans, zoning plans and detailed zoning plans.

The municipal master plans set out the superior guidelines in relation to zoning and must cover all geographical areas within the municipality. A zoning plan sets out guidelines for land use within a smaller geographical area and is used if demanded in the municipal master plan. The detailed zoning plan outlines the detailed terms of land usage in a small geographical area, often consisting of just a few pieces of real estate.

A building permit is required to build or make significant alternations to an existing building. The municipality can refuse building consent if the proposal is not in accordance with the Planning and Building Act, appurtenant regulations, or the stipulations of the zoning plan or detailed zoning plan. However, the planning and building authorities may grant a dispensation and allow a project to commence even if it is not in accordance with the relevant plan(s).

The county and municipal authorities are responsible for regulating the development and designated use of individual parcels of real estate.

The municipalities have an obligation to control local urban development by creating municipal master plans, zoning plans and detailed zoning plans.

The detailed zoning plan outlines the detailed terms of land usage. The terms of land use can focus on the type of development permitted, building height and size, aesthetic qualities, restrictions on the use and development of property, order of development and parking provisions.

Before the developer or the responsible applicant starts to prepare the building application, it is possible to have a preliminary conference with the local planning and building authority to clarify the scope and the overall content of the project.

Furthermore, the developer or the responsible applicant must notify the neighbours and give them the opportunity to raise their objections. A copy of the notifications must be enclosed with the application.

The application must include a sufficient description of the project that gives the local planning and building authorities the necessary information to determine the application.

When the application is submitted, the authorities will consider all relevant aspects of the application and it will result in the issue of a building permit or a refusal. If the application is in accordance with the plan for land use and all other legal requirements, the applicant has a legal right to be granted a building permit.

Those who are deemed to have a sufficiently close connection to the permitted project have the right to submit a complaint following the issue of a permit.

If a building permit is denied or a dispensation from the plan for land use is denied, the decision may in some cases be appealed to the local Standing Committee on Urban Development (for the relevant municipality). If the local building authority’s decision is upheld, the complaint will be tried by the county governor. A denied permit or dispensation can always be appealed to the county governor.

In some cases, the county governor can raise objections to a permit and the final decision is taken by The Ministry of Local Government and Modernisation.

When this method of appeal is exhausted, one can choose to go even further by taking the case to the civil ombudsman or by bringing a civil case.

It is possible for the landowner or the developer to enter into a “development agreement” with the municipality in relation to the development of an area. Neither the municipality nor the landowner/developer has a right to demand such an agreement, but for larger projects it is seen almost as a prerequisite. This is due to often-comprehensive zoning regulations demanding roads, water, sewage, parks, schools, etc, before the actual buildings can be constructed.

Upon the completion date, the constructor must complete a final control check and confirm that the project has been carried out in accordance with the permission and current provisions. Based on this confirmation, the municipality will issue a certificate of completion.

If minor deficiencies are found, provisional permission for use may nevertheless be granted when the municipality has no objections. A provisional permission for use should always be followed up by a certificate of completion.

If  the premises lacks a certificate of completion, and a provisional permission for use has not been granted, it is illegal to use the premises. The planning and building authorities may, in such event, prohibit the continuation of the unlawful use by instructing a close-down and/or impose a fine.

If the instruction given by the local planning and building authorities is not carried out, the authorities can also:

• instruct building works to stop;
• require the rectification/removal of illegal works; and
• impose compulsory fines.

Furthermore, the person responsible can receive fines, be reported to the police and be liable to pay compensation.

Indirect investments in Norway can be made through limited liability corporate entities/vehicles or partnerships. The two types of relevant limited liability corporate entities are:

• a private limited liability company (aksjeselskap/AS); and
• a public limited liability company (allmennaksjeselskap/ASA)

The only type of partnership that offers limited liability to partners under Norwegian law is the limited partnership (kommandittselskap/KS), a hybrid between a limited and unlimited company. Such a company is owned by two types of entities; the komplementar, holding unlimited liability, and one or more komandittists holding limited liability.

Another type of partnership often used for real estate investments in Norway is the general partnership (ansvarlig selskap/ANS and ansvarlig selskap/DA), both of which imply unlimited liability to partners, and the business is run for the owners' own risk and account. As a general rule, all partners (there must be at least two physical or legal persons) in an ANS have unlimited joint and several liability, while partners in a DA have pro rata liability.

Norwegian law does not recognise a collective investment vehicle as a separate legal entity. A real estate fund must therefore be set up using one of the corporate vehicles mentioned above.

A real estate fund may also be set up as a form of simple joint ownership between the investors, without using a corporate vehicle. By organising the fund in this way investors can classify their investment as real estate and not shares. For some investors, such as insurance companies, whose investment activities are regulated by statute, this can be a significant advantage.

Please note that as of 1 November 2021 the Norwegian Act on the Register of Beneficial Owners (Lov om register over reelle rettighetshavere) requires that all enterprises must have an overview of the physical persons that are beneficial/ultimate owners of the entity. That information will be registered in a public register when such register becomes available (date yet to be decided).

Aksjeselskap/AS (Private Limited Company)

This is a limited liability corporate vehicle similar to the private limited companies recognised in other jurisdictions.

Allmennaksjeselskap/ASA (Public Limited Company)

This is a limited liability corporate vehicle similar to the public limited companies recognised in other jurisdictions.

Kommandittselskap/KS (Limited Partnership)

A kommandittselskap/KS is a limited partnership where at least one of the partners has unlimited liability (often a private limited company). There is no limit to the number of partners with limited liability.

Ansvarlig selskap/ANS (General Partnership with Unlimited Liability) and Ansvarlig Selskap/DA (General Partnership with Pro Rata Liability)

An ansvarlig selskap/ANS and an ansvarlig selskap/DA are both general partnerships. All partners in an ANS have joint and several unlimited liability, while partners in a DA have pro rata liability.

Aksjeselskap/AS (Private Limited Company)

NOK30,000.

Allmennaksjeselskap/ASA (Public Limited Company)

NOK1 million.

Kommandittselskap/KS (Limited Partnership)

The minimum contribution for a limited partner (kommandittist) is NOK20,000 and the minimum contribution for the general partner with unlimited liability (komplementar) is 1/10 of the company’s capital subject to a minimum of NOK2,223. Thus, the minimum capital required is NOK22,223.

Ansvarlig selskap/ANS (General Partnership with Unlimited Liability) and Ansvarlig Selskap/DA (General Partnership with Pro Rata Liability)

No minimum contribution is required.

Aksjeselskap/AS (Private Limited Company) and Allmennaksjeselskap/ASA (Public Limited Company)

The shareholders’ meeting is the supreme governing body of the company and elects the board of directors. For ASA-companies it is a statutory obligation to have a managing director who is responsible for day-to-day management of the company. However, for AS-companies it is optional.

The company must keep its own accounts and, as a general rule, appoint a certified auditor (ASA-companies are obliged to appoint a certified auditor). AS-companies may decide, subject to certain threshold requirements, to deviate from the requirement to have an auditor/audit the annual accounts. Both AS-companies and ASA-companies must submit annual accounts, including the auditor’s report if applicable, to the Norwegian Register of Accounts.

If the company conducts a business that is subject to VAT, it must also be registered in the VAT Register. Letting real estate is not normally subject to VAT, although voluntary registration has been introduced for those letting business premises for activities that are liable for VAT. This allows them to deduct input VAT on the purchase of goods and services used in their property rental business.

The company can distribute its non-restricted equity as dividend to shareholders as long as its equity (including restricted equity) and liquidity, after the distribution, are considered as adequate in terms of the risk and the scope of the company’s business. The company’s board must assess whether this requirement will be fulfilled from time to time.

In addition, ASA-companies are subject to the Norwegian Code of Practice for Corporate Governance (NUES-anbefalingen). These "soft law" guidelines are based on a "comply or explain" principle and contain provisions regarding, inter alia, ASA-companies' reporting, value creation, capital structure, treatment of shareholders, share transferability, risk management and audits. For a complete overview, see https://nues.no/english/.

Kommandittselskap/KS (Limited Partnership)

Limited partnerships have considerable flexibility to determine their own corporate governance through their by-laws. Voting and profit participation rights can be freely allocated.

The unlimited partner (komplementar) (or the board of directors) can appoint one or more general managers. The general manager does not have the same decision-making powers as a general manager in a general partnership. Limited partners (kommandittister) may have certain limited rights of approval in relation to management decisions. Appointing a board of directors is optional.

If the partnership conducts business that is subject to VAT, it must also be registered in the VAT Register. Letting real estate is not normally subject to VAT, although voluntary registration has been introduced for those renting out business premises for activities that are subject to VAT. This allows them to deduct input VAT on the purchase of goods and services used in their property rental business.

Ansvarlig Selskap/ANS (General Partnership with Unlimited Liability) and Ansvarlig Selskap/DA (General Partnership with Pro Rata Liability)

The partnership has considerable flexibility to agree its own corporate governance through its by-laws. All partners are jointly and severally liable for the general partnership’s liabilities. Responsibilities, voting and profit participation rights can all be freely allocated. Appointing a board of directors is optional.

If the partnership conducts business that is subject to VAT, it must also be registered in the VAT Register. Letting real estate is not normally subject to VAT, although voluntary registration has been introduced for those renting out business premises for activities that are subject to VAT. This allows them to deduct input VAT on the purchase of goods and services used in their property rental business.

Aksjeselskap/AS (Private Limited Company) and Allmennaksjeselskap/ASA (Public Limited Company)

A limited liability company is subject to the Norwegian regulations relating to accounting and auditing. Each financial year (normally the calendar year), the company must complete and submit annual financial reports and tax returns.

If the company conducts business subject to VAT, a form detailing the sales/turnover must also be submitted to the tax collection office every two months.

Annual costs amount to a minimum of approximately NOK35,000‒50,000. The costs are likely to be lower if the company has resolved (where that is permissible) not to audit the annual accounts.

Kommandittselskap/KS (Limited Partnership)

As a main rule, a limited partnership is subject to the Norwegian regulations relating to accounting and auditing.

If the limited partnership conducts business that is subject to VAT, a form detailing the sales/turnover must be submitted to the tax collection office every two months.

Annual costs amount to a minimum of approximately NOK40,000.

Ansvarlig selskap/ANS (General Partnership with Unlimited Liability) and Ansvarlig Selskap/DA (General Partnership with Pro Rata Liability)

As a main rule, a general partnership is subject to the Norwegian regulations relating to accounting and auditing.

If the limited partnership conducts business subject to VAT, a form detailing the sales/turnover must be submitted to the tax collection office every two months.

Annual costs amount to a minimum of approximately NOK35,000.

Norwegian law differentiates between ground leases (governed by the Norwegian Ground Lease Act); leases for residential premises; and leases for commercial premises (both governed by the Norwegian Tenancy Act).

Ground leases are used as a means for structuring or differentiating ownership of buildings and land, while leases of commercial and/or residential premises only entitle the tenant to use the leased property or premises.

There are no different types of commercial leases apart from the general differentiations mentioned above.

In commercial leases the rent is usually calculated per square metre, including a proportionate share of the common areas of the building. The rent for retail premises is often based upon the tenant's revenue, with an agreed minimum rent as the lowest payable rent. By contrast, rent for residential leases is usually agreed between the parties and not directly connected to the number of square metres. In both cases, rent is as a main rule freely negotiable between the contract parties.

Residential leases in Norway can be entered into for either a fixed term or an indefinite period of time. Commercial leases, on the other hand, are almost solely entered into on a fixed-term basis, typically for five to ten years. Commercial leases will often also include rights of renewal for the tenant.

As a main rule, residential leases cannot be entered into for less than three years. Aside from this restriction, a lease may be entered into for as many years as the parties see fit.

In residential leases entered into for an indefinite period of time, there is a strong legal framework for the protection of tenants. Commercial leases are not subject to such legal limitations and are freely negotiable.

As a consequence of the Norwegian public support schemes, we have so far not experienced any major changes in either the negotiations on, or the content of, commercial lease agreements as a result of the COVID-19 pandemic.

Length of Lease Term

This varies greatly, depending on availability, type of premises, type of lease, rent levels and who the contracting parties are, etc. Leases are often granted for five years (with a right for the tenant to renew for a further five years) or for ten years. The lease can be for a fixed term or an indefinite period of time.

Maintenance and Repair of the Real Estate Actually Occupied by the Tenant

In commercial leases, the tenant is normally responsible for the cost of internal maintenance of the rented property. The tenant’s duty also usually includes renewing wallpaper and floor coverings, interior decorating and repair, as well as wiring/pipes and other arrangements relating to water, heating, electricity, ventilation and refrigeration systems.

Frequency of Rent Payments

Rent is typically paid in advance on a monthly or quarterly basis.

Coronavirus Issues

Probably as a result of the Norwegian public support schemes during the COVID-19 pandemic, we have only to a limited extent seen an increase in the use of COVID-19-related agreement regulations (such as force majeure clauses, etc) in Norwegian commercial leases.

Rent for commercial leases is often adjusted annually in line with the Norwegian Consumer Price Index. Adjustment to market level usually only happens when a lease is renewed.

Generally, commercial rents are adjusted according to the Norwegian Consumer Price Index. For residential leases, the Norwegian Tenancy Act provides a legal platform for both full yearly indexation of rent based on the changes in the Consumer Price Index and statutory adjustment as long as certain terms are met.

The landlord can opt to register as a VAT-paying company or to register the property for VAT purposes.

There are no costs other than the initial rent at the start of a commercial lease, unless otherwise agreed.

It is normally the landlord’s responsibility to pay the cost of all external building maintenance. The tenant will, however, normally pay a share of the communal expenses, according to a budget prepared by the landlord, in the form of a sum on account paid together with the current rent.

Services, such as telecommunications, electricity, water, heating, lighting, ventilation and cleaning, are usually agreed directly between tenants and relevant suppliers.

It is commonly agreed that each of the parties will maintain insurance to cover their own interests. The landlord usually insures the building while the tenant will take out insurance to cover, for example, windows and doors, internal features, furniture and fittings, machinery, data, stock, loss of profit/business interruption and public liability. In the event of any damage, the tenant’s insurance will be used to its full extent before the landlord’s insurance is called upon.

Leases normally stipulate the permitted use of the premises and tenants must also abide by the restrictions imposed by planning regulations.

Tenants are not usually allowed to alter or improve the premises without the landlord’s written consent. The parties must agree on whether or not the premises need to be restored to their original condition at the end of the lease period, and how any costs and benefits related to the alterations and improvements will be allocated.

Leases of residential property are governed by the Tenancy Act. In general, the conditions agreed in residential leases should not be less favourable to the tenant than those provided for under the Tenancy Act.

Leases of commercial property are also governed by the Tenancy Act. Such agreements may, however, with certain exceptions, deviate from the provisions of the Tenancy Act, allowing parties to agree on a wide variety of terms for leases.

Under general contract terms, insolvency on part of the tenant will give the landlord a right of termination without notice if the tenant is unable to make the required rental payments. If the tenant does not vacate the premises despite having been served notice by the landlord, this might lead to formal eviction of the premises through formal proceedings. In the event of bankruptcy, the bankrupt estate has the option to enter into the contract position of the tenant.

One of the most common forms of security is for the tenant to provide the landlord with a deposit or with an appropriate form of surety from a parent company, a Norwegian bank or other financial institution. The deposit or surety is usually equal to the value of the rent for a maximum of six months and any additional obligations.

There is no legislation in Norway conferring security of tenure.

However, a landlord cannot ensure that a tenant leaves on the date originally agreed on this basis alone, so commercial leases normally include provisions for recovering vacant possession without court proceedings after the term of the lease has expired. The tenant has a right to receive a prior warning and an opportunity to rectify any breaches of the lease before losing possession of the property. If the contract does not contain an eviction clause, the landlord must obtain a court order.

Sublease

According to the Norwegian Tenancy Act, a tenant under a fixed-term lease does not have the right to sublet without prior written consent from the landlord. The landlord is, however, normally obliged to give consent if there are no objective grounds for withholding it. If consent is refused and the landlord cannot demonstrate that there were objective grounds for this refusal, the tenant can terminate the lease by giving three months’ notice unless the lease explicitly states otherwise.

In commercial leases, it is possible to deviate from the Norwegian Tenancy Act. Therefore, it is not uncommon in a lease to entitle the landlord freely to withhold consent to subletting.

Assignment

Under the Norwegian Tenancy Act, a tenant cannot generally transfer its rights or obligations under the tenancy agreement to anyone else without the landlord’s consent.

Depending on the wording of the respective lease, the landlord may be free to withhold consent or may be obliged not to withhold it unreasonably.

Commercial leases for a fixed term cannot ordinarily be terminated throughout the duration of the fixed term, unless a walk-away clause or premature termination clause is agreed upon.

On the other hand, commercial leases for an unspecified time period are not common, but they do include a termination right for both parties. The termination period will be three months, unless otherwise agreed.

Residential leases for an unspecified time period can usually only be terminated by the landlord in the circumstances mentioned in 6.2 Types of Commercial Leases. In addition, the tenant has the right to terminate. The termination period will usually be three months, unless a longer period is agreed upon. Fixed-term leases cannot be terminated, unless agreed between the tenant and the landlord.

Both residential and commercial leases can be terminated immediately if either party materially breaches its obligations under the lease.

In general, there are no registration requirements or particular execution formalities according to Norwegian law. A lease can, however, be registered in the Land Register. In case the landlord goes bankrupt, such registration provides legal protection for the tenant. There is a nominal fee (NOK585 as of March 2022) for registration of a lease over real property in the Norwegian Land Registry.

Commercial lease agreements usually contain provisions for recovering vacant possession without court proceedings in cases of non-payment of rent. The tenant has a right to receive a prior warning and an opportunity to deliver up the property and associated fixtures to the landlord voluntarily before losing possession. Eviction usually takes between six and 16 weeks.

If the contract does not contain an eviction clause, the landlord must obtain a court order.

If the tenant commits any material breach of the lease agreement, the landlord is normally also entitled to revoke the contract, which means the tenant must vacate the property.

A lease contract can in certain cases be expropriated against full compensation to the parties concerned. The processing time will vary with the legal basis for the expropriation.

Two price formats most commonly agreed on in Norwegian construction projects are unit price contracts (Enhetspriskontrakt); and fixed-sum contracts (Fastsum kontrakt). In many cases, one will see a combination of the two formats in the same contract. Elements of hourly based remuneration will also often be included under both pricing formats.

During the past two decades, cost-plus and target price contracts, with eg risk-share for overspend, are also frequently seen in the market. In the unit price contracts, all individual services provided to complete construction are separately listed and priced. The contractor bears the risk related to the unit price, and the client bears the risk related to amounts needed to conclude the project. The final price of the works will be calculated depending on the services and units actually delivered in the project.

The responsibility for engineering and design are either left with the client in the commonly used "build only" contract schemes, or assigned to the contractor through the application of various EPC (Engineering, Procurement and Construction) contract formats in construction projects. In either case, the client or main contractor will usually distribute and assign the various engineering and design responsibilities to expert engineers within each technical area relevant to the project.

Indemnifications, warranties, limitations of liability and waivers of damages are commonly implemented in Norwegian construction contracts. Between professional parties there are at the outset no specific limitations to the parties’ ability to agree on said devices. There are, however, general limitations following the law of contracts and a general exclusion towards "unreasonable" contracts (Norwegian act on concluding of agreements § 36).

In the event that the contractor is delayed for reasons attributable to the client, the contractor will commonly be entitled to a corresponding amount of additional time for construction, or increased payment if the client demands acceleration to maintain the previously agreed schedule. If the contractor is delayed due to the contractor’s own circumstances, then acceleration must be implemented at the contractor’s own cost. If such delay leads to breach of agreed milestones or the final date for construction, then the client will commonly be entitled to liquidated damages. Liquidated damages are only applicable if such damages are expressly agreed upon for the specific milestone.

A warranty bond of 10% of the net fee is market standard to secure the performance of the contractor's work until completion. In general, the contractor is allowed to provide a bank guarantee. From completion onwards, a warranty bond of 3% of the amount of the final invoice for malperformance within the liability period is market standard. In general, the contractor is allowed to provide a bank guarantee.

Contractors of a construction project may acquire a right over the property, comparable to a lien in the event of non-payment. The contractor would normally have to take the unpaid invoices to court and ask for security through a temporary injunction. If security is granted by the court, the owner must pay the debt to the contractor to remove the lien.

For all building projects, if applicable, the necessary building permits must be obtained before a project can be inhabited or used for its intended purpose. This includes the official approval of necessary fire safety standards, other technical certificates and completion certificate by the building authority.

VAT is not payable on the purchase of real estate or on the purchase of shares in a vehicle holding real estate. However, construction work is subject to VAT. Accordingly, if a new property is built in Norway or construction works are carried out in relation to an existing building, the initial sale by the construction company is subject to VAT.

If a new property is built in Norway or construction works are carried out in relation to an existing building, the VAT payable on the purchase can be recovered if the procurements are used in the investor’s VAT-liable business (including rental) and the investor is VAT-registered in Norway. VAT refund is not possible for input VAT on procurements related to real estate not used in VAT-liable business in Norway.

The standard rate of VAT in Norway is 25%.

Upon transfer of property where input VAT has been deducted, the property is deemed to have passed to non-deductible use within a period of 10 years and (part of) the input VAT deducted must be repaid. This also applies to property sold by a business using the property in VAT-liable business. This adjustment of VAT can be omitted if the party who takes over the property also takes over the adjustment obligation. The buyer must be VAT-registered in Norway and must use the property in VAT-liable business to be able to take over the adjustment obligation.

An adjustment obligation also applies if the use of the property changes from (whole or partial) use in a business that is subject to VAT to use in a business not subject to VAT. However, fire or demolition of premises do not result in adjustment.

When buying shares in a vehicle holding real estate, the transfer of shares does not trigger an obligation to adjust deducted input VAT.

Stamp duty is normally payable on the transfer of title of real estate located in Norway ‒ whether commercial, residential or industrial ‒ at the rate of 2.5% of the sale value of the property. Normal arm’s-length conditions apply to calculating the sale value. The buyer is responsible for paying the stamp duty and registration fee.

The transfer of shares in limited liability companies and partnerships owning real estate is not subject to stamp duty. A transfer of real estate through the merger or demerger of a limited company is also exempt from stamp duty.

A minor registration fee of approximately EUR60 is payable in order to obtain legal protection for the right of ownership.

Property tax may be imposed by the municipal council. This will in general be at a rate of between 0.2% and 0.7% of the taxable value, normally calculated somewhat lower than the market value.

Under Norwegian domestic tax law, income from real estate located in Norway is taxable in Norway, regardless of where the landowner is domiciled. The tax rate is 22% (2022). This right to tax at source is not subject to adjustment by double-taxation agreements.

For indirect investment through a corporate entity in Norway, the net rental income from real estate in Norway is subject to general corporate income tax at the rate of 22% (2022). Further, withholding tax may be imposed on dividends from the Norwegian corporate entity to the non-Norwegian investor.

Owners of real estate are entitled to tax deprecations, which is calculated by multiplying the tax basis value for the real estate with the applicable tax depreciation rate. The tax deprecation rate for building and construction property and hotels is 4%. For commercial buildings, the tax depreciation rate is 2%. Residential real estate is not subject to tax depreciations.