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How to get your deposit back when renting in Denmark

Foreigners renting in Denmark frequently find that landlords unfairly keep their deposits. We asked Louise Song, co-owner of tenancy law specialists Digura, how to avoid this happening and what to do if it does.

How to get your deposit back when renting in Denmark
The street in Vesterbro where the VEGA music venue is situated. Photo: Thomas Lekfeldt/Ritzau Scanpix

It seems like a lot of people renting in Denmark have problems getting their deposits back. Why is this such a big issue here? 

It’s specifically a problem for international renters. They are often actually a target for landlords who see the deposit as a quick way to make more money, because, of course, international tenants don’t know what rights they have in Denmark. 

As an international in a foreign country, you are often more reluctant to seek legal help and also more inclined to trust your landlord, who is often a Danish citizen themselves, so if they say ‘this is how it is in Denmark’, you’re inclined to believe them.

Because they’re looking to make a quick buck,  the apartment, or maybe the room, they’re renting is often of a low standard, so tenants tend to move in and then move out really quickly, and then the landlord just keeps the deposit every time. 

READ ALSO: 

Do you have any sense of how often this happens? 

I would say maybe 50 percent or more of the cases we at Digura have with our international tenants are cases like these, where we have a landlord who is specifically targeting international tenants and keeping all of their deposits without any legal reason for it.

Is there anything you can do as a tenant to prevent this happening?

Well, under Danish Rent Act, there are separate rules for landlords who only rent out one tenancy and for landlords who rent out more than one tenancy.

If your landlord is only renting one tenancy — and tenancy is categorised per apartment, so if they are renting out multiple rooms in one apartment that is still only one tenancy — then the rules the landlord has to obey are not as strict. In these cases, it would be better to contact a legal representative, because it’s more difficult for tenant to catch the landlord. 

If you have more than one tenancy, you are technically classified as a professional landlord, and for professional landlords there are a set of rules they have to follow. For instance, when you move in they have to make a “move-in report”, and when you move out they have to make a “move-out” report.

When you move out, the landlord also has to invite you to an inspection of the tenancy, and there are also certain deadlines the landlord has to follow. If they don’t follow the deadlines, if they don’t give you one of these reports, you are in most cases entitled to a refund of your whole deposit.

These are set rules and not up for any kind of discussion, and if you mention that paragraph, the landlords usually comply. Specifically in regards to the moving-out report, it is paragraph 98 in the Danish Rent Act. 

Louise Song, who graduates this week in law from Aalborg University, is co-owner of Digura, and started working on rental disputes as part of the student-run legal aid charity Lejerens Frie Retshjælp.

What if they have done a moving out report, and then they’ve sat there and said, ‘this mark on the wall, you know, that wasn’t there before”, and then massively overcharges you for it? 

That’s also where we as legal representatives come in. I have had many cases where I have gotten a copy of the tenants’ correspondence with the landlord after they move out, where I can see that the tenant has been adamantly arguing with the landlord, explaining to them, and also maybe showing pictures proving that the tenancy was left in a nice condition, despite maybe one scratch on the wall, which in no way justifies the high bill. 

But a lot of landlords are used to getting their way by just staying stubborn, without engaging in any kind of fair discussion about the condition, they just stand their ground, or maybe even begin ignoring the tenant.

With the bigger landlords, we often see that if we as legal representatives step in, they are very quick to just settle the case with us. Usually, that’s because we have already won several cases against them in the Danish rent committee or maybe even the court, So they know we’re going to go all the way until we win, and it will just be cheaper for them in terms of legal costs to settle. 

But some of the smaller landlords, who maybe haven’t lost cases yet and are used to getting their way, we would have to bring the case before the Danish Rent Committee, and maybe later the court. 

And what can you do when both when you move in and when you move out, in terms of documenting the condition of the apartment to make it less likely that they can overcharge you?

First of all, the tenant has a right to send in a list of defects and deficiencies within two weeks from when they move in. And if they have sent this list in within the two-week deadline, according to the Danish Rent Act, you are not liable for any of the things you have listed. It’s also a great idea to take pictures of everything and anything really, both when you move in and when you move out.

And in regards to the moving out report, which professional landlords have to make, you have to keep in mind that you’re not obliged to sign it. We often see cases where either the tenant has believed that certain things were written in the report because the representative of the landlord explained the content to them, and then they later found out that they signed something they can’t agree to. 

We also see cases where the landlord just straight out lies to them and tells them that they are obligated to sign no matter what, which of course is damaging to the tenant’s case, because they are essentially agreeing to the content when they sign it.

So you should make absolutely sure that you read through the entire report, and if you don’t agree, don’t sign it? 

Yes, and the report is, unfortunately, usually in Danish. So if you can’t read Danish, just don’t sign it, or, right next to your signature, you can write, “I’m only signing this because I’m confirming that I received a copy, but I don’t agree to the content in any way”. 

Are there any particular companies or particular types of landlords who, who you end up seeing problems with again and again? 

We definitely see both smaller landlords and bigger landlords reoccurring. I myself have a private landlord who is only subletting an apartment. I think I have currently as my clients, maybe eight of his previous tenants, and because, unfortunately, he has been declared insolvent, it’s very difficult for us to extract any money from him. 

Also, with the bigger companies, we have unfortunately seen some companies who specifically market themselves as expat-friendly companies, and a couple of those companies are unfortunately only there to make money off expats as well. 

In terms of what is normal in Denmark, how many months’ rent is reasonable for landlords to ask as deposit? 

This is actually regulated in the Danish Rent Act. The deposit can never exceed what’s equivalent to three months of your rent, and that goes for the prepaid rent as well. So when you move in, you can usually expect to pay what’s equivalent to three month’s rent as a deposit, plus three month’s rent in prepaid rent, and then maybe also the first month’s rent. So you are essentially paying seven month’s rent when you move in. 

And if anyone asks for more than that, what can you do? 

If you have already paid it, it’s illegal for the landlord to keep it, so you just have to point that out to the landlord and then usually they would refund it, because the law is very clear on that, and if they need a bit of nudging, maybe you can contact a legal representative and they will send a more formal letter to the landlord

Are there any other charges that you can get hit with like cleaning fees in addition to the deposit? 

Landlords who rent only one tenancy usually just keep your whole deposit, while the bigger companies tend to overcharge you, sending you a large bill saying that “we have to pay everything, and we have to varnish the floors, and we’re going to claim the whole of all of your deposit”, and then also charge you maybe 10,000 kroner on top of that.

Is this a problem that there’s been in Danish rental apartments for decades?

It has been an issue for many, many years, and with new legislation, it has been increasingly more difficult for the landlord to overcharge the tenant. Before 2015, the landlord was actually allowed to renovate the apartment so that it is as good as new when a tenant moves out, while now, according to the Danish Rent Act, the landlord can’t charge for normal wear and tear.

What if you actually have trashed the apartment? I mean, presumably, the landlords aren’t always in the wrong? 

I would say it’s less than 1% of the cases we get. Our company, at least, doesn’t represent any tenants or any cases which we don’t believe can win, which is why we win 98 percent of all our cases. 

And how much do you charge? 

Óur founders started as a legal aid organisation, specifically helping tenants, and it was after we saw how many tenants actually need actual legal representation and not just legal advice, that we began our company. So helping the tenant has always been at the forefront of our minds. 

We have a “no cure, no pay” payment model, meaning that if, against the expectations, we don’t win the case, we don’t charge anything at all. When we win the case, we don’t charge more than 25% of the winnings, so as to ensure that the tenant will always get some kind of value from having used our services.

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EXPLAINED: How to restructure and reduce your mortgage in Denmark

Denmark's unique borrowing system has enabled thousands of people to restructure their mortgages this year, cashing in on high interest rates which have caused a drop in market value of covered bonds. We explain how it all works and how you can potentially pay off a sum of your mortgage.

EXPLAINED: How to restructure and reduce your mortgage in Denmark

How does the mortgage system work in Denmark?

Denmark has a unique mortgage model, which is regarded as one of the best in the world.

When you take out a loan to buy a house in Denmark, the bank finances the loan through a covered bond [Danish:realkreditobligation,ed.] What makes the model unique is that you as the borrower know exactly what covered bond is issued to finance the loan.

“This direct link is very special to Denmark,”  Peter Jayaswal, executive director at Finans Danmark told The Local.

“You can follow what the market price is for the bond that is funding your loan in the capital market. A German borrower for example has a mortgage by the German bank issuing a loan using a covered bond. But there is no link, so the homeowner doesn’t know what the bond is.

“In Denmark, you can see it exactly. You can go onto your bank website everyday and follow the market price. That means that we have this early repayment system where I as a borrower am allowed to prepay my loan by buying back at market price the bond that has funded my loan,” Jayaswal explained.

When interest rates are increasing, it means that the price on the bonds is decreasing and this is why thousands of homeowners in Denmark have bought out their bonds this year, at a low market value and paid off a portion of their mortgage. 

READ ALSO: Interest rates encourage Danes to restructure mortgages

So how can I make this early repayment on my mortgage?

The first thing to do is to set up a meeting with your bank so they can assess whether you will benefit from the drop in bond value.

The market price of covered bonds is well documented in Danish media but you can also follow them on your bank’s website or by asking for an appointment with your bank to assess your current mortgage.

“You may at some point in the past have taken out a mortgage of 1 million kroner with a one percent fixed interest rate. To keep it simple, let’s say the loan is without amortisation.  When you took out this mortgage, the bond was issued at 99 kroner meaning that the nominal debt will be around 1,010,100 kroner to give a 1 million kroner revenue.

“Today you can see the interest rates have increased and the price on the bond financing your loan is say 80 kroner. As a borrower you can buy the bond in the market at market price and prepay the mortgage loan. But you only need to take out a new loan of around 808,000 kroner to do this.

“So you can take a new loan out at 808,000 kroner and use this to repay your existing loan and reduce your debt by around 200,000 kroner. This transaction can be done simultaneously by your bank, so you won’t end up with two loans,” Jayaswal told The Local.

What about interest rates on my mortgage?

The interest rate you get for your mortgage can be fixed or variable and they mirror the prices investors pay for the bonds. 

Fixed rate mortgage

Today, the fixed interest rate is five percent. This means that if you decide to buy your bond at the lower market value, you will have to take out a new loan at a higher interest rate.

“Using the example of reducing your mortgage by 200,000 kroner by buying the bond at a low market value, every month you are now paying an interest rate of five percent fixed term, rather than your one percent you had before. So you are paying more each month for the benefit of paying off a portion of your mortgage early and the benefits will decrease over time. 

“You usually break even after around ten to fourteen years but the bank will calculate this for you,” Jayaswal said.

“If you know you’re moving in two to three years, it makes sense to get a new loan with a higher interest rate because you’ll have to repay the loan anyway when you move. But if you think you’ll be in your home a long time, keeping this loan, then you need the interest rate to decrease in ten to fourteen years.

“And that’s the problem because we must be frank and say we can do all the forecasts but in the end no one knows what future interest rates will be, so it has to be the decision of the borrower,” Jayaswal explained.

Variable rate mortgage 

The other option is to take out a variable interest rate mortgage to buy the bond, which today is around three percent. However this carries a risk, as the interest rates are adjusted on a regular basis. F3 loans, for example, are adjusted every three years, while F5 loans have adjustments every five years.

“Changing from a fixed to variable interest rate, to reduce your debt and avoid an increase in interest rate, comes with a risk that you don’t have a fixed rate for 30 years, so you are more exposed and that’s very important be aware of,” Jayaswal told The Local.

On Monday, the company Totalkredit, the largest provider of real estate loans for private homes, auctioned flexible loans with resulting interest rates exceeding 3 percent on the F1, F3 and F5 loan types. That means the interest on these types of mortgages will be at their highest for several years.

According to Finans Danmark, Danish home owners have repaid 337 billion kroner of their mortgages in the first three quarters of 2022. Many of these home owners have chosen to switch to variable interest rates. You can swap back to a fixed-rate mortgage at any time but you also have to be aware that these rates may have increased by then too. 

How do I decide which option to take?

“I always say to people, feel free to go to your bank, ask them to make the calculations for you, so you have the foundation to make a decision”, Jayaswal says.

“Some might think a 30-year mortgage at a fixed rate of one percent is great, especially because today interest rate is five percent. Others won’t mind paying a five percent interest rate for a few years, because they want to reduce their debt today and believe interest rates will decrease. It is up to the borrower to decide.

“It’s not that one option is better than the other, it’s that you have opportunities and this is unique in Denmark,” Jayaswal said.

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