Purchase of Your Own Leasehold Plot
Under the Ground Lease Act, most leaseholders of residential and holiday homes have the right to redeem the leased plot, meaning purchase it, every two or every ten years. A landowner may nevertheless allow leaseholders who wish to do so to redeem plots by agreement at any time. Allstad chooses to make an offer to all leaseholders who wish to redeem their plot when a claim for redemption is submitted. Our goal is to send the offer within one month after receiving a complete application for redemption. The offer will be based on the valuation methods set out in the Act:
- You can either purchase the plot at a price corresponding to 25 times the annual ground rent, adjusted in accordance with the provisions of the lease agreement applicable at the time of redemption.
- Alternatively, the redemption sum may be set at 40% of the plot's market value.
It is the lessor (Allstad) who chooses which of the two alternatives will form the basis. The parties may also freely agree on redemption on other terms.
There is an exception to the general rule where there is a sublease arrangement:
A sublease arrangement arises when Allstad leases a larger area to a leaseholder, such as a municipality. The municipality (the sublessor) divides the property into smaller plots, which the municipality subleases to a sublessee. The individual sublessee then has a lease agreement with, for example, the municipality, while the municipality has a lease agreement with Allstad. The legislation regulates these two agreements differently.
In such cases, Allstad has a third alternative to choose from when the plot is subleased, and the ground rent between Allstad as landowner and your lessor is reduced as a result of the plot being redeemed. The Supreme Court has indicated that in such cases the redemption sum may be determined by capitalising the reduction in the ground rent between Allstad and the sublessor, so that the landowner is compensated for its loss under the Constitution. In simplified terms, this is 25 times the CPI-adjusted ground rent income that Allstad loses as a result of the redemption.
Other costs
In addition to the redemption sum itself and an administration fee, costs will be incurred in connection with subdivision, registration and similar matters. Redemption under the Ground Lease Act constitutes expropriation, and ideally the lessor should not be burdened with costs associated with the transaction.
Questions and answers
The following conditions must be met in order to have a claim for redemption:
- The plot is used for a residential or holiday home
- The leaseholder is an individual and not an organisation
- 30 years have passed since the lease agreement was entered into
Read more under Section 32 of the Ground Lease Act.
You can claim redemption whenever you wish. Allstad will normally make an offer within one month after receiving the claim.
The Ground Lease Act contains the following rules, but it is permissible to agree on redemption at other times. Once the lease agreement has run for 30 years, redemption may be claimed. You then have the right to redemption:
- Every 2 years for a residential plot
- Every 10 years for a holiday-home plot
The claim must be submitted no later than 1 year before the redemption date.
Example:
An agreement was entered into on 1 November 1996. The contract concerns a plot for a residential house.
- The first redemption date is 1 November 2026. The leaseholder must therefore claim redemption by 1 November 2025.
- The next redemption date is 1 November 2028. The leaseholder must therefore claim redemption by 1 November 2027.
There are two alternative calculation methods, and the one that results in the highest redemption sum will apply:
- 25 times the adjusted ground rent
- 40% of the plot's current market value
This applies only to leaseholders with a right to redemption under the Ground Lease Act. A separate rule also applies to sublease arrangements, as described in the text at the top of the page.
Example:
The leaseholder claims redemption of a plot with an annual ground rent of NOK 3,000.
25 times the adjusted ground rent gives:
- Ground rent adjusted to NOK 12,000 per year
- Redemption sum of NOK 300,000
40% of the plot's market value gives:
- Plots in the area are valued at NOK 500/m2
- The plot to be redeemed is 1 decare
- The plot's market value is calculated at NOK 500,000
- Redemption sum of NOK 200,000
In this case, the redemption sum will be NOK 300,000.
Please note that if the plot has not been adjusted according to market value since 2002, the adjusted ground rent may be considerably higher than the current ground rent. Read more under Adjustment of the ground rent
Read more about the redemption conditions under Section 37 of the Ground Lease Act.
In addition to the redemption sum, the following costs will be incurred in connection with redeeming the plot:
- Administration fee: NOK 9,600, payable to Allstad.
- Subdivision costs: Depending on the applicable rates, payable to the municipality
- Registration fee and document duty: Depending on the applicable rates, payable to the Norwegian Mapping Authority
There may also be some expenses related to, among other things, postage for sending neighbour notifications.
The following steps must be completed to redeem a plot:
- The leaseholder submits a claim for redemption.
- Allstad sends an offer letter and purchase contract.
- The leaseholder signs the purchase contract.
- Allstad submits an application for subdivision to the municipality.
- The municipality surveys and subdivides the plot. Allstad's experience is that some municipalities have long processing times. Contact your municipality for further information.
- Allstad sends an invoice for the purchase price and other amounts to the leaseholder.
- The leaseholder pays the purchase price and other amounts.
- Allstad sends the deed to the leaseholder.
- The leaseholder must register the deed with the Norwegian Mapping Authority.
The process of redeeming a leasehold plot can be time-consuming. There are particularly two reasons for this:
- Allstad normally sends an offer within one month after receiving a claim for redemption.
- For subleased plots, it may take longer, especially when a process is underway to adjust the municipality's ground rent payable to Allstad.
- In order to subdivide the plot, the municipality will normally need to conduct a survey. Municipalities have different processing times. Many municipalities have limited capacity and long processing times. Your municipality can inform you of its expected processing time.
Allstad cannot influence the legislation or the municipalities' case processing. We ask for your understanding in this regard.
Yes, you can. However, it is important to be aware that the redemption sum will not be changed unless there are compelling reasons to do so. It is also possible that the redemption sum may be increased upon reconsideration.
The following objections are not considered relevant:
- Personal circumstances, such as poor finances
- Comparison with neighbours who have paid a different amount (if the pricing of previous redemptions is relevant, this will have been taken into account in your case)
- Other old price examples or old valuations (more than 3 years old)
If Allstad and the leaseholder cannot reach an agreement, the leaseholder may request a judicial valuation, which means that the court determines the applicable redemption sum.
Read more under Section 37 of the Ground Lease Act.
Claim for redemption of a leasehold plot
A claim for redemption must be submitted using the application form below.