Bortfester
A bortfester is the ground lessor, the landowner who leases out a plot to someone else under a ground lease agreement (festeavtale). The ground lessor keeps legal title to the land and is listed as the registered owner in Grunnboken, while the leaseholder owns the buildings on the plot and pays an annual ground rent (festeavgift) for the right to use the land.
The relationship is governed by the Ground Lease Act (tomtefesteloven) of 1996. The Act distinguishes between leases for homes and holiday homes (chapter III) and leases for other purposes, typically commercial (chapter V). For residential leases the rules give strong consumer protection, while commercial leases are governed to a greater extent by freedom of contract between the parties. Even so, the ground lessor and the leaseholder are not entirely free: under section 7, first paragraph, of the Ground Lease Act, new lease agreements for homes and holiday homes run until the leaseholder terminates the lease or the plot is redeemed, that is, for an indefinite period. Agreements entered into between 1975 and the Act coming into force in 2002 have a minimum term of 80 years. For residential purposes, termination by the ground lessor is in practice ruled out.
The ground rent can be adjusted in line with the consumer price index once per ten-year period, see section 15 of the Ground Lease Act. For lease relationships entered into before 2002 there are transitional rules, which have been amended several times after the Lindheim judgment in the European Court of Human Rights (2012). When the agreed term expires, the leaseholder has the right to an extension on the same terms, and for residential leases the right to redemption (buying out the plot) under section 32 of the Ground Lease Act. As a general rule, the redemption sum is set at 25 times the adjusted annual ground rent, or alternatively 40% of the raw land value if the ground lessor demands it and the agreement is not open-ended.
The ground lessor can mortgage the ownership of the land, but not automatically the plot together with the leaseholder's buildings. The leaseholder, for their part, can mortgage the lease right including the buildings, and such charges are registered in Grunnboken against the lease relationship. This means that a buyer of a leasehold plot takes over the leaseholder's position, while a buyer of the ground lessor's position takes over the landowner's rights with the running ground rent. Both transactions are registered separately.
Typical ground lessors are Statskog, Opplysningsvesenets fond, municipalities, church parishes, foundations and large private landowners who developed cabin or housing areas in the 1950s, 1960s and 1970s. Many of the original agreements are now in the redemption or extension phase, and the landowner has limited room for negotiation. For commercial leases, especially in areas close to town centres, the picture is different: the agreements are usually for a fixed term, the ground rent is significantly higher, and the parties are on a more equal footing.
In Grunnboken, a ground lease relationship can look complicated to a buyer of the buildings, but clean lease relationships are normally value-neutral as long as the terms are known and the ground rent is in step with the market. A decisive check is the remaining lease term, the adjustment and redemption clauses in the agreement, and whether the agreement is registered or only agreed between the parties. An unregistered ground lease agreement gives no legal protection against a later good-faith purchaser of the land.
In Placepoint, lease relationships are shown where they are registered against the property in the property panel, so you can see whether a property is a leasehold plot or has a ground lessor registered before you take a deal further.
How it looks in Placepoint
In Placepoint you find this in the Property panel:
From Placepoint's dictionary: Bortfester
More information: Lovdata: Tomtefesteloven, Kartverket: Tomtefeste, Store norske leksikon: tomtefeste
English: Ground lessor (landowner who leases out a plot under a festeavtale).
Frequently asked questions
What is the difference between a bortfester and a fester?
The ground lessor owns the land and is listed as the registered owner in Grunnboken. The leaseholder leases the land for an annual ground rent and normally owns the buildings on the plot.
Can the ground lessor terminate a lease relationship?
For residential and holiday-home leases, the ground lessor's right to terminate is strictly limited by the Ground Lease Act. The leaseholder has the right to both an extension and redemption when the agreed term expires.
How is the ground rent adjusted?
The ground rent can be adjusted upwards in line with the consumer price index once per ten-year period, see section 15 of the Ground Lease Act. Special transitional rules apply to older agreements.
What does redemption of a leasehold plot mean?
Redemption means that the leaseholder buys out the land and becomes the landowner. As a general rule, the redemption sum is set at 25 times the adjusted ground rent, or 40% of the raw land value if the ground lessor demands it.
Who are typical ground lessors in Norway?
Statskog, Opplysningsvesenets fond, municipalities, church parishes, foundations and large private landowners who established cabin and housing areas from the 1950s to the 1970s.