Festeavtale (ground lease agreement)
A festeavtale (tomtefeste, a Norwegian long-term ground lease) is an agreement where the landowner (bortfester) grants another party (fester, the leaseholder) the right to use a defined part of the property for a period of time in return for an annual ground rent. The fester may erect buildings on the plot and can normally sell, mortgage and let them out, but does not own the land itself. The arrangement splits ownership in two: legal title to the land sits with the bortfester, while title to the right of use and the buildings sits with the fester. In practice, a leased plot works for the leaseholder almost like owning a section of the land, but with a ground rent and redemption rules that govern the finances.
The relationship is governed by tomtefesteloven (the Ground Lease Act) of 1996, which sets the framework for ground rent, rent adjustment, maximum term and redemption. Ground leases for housing and holiday homes run as a general rule without a time limit (tomtefesteloven section 7), so the fester or their descendants have the right to continue the lease on the same terms when the agreed lease period expires. For commercial property, the parties are free to agree a fixed lease term.
The ground lease agreement is registered in Grunnboken at Kartverket, and the leased plot is given its own festenummer (fnr) in the matrikkel. The fnr is what distinguishes a leased plot from a freehold property in the cadastral number: cadastral number 0301-209/369/0/0 is a freehold property, while 0301-209/369/12/0 is ground lease number 12 on the same freehold property. Who the bortfester and fester are is shown in Grunnboken; which buildings stand on the plot is recorded in the matrikkel.
A fester of a housing or holiday home plot has the right of redemption under tomtefesteloven section 32, that is, to buy out the plot at market value, once the lease has run for 30 years or when the lease period expires. The redemption sum is as a general rule 25 times the adjusted annual ground rent, see tomtefesteloven section 37. For plots other than housing and holiday properties leased out indefinitely without a right of termination for the landowner, the redemption sum is instead 40% of the plot value. The ground rent can be adjusted in line with the consumer price index (CPI) at fixed intervals, and special rules apply to adjustment based on the value of the plot.
State regulation of ground rent has been tested several times before the European Court of Human Rights (ECtHR), in particular in the Lindheim case (2012), which led to the 2015 amendment on the "engangsløftet" (one-off uplift) of up to 9,000 kroner per decare of plot at the first adjustment after 01/01/2002. The rules have now been adjusted so that both the fester and the bortfester have a predictable framework, but the area is still politically contested.
Tomtefeste has a long tradition in Norway, used in particular by kommuner, foundations and, historically, by Opplysningsvesenets fond. Many areas around Oslo and other large cities sit on leased plots, with Akershus festning, Aker brygge and Tjuvholmen as well-known examples. When buying a home on a leased plot, the buyer should check the remaining lease term, the next rent adjustment date and the redemption terms. The lease affects both the price and the financing options, since some banks are restrictive about mortgages on leases with a short remaining term.
In Placepoint, ground leases are shown as part of the property panel. The festenummer, the bortfester and known ground lease agreements are taken from the matrikkel and Grunnboken.
How it looks in Placepoint
In Placepoint you find this in the property panel:
From Placepoint's dictionary: Festeavtale
More information: Lovdata: Tomtefesteloven, Kartverket: Feste, Store norske leksikon: tomtefeste
English: Ground lease agreement (Norwegian-specific, long-term land lease with building rights).
Frequently asked questions
What is a festeavtale?
A festeavtale is a contract where a landowner (bortfester) grants another party (fester) the right to use the plot in return for paying an annual ground rent. Ground lease agreements are governed by tomtefesteloven.
How does a festeavtale work?
The lease term is often 50 to 99 years. The fester pays an annual rent to the landowner and owns any buildings on the plot, but does not own the land itself. The ground rent can be adjusted in line with the CPI or the plot value.
Can the leaseholder buy out the plot?
The fester can normally apply to redeem the leased plot at market value once the lease has run for 30 years (housing and holiday homes). Tomtefesteloven gives the fester extended rights in particular cases.
Does the leaseholder own the buildings on the leased plot?
Yes, the fester owns the buildings on the plot, but the landowner owns the land. This is shown in Grunnboken. A leased plot is given its own festenummer (fnr) in the matrikkel.
How do I know whether a property is a leased plot?
Ground lease agreements are shown in Grunnboken and the matrikkel. In Placepoint you can see whether a property is a leased plot through the property information, which is important to clarify early in an acquisition process.