Festetomt

A festetomt (ground-leased plot) is a plot let out on a long-term contract where the fester (leaseholder) owns the buildings, while the bortfester (ground owner) owns the land itself. A festetomt is a separate matrikkelenhet with its own festenummer, and it is a common form of tenure for holiday cabins, older detached houses on industrially owned land, and for commercial property on land owned by public bodies or foundations.

The lease relationship is established through a festeavtale (ground lease agreement) between the bortfester (ground owner) and the fester (the party who builds and uses the plot). The agreement is registered in Grunnboken and the festetomt arises as a separate matrikkelenhet with its own bruksnummer and festenummer (gnr/bnr/fnr). The fester gets a separate register page for the lease right, and if you build a house on the plot you hold hjemmel (legal title) to the buildings, but not to the land. The legal structure is set out in the Tomtefesteloven (Ground Lease Act) from 1996, which applies to all new festeavtaler entered into after 1 January 2002 and partly also to older contracts.

The ground rent is the ongoing payment to the bortfester, typically agreed as a fixed annual amount that is adjusted in line with the consumer price index. For residential and holiday home leases, Tomtefesteloven chapter III sets the limits for how high the ground rent can be and how it can be adjusted when the contract expires or is extended. The rules have been through several rounds in the Supreme Court and at the European Court of Human Rights, and remain politically contested.

For the fester, the right of redemption is the most important right. Under Tomtefesteloven chapter VI, a fester of a home or a holiday home has the right to redeem the festetomt (buy the land) after 30 years, or when the contract expires. Under the statutory rules, the redemption sum is normally set at 25 times the annual ground rent, but the bortfester can require the sum to be set at 40% of the raw land value of the plot. For commercial leases, freedom of contract applies to a greater extent, and a right of redemption must either follow from the festeavtale or be negotiated separately.

Practical consequences when buying a festetomt:

• Lower price per m² than a freehold plot, because you pay for the lease right, not the land. The difference reflects the capitalised ground rent and the redemption value.
• The ground rent is an ongoing charge. A house on a festetomt with 30,000 kr a year in ground rent carries about 750,000 kr in capitalised cost at a 4% required return.
• Right of redemption. Check the term of the festeavtale and whether redemption has been completed, can be demanded now, or only at expiry.
• Mortgage and loans. Banks lend against a lease right, but the lending value can be reduced depending on the remaining lease period and the redemption options.
• Document duty. Transferring a lease right does not always trigger the full document duty of 2.5%; the rules follow the Norwegian Tax Administration's practice for lease rights as opposed to property transfers.

Traditionally, the bortfester is often the state, a kommune, the church (Opplysningsvesenets fond), private landowner associations or heirs of old farms. Many housing developments in the 1960s and 1970s were built on festetomt because the landowner would not sell, and a significant share of Norwegian holiday cabins still stand on festetomt.

In Placepoint, the lease relationship and the festenummer are shown in the property panel for plots with their own festenummer, taken from the matrikkel and Grunnboken. You can see whether the property is leased, who the bortfester is, and you can find the related hjemmel (legal title) details in the same place.

How it looks in Placepoint

In Placepoint you find this in the Property panel:

From Placepoint's glossary: Festetomt

More information: Lovdata: Tomtefesteloven, Kartverket: Matrikkelen, Skatteetaten: Dokumentavgift

English: Ground-leased plot (Norwegian-specific, plot held under a festeavtale).

Frequently asked questions

What is a festetomt?

A plot where the land is let out on a long-term contract: the fester owns the building, the bortfester owns the land. The festetomt has its own festenummer in the matrikkel and its own register page in Grunnboken.

How long does a ground lease contract last?

Residential and holiday home leases under Tomtefesteloven have, as a general rule, unlimited duration, or the duration agreed in the contract. Older contracts with a fixed term can be extended at the request of the fester under chapter VI of the act.

Can I buy out the festetomt?

Yes, a fester of a home or a holiday home has a right of redemption after 30 years or when the contract expires, under chapter VI of Tomtefesteloven. The redemption sum is normally set at 25 times the annual ground rent, but the bortfester can require the sum to be set at 40% of the raw land value.

What does it cost to lease a plot?

An annual ground rent that is typically adjusted in line with the consumer price index. Tomtefesteloven sets limits for how high the rent can be for residential and holiday home leases.

Is a festetomt cheaper than a freehold plot?

Usually yes at the point of purchase, but you pay ongoing ground rent. The capitalised value of the ground rent plus any redemption value gives a better basis for comparison than the sale price alone.