The Eastern High Court has confirmed the City of Copenhagen’s right to enforce registered clawback easements, allowing the municipality to acquire two properties containing 228 residential units and eight commercial units for just DKK 1.2 million, despite the properties being valued at approximately DKK 453 million.
The property owner – the self-governing housing association Byggeselskabet Borgergården – argued that the clawback easements were illegal and that buying back the properties was an abuse of authority because the City of Copenhagen had considered the financial aspect when deciding to buy back the properties.
The Eastern High Court rejected all of these claims. The Court found that the easements were valid and that the City of Copenhagen had acted in the pursuit of a legitimate municipal interest when deciding to exercise its repurchase right under the easements.
The Court also rejected the argument that the difference between the repurchase price (approx. DKK 1.2 million) and the market value (approx. DKK 453 million) of the properties justified setting aside the easements. This ruling aligns with established case law where Danish courts have consistently upheld the enforcement of clawback easements.
A clawback easement is a registered right that entitles the original owner to buy back a property at a pre-determined price at a future date. Such easements are widespread in Copenhagen and have historically been used by the City of Copenhagen to retain long-term control over land use and prices.
The presence of a registered clawback easement significantly reduces the value of the affected property. The resulting uncertainty in ownership reduces market value, deters investors by eliminating the prospect of long-term capital appreciation and may restrict building rights. Furthermore, as property values have risen significantly over the decades, the difference between the agreed repurchase price and the market value has grown considerably — as was recently illustrated by the ruling in the Eastern High Court.
Instead of selling back the property to the municipality at the fixed price agreed at the time of the clawback, property owners can request redemption of the repurchase right or postponement of the repurchase date under a scheme established by the City of Copenhagen.
According to the City of Copenhagen’s current calculation practice, redemption offers are calculated as follows:
Depending on the circumstances and the terms of the relevant redemption offer, redeeming the clawback easement may increase the property’s resale value by making it more marketable and attractive to developers and similar purchasers, even after accounting for the redemption price.
As the recent Eastern High Court ruling demonstrates, asserting one’s rights against the City of Copenhagen in matters involving clawback easements can be challenging.
Gorrissen Federspiel’s Real Estate group has extensive experience in handling clawback easements and can assist with the following:
We are available to answer any questions you may have and assist with any related projects.