Forpagtning: leasing a business, land or property

A lease of a business (forpagtning) gives a person or business the right to use and run someone else's property, land or business in return for payment of a lease charge. This form of lease is common in agriculture, the restaurant sector, kiosks, petrol stations and other businesses.

This guide explains what such a lease contains, what distinguishes it from an ordinary tenancy, and which special rules apply to agricultural leases.

What is a forpagtning agreement?

A forpagtning agreement is a contract in which a lessor (the owner) transfers the right to use and run a property, a piece of land or a business to a lessee in return for payment of an ongoing charge.

The central feature is that the lessee does not merely rent premises, the lessee takes over the operation and has the right to the yield. The lessee runs the business and bears the operating risk.

Examples:

• A farmer leases the neighbouring farm's fields
• A restaurateur leases a restaurant including fit-out and stock
• A kiosk operator leases a kiosk in a shopping centre
• A chef leases the canteen operation in a large company

Forpagtning vs. ordinary tenancy

It can be hard to distinguish forpagtning from an ordinary tenancy, but there are decisive legal differences:

	Forpagtning	Tenancy
What is transferred	Use + operation + yield	Use of the premises
Who bears the operating risk	The lessee	The tenant
Nature	Running a business/land	Housing or business premises
Legislation	The Tenancy Act does not apply	The Tenancy Act / Commercial Tenancies Act applies
Registration needed	Recommended (protects against third parties)	Rarely necessary

What must a forpagtning agreement contain?

A forpagtning agreement should as a minimum govern:

1. Identity of the parties

• The lessor's and lessee's full name, address and CVR/CPR number

2. The leased object

A precise description of what is leased:

• Agricultural land: cadastral numbers, areas, field plans
• Business property: address, floor, square metres
• Business: fixtures, equipment, operating permits, stock

3. The lease charge

• The size of the ongoing charge
• Payment date (monthly, quarterly, half-yearly, annually)
• Adjustment of the charge (price index, market adjustment)

4. Duration and termination

• Start date
• The duration of the agreement (fixed-term or ongoing)
• Notice period

5. The lessee's rights and obligations

• What may the lessee do with the property/business?
• Maintenance obligation
• A requirement of insurance
• A prohibition on sub-leasing (unless agreed)

6. Handover at the end of the agreement

• What must the lessee return?
• Condition assessment
• A requirement of reinstatement?

7. Registration

For agricultural leases and longer-term business leases, registration is recommended to secure the lessee's right against third parties (including the lessor's creditors).

Agricultural leases: special rules

Leasing agricultural land is subject to special legislation, and there are important rules the lessee and lessor should know.

The Agricultural Holdings Act

Leasing agricultural land is primarily governed by the Agricultural Holdings Act (landbrugsloven, lov om landbrugsejendomme), in particular sections 27 to 28. The rules require, among other things:

• A written lease contract when leasing a whole agricultural holding
• Notification/application: leasing a whole agricultural holding must as a rule be notified or approved within a short deadline (typically 4 weeks after the agreement is entered into)
• Maximum lease period: a lease of an agricultural holding can as a rule run for a maximum of 30 years
• A requirement of proper cultivation of the land

Beyond this, the agreement itself follows the general rules of contract law.

The lease charge and market price

There is no statutory minimum for the lease charge, but the charge must reflect a reasonable market price. The tax authorities pay particular attention to charges that are too low in leases between connected parties (for example parents and children), where the difference up to the market price can be treated as a taxable gift.

Termination of an agricultural lease

Unless otherwise agreed, an agricultural lease is typically terminated to the end of a lease year with reasonable notice. Always agree the notice period explicitly in the contract, so that no doubt arises.

Agricultural support

When leasing agricultural land, there can be rules on eligibility for EU agricultural support. Normally it is the person who actually runs and has the land at their disposal (typically the lessee) who is eligible for the support. The lessee and lessor should agree who applies for the support and who holds the payment entitlements.

Registration of an agricultural lease

For the lessee's right to be protected against the lessor's creditors and any new owners of the property, the lease should be registered on the property's page in the land register. Registration of a lease or right of use is charged the fixed registration fee (there is no percentage fee as on a change of ownership). Check the current rate at tinglysning.dk before registering.

Restaurant and business leases

Leasing restaurants, cafés, kiosks and similar businesses is a special form of business lease with its own features.

What does the lessee take over?

• The operation of the restaurant
• Existing fixtures and equipment (stated in a handover statement)
• Stock (typically with a separate statement and payment)
• Lease of the premises (the lessee takes over or enters into a new lease with the landlord)
• Employees (the Business Transfer Act applies if the conditions are met)
• Any permits, for example an alcohol licence and food approval

Alcohol licence

The alcohol licence is personal and cannot be transferred. The lessee must apply for a new alcohol licence themselves (the licence is granted by the licensing authority on the recommendation of the police). Note: the application process can take several months, so start in good time.

Non-compete clause

The lessor typically wants to ensure that the lessee does not start a competing business in the local area if the lease ends. A non-compete clause should state:

• The geographic area
• The time limitation (typically 1 to 3 years)
• Any compensation for respecting the clause

Allocation of responsibility for repairs and maintenance

• Building maintenance: normally the lessor's responsibility
• Operational maintenance and fixtures: normally the lessee's responsibility
• Major renovation: the allocation is agreed in writing

The lease charge and tax

For the lessor

The lease charge is taxable income for the lessor.

For the lessee

The lease charge is a deductible operating cost for the lessee.

VAT

The lease charge is as a rule exempt from VAT. However, leasing certain business properties can be subject to VAT if the property is covered by a voluntary VAT registration. Check the VAT position before entering into the agreement.

Termination and ending

The lessee's breach

The lessor can typically terminate the agreement (with shortened notice) on:

• Failure to pay the lease charge
• Gross neglect of the property
• Unlawful sub-leasing
• Ceasing to run the agreed operation

The lessor's breach

The lessee can terminate the agreement if the lessor:

• Interferes with the lessee's right to operate (disturbs the operation)
• Does not carry out the maintenance that is the lessor's responsibility

Handover at the end of the agreement

The parties should agree a handover meeting at the end of the agreement, similar to a move-out inspection at the end of a tenancy:

• Condition assessment of the property
• A statement of any reinstatement claims
• Minutes of any disagreements

The alternative: management and franchise agreements

In some cases a management agreement or a franchise agreement is an alternative to a lease:

• Management agreement: an operator runs the business for the owner's account, the owner bears the financial risks, and the operator receives a fixed fee
• Franchise: the franchisee runs under an established concept and pays royalties, but has more independence than an employee

The choice depends on who is to bear the business risk and what degree of control the owner wants to keep.

The size of the lease charge: what is market rate?

Agricultural leases

The lease charge for agricultural land is set on market terms. The price varies considerably depending on:

• The quality of the soil (fertility and suitability for cultivation)
• Location (proximity to infrastructure)
• The condition of the buildings (if included)
• Local market conditions

A guideline price range for agricultural land in Denmark in 2025 was typically DKK 2,500 to 5,000 per hectare per year for average land, while top-quality land can reach considerably higher. The figures are indicative and change with the market.

The Tax Agency pays particular attention to the size of the lease charge when the lessee and lessor are related (for example parent and child). A charge that is too low can be treated as a hidden gift.

Business leases

For restaurants and business properties, the lease charge depends on:

• The property's location and customer base
• The turnover potential
• The fixtures and equipment included in the lease
• The state of the operating permits

Many restaurant leases include a turnover-based component, for example a percentage of turnover, possibly with a minimum amount.

Checklist: forpagtning agreement

Before you enter into a lease, you should ensure:

• The leased object is precisely described (cadastral number, inventory list, etc.)
• The lease charge is at market rate
• The duration and notice period are agreed
• The maintenance responsibility is clearly allocated
• The lessee's rights are defined
• Registration has been considered
• Any permits are clarified
• The tax and VAT position has been reviewed

The lease and bankruptcy: protect yourself as lessor

What happens if the lessee goes bankrupt during the lease period?

The starting point: The lessee's bankruptcy estate can choose to step into the lease, that is, pay the lease charge and continue the lease. Alternatively, the estate can choose not to step in, and the lessor must then file its claim for unpaid lease charge in the estate.

What can you as lessor do?

• Include a termination clause on bankruptcy
• Require security (a deposit or bank guarantee), typically corresponding to a few months' lease charge
• Consider a retention of title on fixtures included in the lease, to secure a right of repossession

Forpagtning vs. business transfer

It can sometimes be hard to distinguish between a lease and an actual business transfer. The distinction is important, because:

• The Business Transfer Act can apply if employees pass over as part of a lease and the lessee thereby takes over the commercial basis
• For VAT, a business transfer (going concern) can be treated differently from a lease (cf. section 8(1) of the VAT Act)

Signs of a business transfer (rather than a lease):

• All employees pass over
• Stock is transferred and included in the price
• Operating permits and contracts are transferred

Always consult an accountant or lawyer if there is doubt about the characterisation.

Related topics

Are you running a business and considering renting business premises? Read our guide to commercial leases.

Are you considering transferring your business to a buyer? Read about business transfer.

Do you run a business with several owners? Read about shareholders' agreements.

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