What does the landlord do when the tenant claims that a term in a rental agreement is invalid?

Entering into rental agreements

The starting point in Danish law is that there is freedom of contract. The parties to a contract can therefore generally agree to whatever they want, and the parties will therefore generally be bound by their agreement.

This principle also applies to rental agreements, although there are quite a few exceptions. This is especially true for residential rental agreements, due to the fact that the tenant is considered the 'weaker party' in the contractual relationship. Legally, a residential tenant is considered a consumer and a residential tenancy agreement is therefore considered a consumer contract. A consumer contract is defined in several places in legislation. Section 38a(2) of the Contracts Act states the following:

"For the purposes of this Act, a consumer contract means a contract concluded by a trader in the course of his trade or profession, where the other party (the consumer) is acting primarily outside his trade or profession."

Contrary to the above definition, a commercial lease agreement will normally not be a consumer agreement. Business leases and the Business Lease Act are thus also characterized by the fact that there is a very large degree of freedom of contract. Thus, there are only a few matters that the parties to a commercial lease cannot agree on.

In the following, however, the focus is on residential leases.

The general purpose of rental legislation

In the following, rent legislation primarily refers to the Rent Act and the Housing Regulation Act.

The rules in these laws have the general purpose of stating what applies if the parties have not addressed this in the rental agreement. This is often referred to as "filling in". This means that if the parties have not addressed a specific issue in the rental agreement, the rules of the rental legislation apply. The rules thus fill the "gap" that may exist in the parties' agreement.

However, many of the rules in the Rent Act cannot be deviated from at all to the detriment of the tenant (see below), which is why the overall purpose of the Rent Act is to set the framework for what can be agreed between landlord and tenant in general. It is therefore both natural and appropriate that the landlord and tenant do not deal in detail with, for example, rules on the presentation of consumption accounts in the lease agreement, as these rules are clearly stated in the Rent Act and cannot be deviated from.

Mandatory rules in rental legislation

There are a large number of mandatory rules in rental legislation (preceptive). Most of these rules mean that the landlord and tenant cannot enter into an agreement that deviates from these rules to the detriment of the tenant. However, agreements can be made that put the tenant in a better position than the tenancy law's starting point.

For example, section 70 of the Rent Act states that a tenant (in most cases) has the right to sublet their home for up to 2 years if the tenant is going to study etc. It cannot be agreed that the tenant does not have this right, but it can of course be agreed to extend this right so that the tenant generally has the right to sublet, or that the tenant has the right to sublet for up to 3 years for study stays etc.

For several of the rules, non-derogability also only applies to advance agreements, which means that you cannot deviate from the rule in advance (in practice by writing something about this in section 11 of the standard form), but that you can deviate from the law at a later date when the "issue" arises.

For example, in connection with the landlord's notification of a rent increase, the tenant may waive his/her right to have the increase in the deposit, which normally must also be made as a result of a rent increase, spread over 3 months, cf. Section 34(3) of the Rent Act.

The tenant can also waive their right to be summoned for a vacancy inspection with 7 days' notice when the tenant has terminated their tenancy and the parties think it is appropriate to carry out the vacancy inspection sooner.

Of course, many of the mandatory rules in rental legislation cannot be deviated from, even if an agreement to do so is made after the rental agreement itself was originally signed.

Thus, it will typically only be such "one-off cases" as described in the above examples where there may later be a deviation/waiver from the tenant.

On the other hand, it is not binding on a tenant, for example, if the landlord and tenant after July 1, 2015 enter into an agreement that the rent in an existing tenancy must be regulated according to a staircase rent adjustment clause, as such an agreement cannot be validly entered into after that date.

What are the consequences of disregarding mandatory rules in rental legislation?

If the landlord and tenant have entered into an agreement in violation of a mandatory rule in rental legislation, the consequence is that that part of the agreement is invalid.

The invalidity means that the landlord cannot invoke the contract term against the tenant. The tenant must therefore be treated as if the contract term does not exist.

For example, if the landlord has inserted a staircase rent clause in a lease agreement entered into after July 1, 2015, this means that the increases made pursuant to the staircase rent clause will lapse. In practice, this means that the rent must be reduced to the initial rent. Furthermore, the tenant will be able to claim back increases already paid. However, payments older than 3 years will be void due to statute of limitations.

In special cases, however, the tenant will be able to rely on the invalid agreement to the extent that it may be to the tenant's advantage. If it has been agreed that the rent cannot be higher than what is stated in an (invalid) staircase rent clause, the tenant will in some situations be able to invoke that part of the agreement, even if the staircase rent clause is otherwise invalid. For example, this may be relevant if the landlord later announces a rent increase, e.g. due to increases in taxes and duties, and this increase will bring the rent higher than what the staircase rent clause would have entailed. However, this will of course depend on a detailed interpretation of the parties' agreement.

Type forms

Since July 1, 2015, landlords have had to use the 9th edition of type form A when entering into rental agreements if they want to use a type form. However, it should be noted that there has been a transition period until October 1, 2015, where you could use both the 8th and 9th edition of the type form.

Older rental agreements entered into using the current standard form are of course still valid. In older leases, older versions of the standard form will of course have been used. However, even in older leases, you may have used the wrong type form, e.g. 6th edition when you should have used the 7th edition, etc.

It should also be noted that there is no requirement to use the standard form when entering into rental agreements. However, it is strongly recommended that you as a landlord use the standard form, as otherwise you may risk the terms of the lease agreement being disregarded under section 5 of the Danish Rent Act.

Section 5(3) states that if the landlord has used a lease that the tenant must perceive as being standardized, the tenant risks being equated with the use of an invalid standard form.

What are the consequences of using the wrong type form?

Unfortunately, it sometimes happens that the landlord has used an old/incorrect type form. The consequence of this is that the terms that put the tenant at a disadvantage compared to the tenancy legislation are not valid.

However, it is worth noting that only the terms agreed in sections 1 - 10 of the standard form are invalid (it should be noted that contract terms may not be included in section 10 of standard form A, 9th edition).

The terms that may be stated in section 11 of the standard form - the individual terms - are thus not invalid. This has been established by the Supreme Court in the judgment reported in Ugeskrift for Retsvæsen 2015, page 3294/2 (U 2015.3294/2 H).

In the case, the landlord had used an incorrect type form and it was agreed in section 11 that the lease was covered by the rules on free rent setting, as the lease was located in a property occupied after December 31, 1991 (a so-called "newly built property").

The tenant claimed that since the landlord had used an incorrect type form, the terms in the lease that put the tenant at a disadvantage compared to the tenancy legislation were invalid. The tenant therefore believed that the rent should be determined according to the rules in section 29 c of the Housing Regulation Act on small houses and thus not according to the rules on free rent determination.

The Supreme Court ruled that section 11 contained individual contract terms, which thus did not require the use of a valid type form for these terms to be enforceable by the landlord. Therefore, the tenant did not succeed that the rent should be set according to the rules for small houses. The rent determination was therefore upheld, and the rent could be determined according to the rules on free rent determination.

In practice, the discussion about using the wrong type form often arises in connection with the relocation settlement when the tenant moves out.

If the landlord has used an incorrect type form, this will generally mean that an agreement (by checking the box in section 8 of the type form) that the tenant is responsible for interior maintenance is invalid.

The Rent Act's starting point is that it is the landlord who has the interior maintenance obligation. Thus, the invalidity means that the deviation from the legal basis does not apply anyway, and the landlord therefore has the interior maintenance obligation.

This also means that the landlord cannot require the tenant to pay for normal repairs such as painting, whitewashing, wallpapering and floor treatment. However, the landlord will still be able to require the tenant to pay for the repair of defects caused by breach of the lease, as this follows directly from section 25 of the Rent Act.

However, if it is also stated in section 11 of the type form that the tenant has the interior maintenance obligation, the landlord will be "saved" by this. As stated in the aforementioned Supreme Court ruling, this individual term is not invalidated by the fact that the landlord has used an incorrect type form. Not even if the checkbox in section 8 of the type form in isolation cannot be invoked by the landlord because that part of the agreement is invalid.

Summing up

If a tenant claims that a contract term is invalid, the landlord should of course clarify whether this is correct. This includes clarifying the scope of the invalidity.

The fact that an invalid standard form has been used does not necessarily mean that all the terms of the agreement are invalid. It goes without saying that the rental agreement itself remains valid even if an invalid standard form is used.

However, the relevant thing to do is to clarify whether any of the terms of the agreement are no longer enforceable against the tenant.

It can be a complex issue to clarify the scope of an invalidity, which is why the landlord should contact a professional advisor in case of doubt. Sometimes it can be clarified via Danske Udlejeres telephone hotline.

If it turns out that a contract term is invalid, the landlord should consider whether the law opens up any other options for the tenant. For example, if a staircase rent clause is invalid, the landlord should consider whether it is possible to give notice of a rent increase according to the general rules of rent legislation.

(The article is published in the magazine Danske Udlejere no. 9 - November 2020)

If you have questions regarding mandatory rules in rental legislation or questions about residential rental agreements, you are always welcome to contact CLEMENS specialists in residential rental law.