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9 February 2022

The Eastern High Court's Judgment in the Cooperative Housing Association's Breach of a "Subsidy Declaration"

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Introduction

Several cooperative housing associations in the greater Copenhagen area are subject to a so-called “subsidy declaration” due to the associations having received partial public funding in connection with the construction of their real estate (typically executed in the 1920s). 

The declaration is registered as a burden on the real estate of the associations with the Municipality of Copenhagen (“the Municipality”) as the creditor entitled to enforce the declaration. The declaration provides that the Municipality may claim the transfer of the “profit” arising from any sale of shares in the associations or from the sale of the real estate of the association. The declaration contains a particular definition of what constitutes a “profit” for these purposes.


Contrary to the standard regulation in the Danish Cooperative Housing Association Act, the declaration does not fix any mandatory maximum price applicable to the sale of shares in the associations, nor does it grant the buyers of such shares any excess repayment right against the sellers. 


This complex regulation has given rise to a long-standing dispute between the Municipality and a significant association, Andelsboligforeningen København & Omegn (“ABKO”), which has so far been tried 3 times by the Eastern High Court and once by the Supreme Court.


The core subject of the latest dispute between the parties concerned whether the Municipality had a direct payment claim or damages claim against ABKO due to ABKO having condoned certain sales of shares at an excess price (as calculated according to the declaration).


By its appeal judgment of 7 February 2022, the Eastern High Court has now ruled on the matter. In doing so, the High Court provides an important precedent with respect to the legal nature of the Municipality’s claims arising from an association’s breach of the declaration.

Thomas Weitemeyer

Managing Partner

+45 30 37 96 90

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Thomas Mygind

Partner

+45 30 37 96 58

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