How do I set the rent for my rental property?

There is no single rule for how rent must be set.

In principle, there are three different methods, and which method applies depends primarily on:

whether the rental property is located in a regulated or unregulated municipality
when the property was built

Step 1: When was the property built?

The first thing you need to check is the year the property was built.

If the property was built after December 31, 1991, the rent can generally be set freely according to market rent. This applies regardless of whether the home is located in a regulated or unregulated municipality.

If you are setting the rent based on market rent, you can review what similar rental properties in the area cost and set the rent accordingly.

If the property was built before January 1, 1992, you must proceed to the next step.

Step 2: Is the home located in a regulated municipality?

If the property was built before 1992, the rules depend on whether the municipality is regulated.

Regulated municipality - cost-based rent

In most regulated municipalities, the rent must be set according to the rules for cost-based rent.

Here, the rent is based on the property's operating expenses, such as:

taxes and duties
insurance
administration
maintenance

In addition to operating expenses, the landlord may in certain cases include a statutory return.

Unregulated municipality - value of the tenancy

If the property is located in an unregulated municipality, the rent is generally determined based on the value of the tenancy.

This means that the rent must correspond to what similar properties in the same area are rented out for. The assessment considers factors such as:

location
size
condition
quality
level of maintenance

Therefore, it is often relevant to compare with similar tenancies in the area.

Properties built after 1991 – free market rent

If the property was built after December 31, 1991, the rent is generally subject to free market determination.

This means that the landlord and tenant are free to agree on the rent amount. However, the rent must not be unreasonable or in violation of the Rent Act.

Why is it important to set the rent correctly?

If the rent is set according to the wrong rules, the tenant may in some cases have it reviewed by the Rent Tribunal.

Therefore, it is a good idea to clarify which set of rules applies to your specific tenancy before entering into a lease agreement.

Once the rent is set, the taxes must also be correct

Once you have set the rent, the rental income must be included in your tax calculation along with any deductible expenses.

Reportability helps landlords calculate rental tax, keep track of deductions, and make reporting to the Danish Tax Agency easier.

In short

You can set the rent using one of three methods:

Cost-based rent – typically for properties built before 1992 in regulated municipalities.
Value of the tenancy – typically for properties built before 1992 in unregulated municipalities.
Free market rent – generally for properties built after December 31, 1991.

Which method applies depends on both the age of the property and the regulations in the municipality where the rental property is located.