Bank Guarantee and Security Deposits for Commercial Premises in Norway

The size of the contracts and development investments in commercial relations massively exceed ordinary dwellings. If a company (corporate tenant) goes to the bankruptcy court with bankruptcy, the landlord's claim will fall totally at the bottom of the debt list behind tax, loans, and salary. Good and solid pledge securities in the contract's bottom line is exclusively the most important parameter in Norwegian Real Estate B2B management.

1. Bank Guarantee (On-Demand Guarantee) - The B2B Standard

In commercial relations (office, warehouse, retail) one very rarely uses a traditional cash deposit account. Companies need capital in operation, they do not want to tie up million amounts in cash in a closed account. The standard is that the corporate tenant instructs its Norwegian bank connection to issue a Security Guarantee (Bank Guarantee).

• Selvskyldnerkausjon (On-Demand Character): With a self-surety guarantee ("Guarantees as for own debt") the landlord does not first need to go to a lawsuit against the business tenant and prove something before the bank is demanded for money. One can demand the Norges Bank giant (like DNB, Nordea) for owed rent the moment the tenant rounds the due date. The bank pays the landlord, and the Bank then collects a settlement with the Tenant afterwards on its own account.

2. Amount Limits (No 6-Month Rule in Commerce!)

The Tenancy Act's § 3-5 dictates in a dwelling that a pledge impossibly can pass "6 months' rent". This limit was made to protect private individuals against monstrous cynicism. In corporate life, the law's consumer regulation is waived almost automatically for security management to become realistic!

• Freedom of Contract: If an AS (Ltd) rents from an AS, the bank guarantees are free of limitations. Must the landlord pay a specially refurbished million amount for "specific rebuilding" for the technological company that moves in? Then a "Rebuilding-conditional Guarantee" which corresponds to 1 to perhaps 2 full annual amounts in the start is often accepted.

• Market Standard (Norsk Eiendom template): Standard contract takes its starting point in a security payment of 6 (six) months' rent plus VAT, and most often adjusted along the way through exchangeable common cost contribution factor.

3. The Guarantee's Living Duration – The Time Risk

The biggest mistake inexperienced commercial managers make in an agreement, is not to check the text's Duration clause.

• The lease agreement reads "The rent expires on Dec 31, 2030." If the Guarantee agreement from the private bank says "The guarantors' guarantee obligation runs until date: Dec 31, 2030", then the property manager is extremely thinly positioned!
• The bank guarantee always according to lawyers in Norway is obliged to have added for security: "Plus an appendage (Extra coverage) for e.g. 6 months after actual move-out and handed-over unit!" The reason is that unpaid Common cost settlements and enormous hidden demolition- /cleaning and destroyed window reports most often arise/are booked precisely two-three weeks AFTER one received the key in December. Then the guarantee that has due date before, has become worthless plastic ink.

4. Parent Company Guarantee (Morselskapsgaranti)

Through national retail chains (Narvesen, H&M, etc.) where the actual rental company that is addressed in the contract really is an empty and profit-poor AS that only runs the one local coffee shop, but is backed up by a gigantic European/Nordic billion-parent company, the owner can decline expensive paper bank fees for the store managers: They are requested instead to have signed in a Corporate Guarantee (Parent Company Guarantee), where the "Holding company X" guarantees and sells itself dearly through the signature to central ownership if its subsidiary's invoice omitted! This is more bureaucratization, and if the corporation falls under in a foreign crash – your safety net is uninterruptedly burned down. The bank is safest.

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