Right of withdrawal when buying a home

Even if both you and the seller have signed the purchase agreement, you can exercise your right of withdrawal when purchasing a home.

But what is the cost of withdrawing from a real estate purchase, and how does it work? Read more about the regulations that apply when withdrawing from a property purchase.

What is a right of withdrawal when buying a home?

When purchasing a home, you have a statutory right of withdrawal. The right of withdrawal is a period during which you can cancel your purchase – even if both you and the seller have signed the purchase agreement. However, there are several conditions that must be met for the right of withdrawal to be valid.

The right of withdrawal is regulated by the Consumer Protection Act (CPA). This means that you, the buyer, must purchase the property mainly for residential purposes pursuant to CPA § 6, paragraph 1. The right of withdrawal for the purchase of real estate therefore applies to the purchase of houses, condos, co-ownerships, and holiday homes, pursuant to CPA § 6, paragraph 1.

To exercise your right of withdrawal, it is important that you do so within the applicable time period, which is six business days after entering into the purchase agreement.

If you want to exercise your right of withdrawal, you must notify either the seller or the seller’s real estate agent in writing before the deadline expires, pursuant to CPA § 8, paragraph 1, part 2.

How is the withdrawal period calculated when buying a home?

Only the buyer can exercise the right of withdrawal. If you, the buyer, wish to exercise your right of withdrawal, you must do so before the applicable time period has expired.

As mentioned, the time limit is six business days – meaning that weekends and holidays aren’t included in the withdrawal period.

To determine the final day for notifying your withdrawal from the property purchase, you must count six business days from the day you entered into the purchase agreement. When calculating the six business days, do not include the day you entered into the agreement. The first day of the six business days is the day after the buyer has received the seller’s acceptance of the purchase agreement.

If the purchase is made through the buyer’s acceptance of an offer from the seller (in which case the seller is the first to sign the purchase agreement), then the right of withdrawal runs from the day the buyer is made aware of the seller’s offer, and not from the day the buyer accepts the seller’s offer, pursuant to CPA § 8, paragraph 2.

Calculation examples

Offer to purchase (the buyer signs the purchase agreement first)

1. The buyer signs the purchase offer on Monday the 6th.
2. The seller accepts the offer on Tuesday the 7th.
3. The buyer is notified about the seller’s acceptance on Wednesday the 8th.
4. The first of the six business days is, in this case, Thursday the 9th.
5. The buyer’s right of withdrawal expires on Thursday the 16th at midnight.

Offer to sell (the seller signs the purchase agreement first)

1. The seller signs the sales offer on Monday the 6th.
2. The buyer receives and reads the sales offer on Tuesday the 7th.
3. The seller receives the buyer’s acceptance on Thursday the 9th.
4. The first of the six business days is, in this case, Wednesday the 8th.
5. The right of withdrawal expires on Wednesday the 15th at midnight.

How do you exercise your right of withdrawal?

If you, the buyer, want to cancel your purchase of a home, you must do so within the cancellation period. To exercise your right of withdrawal, you must notify either the seller or the seller’s real estate agent in writing, pursuant to CPA § 8, paragraph 1, part 2.

The cancellation is valid regardless of whether the seller or the seller’s representative has seen the notification that you wish to cancel your purchase. The requirement is that you must be able to document that the written notice reached the seller or the seller’s representative before the expiry of the withdrawal period.

What is the cost of canceling the purchase of a home?

Exercising your right of withdrawal is not without financial consequences. The right of withdrawal is conditional on the payment of compensation to the seller. The compensation is equivalent to 1% of the purchase price – and the amount must be paid to the seller’s account before the withdrawal period expires for the withdrawal to take effect, pursuant to CPA § 11.

If you’ve already paid the seller a part of the purchase price that is higher than 1% of the purchase price, then the seller can offset this, pursuant to CPA § 12. If the compensation isn’t paid to the seller before the expiry of the withdrawal period, you are bound by the transaction – even if you’ve notified the seller or the seller’s adviser that you wish to cancel the purchase, pursuant to CPA § 11.

If the purchase agreement has been entered with a seller who built the property with the intent to sell, or whose main occupation is to sell real estate, and the seller has traded as part of this occupation, the buyer doesn’t have to pay compensation, pursuant to CPA § 11, paragraph 2.

How to avoid having to pay compensation?

As mentioned above, you will have to pay 1% of the purchase price if you make use of the general right of withdrawal for real estate purchases. That is, if you buy a home for DKK 6,000,000, you will have to pay the seller DKK 60,000 if you want to cancel the deal.

Fortunately, there is a way to cancel the purchase of real estate free of charge. All that is required is that you make sure to include a written adviser’s reservation in the purchase agreement before signing it. This allows you to sign the purchase agreement and have it reviewed by a buyer’s agent afterwards.

If your adviser cannot approve of the transaction in its entirety, you have the option to withdraw from the deal at no cost to you. The adviser’s reservation is, in principle, the same as a right of withdrawal, except for the free-of-charge cancelation of the home purchase when using the adviser’s reservation.

The purpose of the adviser’s reservation is to allow you, as the buyer, to sign the purchase agreement before having it reviewed by an adviser. If there are terms or conditions that you shouldn’t accept, you are free to withdraw from the deal without paying the seller compensation.

It is crucial, however, that your adviser notifies the seller’s representative before the objection period expires. This period is typically three to five business days, but you should make sure that this is stated in the purchase agreement. If it isn’t included in the purchase agreement, uncertainty may arise, and this may ultimately lead to you being unable to withdraw from the deal.

You should also ensure that a bank reservation is included in the purchase agreement before signing it. The bank reservation means that your signature is valid only if your bank approves the deal. If the bank won’t lend you the money, you are free to withdraw from the deal provided that a bank reservation is included in the purchase agreement.

When does the buyer have no right of withdrawal?

When purchasing property at a forced auction, an agricultural property, real estate on a timeshare basis, or a property acquired with a view to renting (excluding parental purchases or similar interests), it is not possible to make use of the statutory right of withdrawal, pursuant to CPA § 6, paragraph 2, part 1, and CPA § 6, paragraph 2, part 2.

The Ministry of Justice also issued a statement on May the 15th, 1996 stating that the buyer does not have a right of withdrawal if the buyer is a legal entity, such as a company or association.