Foreign Nationals' Real Property Rights
All Icelandic nationals, and foreign nationals who are domiciled in the country, may own real property (real estate) in Iceland. The conditions for owning real estate in Iceland are laid down in the Act on the Right of Ownership and Use of Real Property. Special rules apply to parties who exercise their rights under the EEA Agreement. Parties who are not EEA nationals require an exemption from the Minister of Justice to own real estate in Iceland.
The conditions for entitlement to own and use real estate in Iceland are set in the Act on the Right of Ownership and Use of Real Property. These rights also include fishing and hunting rights, water rights and other real property rights, whether acquired by free assignation or enforcement measures, marriage, inheritance or transfer of deed. The general principle under the Act is that Icelandic nationals and foreign nationals domiciled in Iceland may own property in the country or acquire the rights to its use. Legal entities must satisfy certain requirements to own real estate in Iceland, see here for details.
Special rules apply to foreign nationals and legal entities who enjoy rights under the Agreement on a European Economic Area, the EFTA Treaty or the Hoyvik Agreement between Iceland and the Faroe Islands; they do not need permission from the Minister if they satisfy certain conditions.
The Minister of Justice may grant special exemptions for ownership or use rights if the party intending to acquire real property is not covered by the general rules of the Act or the above-mentioned agreements. No exemption is required, however, in the case of a lease on real property or rights to it if the term of the lease or other rights is three years or less, or termination with no more than one year's notice is provided for.
Regulation on the rights of parties under the EEA Agreement
If a prospective buyer or lessee enjoys rights in Iceland under the rules of the EEA Agreement or EFTA Treaty, i.e. to freedom of movement, of establishment, to provide services or of movement of capital, or the Hoyvik Agreement between Iceland and the Faroe Islands, the party may own property in Iceland without special permission if certain conditions are satisfied, see specifically Articles 2. to 4 of Regulation No. 702/2002.
Regulation No. 702/2002, applies regarding rights under the EEA Agreement or EFTA Treaty.
In these instances, a declaration must be filled out and submitted for official registration together with a purchase contract or leasing contract. Specimen declarations are appended to the Regulation. The declaration must state that the person/company/institution in question satisfies the requirements set in Regulation No. 702/2000 for parties benefiting from these rights.
If the party in question is neither an Icelandic national nor a foreign national domiciled in Iceland, and does not enjoy rights under the above-mentioned agreements, an exemption may be sought from the Minister to acquire the right to own or use real property in Iceland. This applies in the following instances:
- If the applicant is entitled to pursue commercial operations in Iceland and wishes to acquire the right to own or use real estate directly connected with the commercial activities or to reside there.
- If other reasons are considered to apply.
Agreements, deeds of transfer or other documents attesting to the right of ownership or use requiring an exemption, as provided for in the second paragraph of Art. 1 of Act No. 19/1966, are not valid until the Minister has approved the acquisition by signing the original documents.
The application can be filled out electronically on the website and a scanned copy sent as an attachment to the e-mail address [email protected] or by post, see the application forms below. All original documents to be sent to the Ministry which are not in Icelandic or English must be accompanied by a translation in either of these languages by a certified translator. Processing of applications commences once all documentation and information requested on the application forms have been received by the Ministry.
Guidelines in processing applications
Guidelines in processing applications by foreign nationals to purchase real estate in Iceland based on the second paragraph of Art. 1 of Act No. 19/1966 are based primarily on a report of 30 May 2014 by the Committee reviewing the Act on the Right of Ownership and Use of Real Property, No. 19/1966. The guidelines have been used as a basis for the Ministry's assessment as to whether consent for the purchase shall be given; it should be underlined that each application is assessed individually.
For both individuals and legal entities, assessment shall in each case take into consideration:
- proposed usage;
- national economic benefit;
- environmental and social impact;
- position of the local authority (the position of the municipality need not be sought specifically);
- transparency of ownership;
- need for land, having regard to use.
If there are natural resources, such as water or geothermal rights, located on the land/farm which the party concerned wishes to acquire, special consideration shall be given to such factors.
Purchases of land outside zoned urban areas shall be limited to land below the contour line defining the Central Highlands.
1. Land inside zoned urban areas, including areas for outdoor leisure
1.1. Acquisition of rights to land use (real property together with lot rental rights). As a general rule, permission for such purchase is granted (provided other conditions are satisfied), whether the real estate is intended as a residence, vacation home or for direct use in commercial activities.
1.2. Acquisition of land ownership rights. As a general rule, permission for such purchase is granted (provided other conditions are satisfied). The size of the land should not exceed 5-10 hectares and be the only property owned by the party in Iceland. It makes no difference whether the property is intended as a residence, vacation home or for direct use in commercial activities.
2. Land outside of zoned urban areas
Permission for acquisition of rights to ownership/use of land outside of zoned urban areas is subject to stricter limitations than land within such areas. The reasons arise primarily from considerations of the need to protect future food production; the importance of safeguarding the country's sovereignty, including buying up of farmlands; possibilities of coming generations to enjoy the rent from the country's resources in the more distant future; the importance of environmental conservation; and cultural protection.
2.1. Acquisition of rights to ownership/use of land (leasing rights) for real estate as a residence or vacation home. As a general rule, permission for such purchases is granted as long as the land is not larger than 1 hectare and is the only property of the party concerned in Iceland.
2.2. Acquisition of rights to ownership/use of land (leasing rights) for real estate for direct use in commercial activities. As a general rule, permission for such purchases is granted as long as the land/farm is not larger than 25 hectares and is the only property of the party concerned in Iceland.
 The demarcation of the Central Highlands is based on the definition in the Regional Plan for the Central Highlands of Iceland 2015, cf. the Parliamentary Resolution on National Planning Policy 2015-2026, adopted by the Icelandic parliament Althingi on 16 March 2016.
If a legal entity satisfies the requirements below it does not require the permission of the Minstry of Justice. A distinction is made as to where responsibility lies in the company/institution.
- In the case of an unlimited partnership or company in which shareholders bear unlimited liability for the company's obligations, all of its members must be Icelandic nationals or have been domiciled in Iceland for a continuous period of at least five years.
- In the case of a limited partnership or limited partnership companies, i.e. in which some members bear unlimited and others limited liability for the company's obligations, then those who bear unlimited liability must all be Icelandic nationals or have been domiciled in Iceland for a continuous period of at least five year.
- In the case of a company in which none of the members bears full liability for the company's obligations, or an institution, then the company/institution must:
- be domiciled and have its legal venue in Iceland and
- its management must all be Icelandic nationals, or
- it must have been domiciled in Iceland for a continuous period of at least five years.
This latter category includes, for instance, public and private limited companies and limited partnership companies. In limited liability companies at least 4/5 of the share capital must be held by Icelandic nationals and Icelandic nationals must exercise the majority of votes at shareholders' meetings.
In assessing whether the conditions are satisfied for a legal entity to acquire rights of ownership or use to real property in Iceland, as previously stated, an examination must be made of information concerning the legal entity, its management and ownership of share capital.