Ground lease or leasehold in The Netherlands (erfpacht) is pretty common. The City of Amsterdam owns 80% of the land and has approximately 200.000 ground lease contracts.
The leaseholder (erfpachter) obtains the right to use or build on the land and will pay an annual fee or ground rent (canon) to the owner of the property. The leasehold can only concern the land but can also include a house or a flat. Unlike tenancy or rent, ground lease is a real right, which means that it can be transferred to a purchaser and will be registered in the Dutch real estate registry (Kadaster) in The Netherlands. In case of disputes regarding a ground lease as real estate lawyer I will study the ground lease conditions applying to the ground lease contract.
Buying ground lease property in The Netherlands
You should consult a lawyer in the Netherlands when Purchasing a home on a leased land. Dutch Leasehold (also called ground lease or land lease) has a lot of cavities, mainly because of the lack of proper legislation on ground lease. Therefor ground lease is fully shaped by general lease conditions applied by the landowners. Leasehold on private land needs special attention since banks are reluctant to finance private leasehold in the Netherlands.
Purchasing a house on Dutch Leasehold
A foreigner you can buy a house or flat on leasehold in the Netherlands. It is important check the leasehold conditions and hidden facts, and never purchase a leased-land property without full understanding the unusual features of this type of home ownership. Things you should first find out before buying a leasehold flat is the ground rent (canon), the period of the lease, historical and future charges and clauses in the lease that will limit the use of the property. Especially to mechanism that renews the ground rent needs special attention, because your housing costs can increase substantially when the ground rent is renewed.
Land lease transfer under Dutch Law
Ground lease is a real right, which means that it can be transferred to someone else and will be registered in the real estate registry (Kadaster) in The Netherlands. If the lease holder transfers his right to ground lease to someone else, the conditions of the ground lease will not change. The rights under the ground lease will be fully transfered to the Purchaser of the leasehold. In case of death of the leaseholder, the leasehold will pass to his successors. The leasehold is only continued if it is nor a temporary lease (for 30 or 50 years). In Amsterdam the ground lease can be extended.
Dutch leasehold fully shaped by Landowner’s lease conditions
The law on ground lease is very limited in The Netherlands. Therefore the ground lease contract (and applicable general conditions) stipulates almost all the rights and obligations of the leasehlder and the landowner. These ground lease conditions (erfpachtvoorwaarden) come in all sorts and variations. Therefor a lot of varieties of leasehold are around in The Netherlands. In case of legal issues regarding a ground lease I can advise as a real estate lawyer and I will study the ground lease conditions applying to the ground lease contract.
Leasehold property in The Netherlands
The City of Amsterdam is a big landowner and lease contracts outstanding. But other government bodies are strong in leasehold as well. To these lease contracts the general conditions of the landowner apply. The leasehold right is very often issued for a long period, for example 30 or 50 years. During this period, the annual usage fee (canon) can be adjusted according to a price index and may be adjusted every five or ten years, according to a price adjusting mechanism in the general conditions applying to the land lease. In case the leaseholder of the ground lease changes the use or changes the building on the property, the landowner will try to increase to the annual usage fee (ground rent). That is a source of disputes.
Price adjustment of leasehold source of disputes
Disputes very often arise from adjusting the lease price. To fix the ground rent, the land price is valuated. The (new) percentage rate (canon percentage) is applied to the market value as established by the land owner. The price of the ground lease may therefor “explode”. It is important to have the landlease conditions checked before you enter into a contract of sale in combination with ground lease.
Ground lease price arrangements
The percentage rate applied to the market value on the ground is linked to the return on the government loans. It is possible to buy off the ground rent for a longer period. Buying off the ground rent for 30 or 50 years is possible. Amsterdam now has introduced perpetual leasehold. For existing leaseholders the City of Amsterdam has formulated a Conversion Regulation so they can switch to a perpetual ground lease.
Perpetual ground lease Amsterdam
Amsterdam has mostly continuous leases. With continuous leases, the City can unilaterally impose new General Conditions at the end of each period (every 50 or 75 years). With a perpetual lease that Amsterdam has issued, the ground rent will be determined once, and for all time. The ground rent is then only indexed annually (inflation). The ground rent and other agreements will never again be revised, unless the leaseholder changes the way the land is used. The new General Conditions for perpetual ground lease will automatically apply to new leases (for future building projects in Amsterdam).
Transfer of property on leasehold through Dutch notary public
Ground lease is established by stipulating the right in a notarial deed. The groundlease deed is registered in the land registry (Kadaster). From registration of the ground lease in the register, the right comes into existence. The leaseholder is entitled to rent the property to others, to build on it, to mortgage the ground lease or according to the conditions in the contract and taking into account the paragraph on ground lease (erfpacht) in the Dutch Civil Code. The transfer of a house on ground lease is also done in a notarial act. The landowner may stipulate conditions to the transfer of the leasehold. These conditions on the transfer of the ground lease may not be unreasonable.
Legal advice on Dutch ground lease
Owning a house on groundlease was the reason I got into leasehold issues. And before I knew my legal practice absorbed serious leasehold issues. I’m glad that I could help out a lot of Dutch leaseholders who got into trouble with their leasehold. I ended up writing a book about leasehold in the Netherlands called “50 Vragen over Erfpacht” (“50 questions on ground lease“). For questions on ground lease and leasehold in The Netherlands or questions relating to any particular kind of land lease in The Netherlands, please contact me.