Buying property on leasehold in The Netherlands?

Advice from a Dutch law firm on leasehold in Holland 

Ground lease (erfpacht) or land lease in The Netherlands is the right to hold the use of ground/property of the landowner or landlord (or freeholder). 
The leaseholder (erfpachter) will usually pay an annual fee or ground rent (canon) to the owner of the property.
The lease 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 someone else and will be registered in the real estate registry (kadaster) in The Netherlands. In case of disputes regarding a ground lease a real estate lawyer will study the ground lease conditions applying to the ground lease contract.

For questions relating leasehold or land lease in The Netherlands, please contact:

real estate attorney Mark van Weeren.

Buying a property on leased land in The Netherlands

Purchasing a home in a leased land community enables you to own a home that you otherwise (probably) wouldn't be able to afford. The reason for this is that you do not pay for the full value oth land; instead you pay an annual ground rent. To finance the house on leasehold you'll take out a mortgage on the property as usual. The monthly mortgage payment will be less because the home's purchase price is lower, but you'll also have to pay a significant monthly land lease fee. This ground rent can however be increased significantly in the future. This has caused major disputes in The Netherlands. However, this type of purchase lacks some of the benefits of traditional home ownership and has other significant drawbacks. Ground lease has caused serous disputes between landowners and leaseholders. Therefore, always  investigate the leasehold conditions and hidden facts, and never purchase a leased-land property without thoroughly 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, the period of the lease, historical and future charges and clauses in the lease that will limit the use of the property.

Land lease 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 transfer to the buyer of the lease. In case of death of the lease holder, the lease hold 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.

A section of the Dutch Civil Code contains (only) 15 paragraphs on ground lease. The law on ground lease therefore is very limited in The Netherlands. Therefore the ground lease contract stipulates most of the rights and obligations of the owner of the land and the leaseholder. These ground lease conditions (erfpachtvoorwaarden) come in all sorts and variations. As a result of thereof ground lease has a lot of varieties  in The Netherlands. In case of Legal issues regarding a ground lease a real estate lawyer will study the ground lease conditions applying to the ground lease contract.

Leasehold in The Netherlands very often issued for long periods

The city of Amsterdam has more than 200,000 ground lease contracts outstanding. To these lease contracts the general conditions of the city of Amsterdam 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 lease holder of the ground lease changes the use or changes the building on the property, this will cause an increase to the annual usage fee. The reason for this lies in the increase of the value of the property, which triggers a higher ground rent.

Adjusting price of leasehold often source of disputes

Adjusting the annual usage fee is very often a source of disputes. 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 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.

Some cities in The Netherlands have decided to abolish ground lease and have offered the land for sale to the lease holders. However, in the city of Amsterdam that is not the case.

Transfer of the leasehold with Dutch notary public

A right of ground lease is created by stipulating the right in a notarial deed, which deed is registered in the land registry (Kadaster). From registration of the ground lease in the register, the right comes into existence. The lease holder 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.  

Termination of leasehold by the landowner

In case ground lease is used for housing, than the landowner can only terminate the ground lease by compensating all damage, including loss of profits of the lease holder. Termination of ground lease does not happen very often. Termination does take place in case the lease holder does not pay the ground rent for more than two years or is using the ground lease for other purposes then the right it was issued for (for example illegal activities). In case where the landowner cancels the leasecontract before the end of the term (if that would be possible) the leaseholder is entitled to compensation.

Legal advice on Dutch leasehold

The Dutch law firm Blenheim has large experience in real estate issues.
For general queries on ground lease and leasehold in The Netherlands or questions relating to any particular kind of leasehold or land lease in The Netherlands, please contact real estate attorney Mark van Weeren, who has written a book on leasehold in the Netherlands called "50 Vragen over Erfpacht" ("50 questions on ground lease"). 

LAW - associated firm

Together with a number of international law firms outside
The Netherlands, Blenheim is member of Lawyers Associated Worldwide.

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