You have come to the Netherlands and (eventually) decide to buy a property. You find a place you like. A place you can afford. Well on your way into the buying process, it appears that you will be owning the apartment, but not the ground on which it stands. This will cost you a € 380 a month. Welcome to the Dutch erfpacht system.
In the Netherlands many houses are build on other people’s ground (especially Amsterdam and The Hague, Haarlem as well). Meaning, you own the house but not the land. It’s calles ‘erfpacht’. It’s something in between ownership and tenancy. It gives exclusive right to the usage of a real estate, usually a piece of ground. The user pays a monthly amount, the so-called ‘canon’. It allows him to use the ground and the property as if he would be the owner.
Most municipalities sell the ground to the projectdeveloper, immediately when properties are built. If this is not the case, erfpacht is the solution: “You can build here, but we keep the land”.
Erfpacht has been a hot news item these past few months. The municipality of Amsterdam decided to have an attempt at making the system more transparent. This affects many households. To give you an idea: in the area between the canal area and ring road, almost 70% of the properties are leasehold.
In the Netherlands there are 2 types of ground ownership:
– leasehold (erfpacht)
– freehold (eigen grond)
Municipal leasehold or private leasehold are both possible.
When you buy a property freehold there is no problem. So if you have the chance to buy leasehold or freehold, by all means, freehold is much better.
Private leasehold property is to be avoided at all costs because it’s almost impossible to finance. Selling in the future will also be a problem because potential buyers will also have problems arranging a mortgage.
Changes coming up
The introduction of a new system would allow homeowners to prepay the leasehold forever. Until now it was possible to either prepay for a number of years, or pay annually. The amount to pay will be determined by the size of your property.
What would the new system look like:
Example: A homeowner in Amsterdam Baarsjes, living in a house on a plot of leasehold ground of 68 m2, needs to pay 50.000 euros (730 euros per square metres) to prepay the leasehold forever.
Homeowners that will be affected by the change can have their opinions known to officials until February 19, 2017. The city council expects to take a final decision in June this year.
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