What is ground lease (erfpacht)?

In Amsterdam, and other major cities in the Netherlands, many houses are built on ground that is owned by the related municipality.

You pay a lease for use of the ground. Often the lease has been paid for 50 or 75 years in advance but sometimes you have to pay an annual lease. The annual lease will affect your loan capacity. Advisers at A&H Finance are happy to help you with finding the best solution on financing your house, either with or without houses that have a ground lease.

The value of the ground is determined by an independent appraiser.

This ground is part of the value of your house, as you cannot sell the leasehold value separately. The appraiser will look at, among other things: market value (ground plus property), purpose of ground and its actual use, size and state of property, and the location of the ground. This value is the basis for the determination of the lease.


Temporary ground lease

There are two types of ground lease (also called leasehold) in Amsterdam: Temporary and perpetual. The temporary ground lease has a periodic revision, usually every 50 or 75 years. This means that the leasehold is recalculated based on the value of the land at the time of revision. There is a high chance that the value of the land has increased over time, leading to higher monthly costs for the lessee as a consequence. Because this brings discomfort for leaseholders, mortgage providers and real estate agents, the municipality of Amsterdam introduced the perpetual ground lease in June 2017.

And what about perpetual ground lease?

With perpetual ground lease, the land rent is determined only once. The rent will remain the same forever, it is only adjusted for inflation annually. In other words: the ground rent will not be revised anymore. Current ground lease holders will receive an offer from the municipality to switch to the new system. You may wonder what the best option for you is.

The website of Amsterdam on ground lease has some additional information (in English).

How does ground lease affect my mortgage?

When calculating your maximum mortgage, the mortgage provider will both look at your income as well as your expenses.

For perpetual ground lease with no recurring expenses, this does not affect your loan capacity. A temporary leasehold, or a leasehold that has a yearly compensation does affect your maximum mortgage.

Get in touch with us to discuss your mortgage options with ground lease.

Should you switch to perpetual leasehold?

It could be very beneficial financially, among other things, to switch from temporary (continuous) to perpetual ground lease.

A perpetual ground lease has a fixed amount per year, only adjusted for inflation. This means that your monthly costs can decrease. Additionally, your house becomes more attractive to potential buyers. It really depends on your personal living situation what the best thing to do is.

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