18/09/2022 by Team Concepts 0 Comments
What is leasehold, or erfpacht?
Most properties in Amsterdam are built on land owned by the city. The municipality charges a fee for use of the land. This is what we call leasehold, or erfpacht.
When you buy a new property, it’s important to check whether it has erfpacht. Look at it like this: When you buy a property, you sign a contract of ownership for the house, and a lease contract to live on the piece of land your property occupies.
Ground rent, or canon
As with any other type of lease, a ground lease means that you (the owner of the property), pay a fee to the municipality (the owner of the land the property occupies). Payment is called ground rent, or canon. The canon amount is attributed to both the type of property (and exists for residential and business properties) and the location. For example, a home in Zuidoost will owe less canon than a corporate office in the middle of Centrum.
Types of leasehold: continuous or perpetual
A continuous leasehold is true to its name: it is continuous and only adjusted every 50 or 75 years. Near the end of the time period, or tijdvak, the municipality will recalculate the value of the property and make adjustments to the ground rent. The change in the value of a property is directly related to the change in the amount of the canon. Sometimes, especially in today’s market, it can mean a sudden increase in canon.
A perpetual leasehold, too, is true to its name: once a ground rent is determined, it remains fixed in perpetuity (small caveat: in perpetuity here generally means for 100 years). The ground rent, or canon, will not be recalculated or adjusted based on the property valuation; though it will be adjusted for inflation yearly.
Does a leasehold affect your mortgage?
When buying a new property, it’s imperative to know if your property has a leasehold. If so, whether the leasehold is continuous or perpetual. Essentially, you need to know if the leasehold has been paid off in full or if there is an annual fee. When it has been paid off, it has no recurring fees and thus will not affect your borrowing capacity. But a leasehold with annual fees will be brought into your mortgage calculation and affect your maximum loan capacity.
Hopefully, this article has provided some insight into Amsterdam’s leasehold situation. Interested to learn more about what erfpacht means for your next property? Contact me today for a free consultation.