Ground lease (erfpacht) in Amsterdam: what to check when buying or selling
With ground lease (erfpacht) the land belongs to the city and you pay for its use. For the price of an Amsterdam home, what matters most is whether the lease is continuous or perpetual, and whether the ground rent has been bought off, and until when. Those details are in the lease deed and partly determine what a buyer can borrow.
What is ground lease?
In large parts of Amsterdam the land under a home is owned by the city. The owner of the home holds the right of ground lease (erfpacht): he may use the land and pays a fee for it, the ground rent (canon). The ground rent can be paid yearly, bought off for a period, or bought off for ever in one payment.
Ground lease also exists in Amstelveen, with its own rules. In the Gooi and the Vecht area it is rare.
Continuous or perpetual
With continuous ground lease the right runs in periods, often of fifty or seventy-five years. At the end of a period the city sets the ground rent again, based on the land value at that time. That is where the uncertainty for a buyer lies.
With perpetual ground lease, the standard for new leases since 2017, the ground rent is fixed and only adjusted for inflation. Owners with continuous ground lease could switch to perpetual ground lease. Whether that has happened for a home, and on what terms, is in the deed.
What determines the effect on the price?
Has the ground rent been bought off, and until when? A home with ground rent bought off in perpetuity has no annual land costs. A buyer can then borrow more and will pay more. If it has been bought off until a date that is close, a buyer reckons with the new ground rent after that.
Which general conditions apply? The deed states which version of the general conditions applies, for example those of 1966, 1994 or 2000. They determine, among other things, what happens at the end of a period.
How high is the annual ground rent? An ongoing ground rent counts as a housing cost for the mortgage and lowers what a buyer can borrow.
What to do as a seller
Have the lease deed, the general conditions and any correspondence about a switch ready in advance. A buyer and his bank want to know exactly what applies. The sooner those documents are on the table, the less needs to be discussed in the negotiation.
What to do as a buyer
Ask for the deed before you bid, and have the ground lease costs for the coming years calculated. If a period ends within the term of your mortgage, it is wiser to reckon with a higher ground rent than with the current one.
The current rules and calculators are on the City of Amsterdam website. With every home we read the deed and explain what it means for you, in English.