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What is erfpacht and how does it work?

When the term erfpacht is used in an advertisement to sell a house, it refers to ground lease, ground rent or leasehold. The person buying the house (apartment, studio, building, flat) only buys the ‘stones’ and does not buy the ground on which the house is built. The buyer signs a lease for the right to use the ground. The buyer (the new owner of the house) pays the owner of the land a fee (canon in Dutch) for the use of the land. This can be a monthly/annual fee or it can be bought one-off. Many large cities in the Netherlands have a ground lease system. It is especially very common in Amsterdam where about 80% of the land is owned by the municipality.

The amount of the ground rent depends on the use of the object and on its commercial and financial value. For example, a school will probably be charged less ground rent than an office building and a private home owner. Ground rents in the popular city centre are higher than in the less visited suburbs.

There are two ground lease systems: continuous and perpetual. In continuous ground lease, the ground rent is adjusted every 50 or 75 years. Towards the end of this timeslot, the ground rent is determined once again based on the adjusted value of the ground at that time. The value can only be recalculated shortly before the end of the timeslot. If the value has risen significantly, the ground rent will increase accordingly. This could mean a sudden increase in costs for homeowners. In perpetual ground lease, a fixed ground rent is agreed and will remain at that level permanently. If the ground increases in value, it will not affect the ground rent; there are no major, sudden increases in ground rent for the future. With perpetual ground lease the risk of future fluctuations in ground rent is annulled. 

When buying a house with ground lease, always be sure that you can answer the following questions:

  • Is there a municipal or private ground lease?
  • Has the ground lease been bought out?
  • Is an annual payment of ground lease required?
  • When is the next adjustment of the ground lease due?
  • And of course, how high is the annual or monthly ground lease?

If you cannot answer these questions, please do consult a professional real estate agent.