Huis verkopen met erfpacht
Do you have a house with ground rent and want to sell it? Then there are a few things that are important to know. In this blog, we’ll give you helpful advice and helpful tips.
Erfpacht simpel uitgelegd
First, this: what is ground rent? With leasehold, you do not own the land on which the property stands and/or you do not own the property (“the buildings”) itself. The owner of the land and/or buildings is usually the municipality, but (note!) it does not have to be. You pay the owner money for the use of this right. Say a kind of rent. We call this payment “canon.
Canon
The canon can be determined per month, per six months or, for example, per year. That’s just what is written about that. It may also be that the canon has been bought out for a specific period of time (e.g., 50 years).
Canonverhoging
It is often arranged in the ground lease conditions that the ground rent can be adjusted to the legally determined inflation. What makes it more exciting, however, is the length of time the canon is in.
The leasehold conditions of ‘perpetual leasehold’ often stipulate that a certain canon (subject to annual inflation) is fixed for a period of (usually) 50 or 75 years. When that period is over, a new canon will be established by the ‘bare owner’. And that’s where it gets exciting. Namely, the question is: what has been recorded on paper about how the owner may set the new canon. Is he completely free to do that or does it have to be through a certain calculation method. And if so, how high can that canon get?
There is also perpetual ground lease. Perpetual should be read as “forever. There, the canon cannot change completely just like with the continuing ground lease. So this offers the owner of the leasehold much more security. Regularly you see that the owner of the leasehold right receives an offer from the landowner (the municipality) to buy off the leasehold rent in perpetuity (i.e., forever).
Maar waar moet jij nu op letten als je jouw huis met erfpacht gaat verkopen?
First of all, it is important to look up what exactly the ground lease conditions are that apply to your situation. So:
-Do you have continuing or perpetual ground leases?
-Have you bought off the ground rent and if so, for how long?
-How much is the canon you are paying now and over what period (month, half year, year) are you paying it each time?
-Who owns the land? (For example: the Municipality of Amsterdam)?
This is important for the selling broker to know. Rest assured, if you take an experienced sales agent specializing in leasehold, they won’t need to get all that information from you. In fact, experienced leasehold sales agents have access to a leasehold system from which they can already extract all this information. It then looks like this.
Tip 1: Kijk goed naar de looptijd van het erfpachttijdvak
As mentioned above, a ground lease often has time periods of 50 or 75 years. At the end of a period, the ground rent must be redefined. This is something that lenders can get nervous about. And that’s what happens when this time period expires as early as the first half of the mortgage term. This can then be a hindrance for the lender with the result that the buyers cannot get the mortgage done or it is a lot harder to get it done.
An example: the leasehold term of your house expires in 10 years. You sell your house to someone who wants to mortgage it for 30 years. That buyer included a full financial caveat. The ground rent expires after only 10 years and the mortgage is taken out for 30 years. So then the leasehold period ends already in the1st half (the first 15 years) of the 30-year mortgage. This could become a dealbreaker in the funding application though.
Another example: the ground lease of your house expires in 20 years. You sell your house to someone who wants to mortgage it for 30 years. That buyer included a full financial caveat. The ground rent only expires after 20 years in a mortgage taken out for 30 years. Thus, the leasehold period already ends in the2nd half (the second 15 years) of the 30-year mortgage. This should not be a dealbreaker for the funding application.
Many financing requests are made for 20 or 30 years. Therefore, the period of your ground lease expires within 15 years and you have several bids? Then it may be wise to choose an unreserved bid instead. What you can also do is ask the highest bidder (who has a financial reservation) if your selling agent can make a call to his financial advisor to find out if the expiring ground lease could become a dealbreaker in getting financing?
Tip 2: Aanbod tot afkoop
Very important: have you received or already accepted an offer to buy off the ground rent? Then make sure you have a copy of this redemption offer or to your request for redemption to give to your selling agent. This is very important because a property with a valid possibility of surrender or a pending application for surrender can be very much of positive value to your property. The selling broker just has to know about it.
Tip 3: Particuliere erfpacht
It is rare, but if your house is on private leasehold land, keep in mind that it is very difficult to get private leasehold financed. Here, it might be wise to choose a “cash buyer” (Cash Buyer: buyer who pays for a property entirely from their own funds). What you can also do as preparation is to ask a notary for a so-called ‘leasehold opinion’/’erfpachtopinie’. A leasehold opinion establishes the criteria against which the value of and leasehold house can be assessed. Thereby 3 scores apply:
Red: almost impossible to finance
Orange: funding is possible, but difficult
Green: There are opportunities to finance
If you, as a seller, figure this out yourself in advance, then you have already done a very good job of preparing prospect buyers which increases the chances of a better sale.
Tip 4: Check wat de leencapaciteit is van de kandidaat-kopers
Did the prospective buyers include a full financial caveat in their bid? And has the ground rent not been paid off? Then it may be wise to first ask what the maximum borrowing capacity of prospective buyers is. The reason is that you can borrow less than your borrowing capacity if there is ground rent to be paid. And this in turn can result in then people not getting the financing. Suppose you sell your house with leasehold for €350,000 and this is also the maximum borrowing capacity of the buyer, then there is a good chance that the financing will not succeed.
Roughly speaking, people can get about 20 times the annual ground rent less in loans. So if the ground rent is €1000 per year, then one can get approx. borrowing €20,000 less than what was assumed. This can become an unpleasant bummer.
Want to know more about selling your house with ground lease? Do not hesitate to contact us at.