Now is the time: Switch your ground lease from continuous to perpetual!
Are you a homeowner with a continuous ground lease from the municipality of Amsterdam? If so, this is the year to take action!
Ground lease or leasehold (erfpacht) means you don’t own the ground your property stands on. In Amsterdam, it is very common that the owner of the ground is the municipality of Amsterdam. What this means is that you need to pay a sort of rent for the ground - hence ground lease. Each homeowner has their own contract with the municipality. Now, the municipality of Amsterdam is giving people the opportunity to switch to a perpetual ground lease.
Differences between a continuous and perpetual ground lease
The differences between a continuous and perpetual ground lease are:
Continuous ground lease
- You pay rent for a certain period of time; usually 50 years
- Ground rent for a new period will be calculated based on the property value at that time
Perpetual ground lease
- Ground rent will be recalculated at the date of the switch and then set at that level permanently
- No further blocks of several years
- Two ways to pay: annually or a lump sum
- The ground rent will not depend on the property value / housing market
Why should you switch this year?
The cost of switching to a perpetual leasehold in 2019 will be based on the property value (WOZ) from 2014 or 2015 (the lower of these will be used). You can imagine that these values are much lower than this year’s WOZ. There will also be an additional discount of 35%. This means that switching before the end of the year will be more cost-effective.
Whether you have a house or an apartment, anyone who owns a property can make use of this offer. You can switch this year or at any other time in the future. There are several options to choose from, so make sure you find out what’s best for you. Don’t forget to keep in mind that the switch could influence the saleability of your home.
One option you have is to switch to a perpetual ground lease and pay off the rent in a lump sum. Using the municipality’s transition portal (overstapportaal), you can calculate how much you will have to pay. This amount may be quite substantial, so this option may be too costly for you.
Let me point out that you have another option! You can also fix the perpetual ground rent permanently for a new period of time. It will be adjusted for inflation each year.
If you choose this option, the municipality will use this year’s switching advantages to calculate the rent for the new period of time. So, if paying off the perpetual leasehold is not an interesting option for you or it's too expensive; you can at least use the opportunity to fix the yearly ground rent for the new period. You will have to finalise this at the notary office, and this will cost you between 600 - 1.000 euros.
How does the switch to perpetual ground lease work?
You don’t have to make the switch. If you do not switch, your situation will not change. You can request the switch from continuous to perpetual ground lease via Amsterdam’s transition portal, using your DigiD. Within three to six months, you will receive an offer which includes the available options. You will have three months to consider these options. After you have accepted one of the offers, you need to arrange everything at the notary within another six months.
More desirable to buyers
You still have time to make this decision and to request an offer, but we highly advise you to do so before the end of this year. At least you’ll know which options you have. Perhaps it doesn’t make sense for you to pay off the entire amount, but at least see if having the amount fixed will work in your favour. It will make your property more desirable to buyers in the future.