Municipalities own the land in the Netherlands. When you buy a home in the Netherlands, you buy a building but not the building’s ground. Ground lease (erfpacht) means you are not the land owner. In most cases, the ground belongs to a private landlord or local municipality. A lease agreement between two parties gives a right to use the land on which your home is built. An annual fee for a ground lease is paid to a city or private landlord.
The value of the land determines the amount or rent paid to the landlord. The lease price ranges across municipalities.
A continuous ground lease is adjusted every 50 or 70 years. At the end of the contract, the municipality determines the rental price based on the ground’s value. If the value of the land increases, the rent tends to grow too.
A perpetual ground lease is a fixed contract which means that a rental fee is calculated only once during the lease period. If the ground ease increases, it will not affect the rental price. There are no significant changes in rent during the lease period. The amount is only adjusted yearly based on inflation.
A leaseholder has a right to change the lease agreement from continuous ground to perpetual ground. The municipality indicates switching costs.
Three different types of payments for ground lease:
1. An annual fee which means the fixed ground fee is paid yearly. The yearly fee is adjusted annually based on inflation.
2. Buy off after a perpetual period which means you buy a perpetual ground lease in one go.
3. Buy off current and perpetual leasehold, which means you pay an annual fee and the continuous period in one go.