Leasehold is a complex topic that affects many homeowners, especially in Amsterdam, Utrecht, and The Hague. In this article, we explain what leasehold is, how ground rent works, and whether buying out is worthwhile.
What is leasehold?
With leasehold, you don't pay the full purchase price for the land your house stands on. Instead, you pay an annual amount (ground rent) to the landowner - usually the municipality. You own the house but not the land.
How does ground rent work?
Ground rent is a percentage of the land value. This percentage is indexed annually. The amount depends on the WOZ value, the allocation percentage, and the type of leasehold.
Buying out leasehold
You can buy out the leasehold by paying a one-off amount. This amount is based on the land value and the number of years you still have to pay. In many cases, buying out is financially beneficial in the long term.
Perpetual leasehold
Since 2019, some municipalities (including Amsterdam) offer perpetual leasehold. With perpetual leasehold, you pay a fixed annual rent that is indexed annually but never increases. You can also switch from temporary to perpetual.
Calculating ground rent
You can calculate ground rent using the following formula: land value × ground rent percentage. Land value is usually a percentage of the WOZ value (often 50-70%).
Which municipalities use leasehold?
Leasehold occurs in various municipalities but is most prevalent in Amsterdam, Utrecht, The Hague, and Rotterdam. The conditions vary per municipality.
Conclusion
Leasehold is an important factor when purchasing a house. Make sure you are well informed about the conditions and calculate whether buying out or perpetual leasehold is right for your situation.