Leasehold in Amsterdam: explanation for beginners of J-oost de AankoopCoach

When you buy a house in Amsterdam, you will almost always encounter one word: ground lease. Many people find it complicated, but it can actually be explained very simply. Below, J-oost the Purchase Coach explains step by step what a ground lease is, why it is so important, and what you need to pay attention to when buying or selling a house in Amsterdam.

Summary – the simple version

Summary – the simple version

• Leasehold is renting the land, but you do own the house.

• This is very common in Amsterdam: 8 out of 10 homes have it.

• Continuous leasehold = uncertainty and potentially high future costs.

• Perpetual leasehold = certainty, peace of mind, and more value.

• Favorable terms = often much lower costs → a golden deal.

• Leasehold can make a huge difference when buying or selling.

What is leasehold?

Leasehold means that you own the house, but not the land. You rent the land from the municipality, as it were. You pay an annual fee for this rent: the ground rent. This is tax deductible from your income tax.

So you buy:

• The house → for yourself

• The land → remains the property of the municipality (or sometimes another landowner. This is always tricky.)

Leasehold is very common in Amsterdam: approximately 80% of all homes are on leasehold land. In the city center and parts of Oud-Zuid, you will more often see homes on freehold land or homes where the leasehold has already been bought out, but leasehold remains an important topic there as well.

How does leasehold work in practise?

Very simple:

1. The municipality determines the land value, of which the WOZ value is an important factor.

2. Based on this, the municipality calculates the ground rent (annual payment).

3. You pay this ground rent unless you choose to buy out the leasehold.

4. You can sell, renovate, and live in the house just like any other home. The municipality of Amsterdam is also obliged to make a new offer when the current period expires. Please note: For some major renovations/extensions, you might need to request permission from the landowner. More information about this can be found in the relevant ground lease conditions, which are not very restrictive.

Two most common types of leasehold: continuous & perpetual

1. Continuous leasehold

This is the old system. The leasehold runs in periods, often 50 or 75 years. When such a period expires, the municipality considers:

• What is the new land value?

• Will the ground rent increase?

Disadvantage: this can become considerably more expensive. Continuous leasehold therefore creates uncertainty about the future.

2. Perpetual leasehold

This is Amsterdam's new system. The ground rent is set once and never adjusted again. So you know exactly where you stand.

Advantages:

• No surprises

• No review after 50 years

• Peace of mind for your wallet and for the buyer of your home

Disadvantage: the ground rent increases in line with inflation, rather than inflation minus 1% as in the continuous system.

What is meant by “favorable conditions” in perpetual ground lease?

When Amsterdam switched to perpetual ground leases in 2020, homeowners were able to switch under favorable conditions. This means that:

• The municipality calculated amongst other things, a much lower land value (e.g., WOZ 2014/2015)

• This resulted in a much lower redemption or ground rent amount (this can easily be 3x/4x lower)

Those who submitted a transfer application before January 8, 2020, are almost always in an extremely favorable position compared to those who switch later.

This is one of the reasons why leasehold in Amsterdam can make a huge difference in value and marketability.

The impact of leasehold for the sale of your property

Leasehold can affect the sale of a house. In short:

Positive for the sale

• Leasehold has been bought out in perpetuity

• Leasehold has been secured in perpetuity under favorable conditions

• The annual ground rent is low and predictable

Negative for the sale

• The leasehold period is almost over

• The ground rent is about to increase significantly

• Switching to a perpetual leasehold has become expensive, as favorable conditions no longer apply.

• The buyer does not understand the leasehold → uncertainty → lower bid

Buyers want certainty. Certainty about costs means more value.

Why is it so important that leasehold has been switchted to perpetual?

1. Piece of mind for the buyer

With perpetual leasehold, there will be no more ground rent increases. For buyers, that is worth its weight in gold. And you can always decide later to buy it off completely, if this is not done already. There will be an inflation increase, though. Please note: with an unredeemed ground rent, there is always annual indexation with inflation, as opposed to indexation of inflation minus 1% under the perpetual system.

2. Better financeability

Banks are more positive about homes with perpetual ground leases. Uncertain ground lease → more risk → stricter mortgage rules.

3. Higher sales value

A property with a well-organized ground lease is more attractive. You can see this immediately in:

• Faster sales

• More interest

• Higher bids
  

4. No financial surprises

No letters from the municipality with “new period,” “canon revision,” or “land value multiplied.”

5. Amsterdam remains a leasehold city

Since 80% of homes are leasehold, this remains the key issue when buying and selling. The better your leasehold is arranged, the stronger your position.

Conclusion – How can J-oost de AankoopCoach help?

Leasehold may seem complicated, but with the right explanation, it is easy to understand. As a purchasing coach, J-oost always looks at:

• What are the leasehold conditions?

• Has it been bought out?

• Is it fixed for perpetuity?

• Was this under favorable conditions?

• How much risk is there in the ground rent?

• And what does this mean for the value of the house?

This way, you know exactly where you stand—and you never pay too much for a leasehold property.