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Buying property in Belgium: scams and pitfalls

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Everything you need to know is included in our Belgium Property Pack

Belgium is increasingly attracting foreigners interested in its real estate market, thanks to its strategic location in Europe and vibrant economy.

However, keep in mind that the local real estate market can be tricky for non-residents.

Our community of property-buying customers and our local partners have reported several common issues to us. We've listed them all in our Belgium Property Pack.

This article will give you a quick overview of some of the potential pitfalls you could face.

Is it safe or risky to invest in real estate in Belgium?

Although Belgium generally has a reputation for being safe, there have been isolated instances where buyers have fallen prey to scams, specifically in tourist-heavy regions like Bruges.

For instance, there were reports of properties being 'sold' to multiple foreign investors simultaneously, leading to legal tangles and significant financial loss.

One unique challenge in Belgium arises from its linguistic diversity. The country is divided into Dutch-speaking Flanders, French-speaking Wallonia, and bilingual Brussels. In cities like Antwerp in Flanders, a foreign buyer might find all official documentation in Dutch. Without proper translation or understanding, this can lead to oversights.

In Belgium, the "pre-sale agreement" or "compromis de vente" holds significant weight. In one unfortunate scenario, a British couple lost their deposit after backing out of a pre-sale agreement, unaware that it was legally binding.

However, Belgian laws offer robust protection to buyers. The notary's involvement is more than ceremonial; they play a pivotal role in safeguarding both parties' interests.

One noteworthy case involved a Dutch investor in Brussels who faced a legal battle over property lines. Though the process was tedious, the Belgian legal system's fairness was evident as both parties reached a satisfactory resolution, showcasing the system's efficiency.

Due to Belgium's complex regional regulations, it's advisable for foreign buyers to hire local real estate experts.

An American investor in Wallonia benefitted greatly from local expertise when they were informed about the region's specific property tax incentives, which they had previously been unaware of.

One distinctive feature of the Belgian real estate scene is the government's intervention in housing. In Ghent, for instance, the local government launched the "Room in Ghent" project, aiming to ensure quality housing for students.

Such initiatives, while beneficial for residents, can influence property values and rental yields.

While many laud Belgium's structured approach, some also cite the country's high property transaction taxes, especially in regions like Brussels-Capital, as a deterrent.

In fact, transaction taxes in Brussels can go up to 12.5% of the property's value, a cost that can be surprising for many foreign investors.

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Watch out for mistakes when buying property in Belgium

The concept of "Bodemattest"

When buying residential property in Belgium, one specific pitfall you should be aware of is related to the unique concept of "Bodemattest" in the Flemish region.

This is a certificate that provides information about the soil contamination status of the property. In Belgium, especially in Flanders, the issue of soil contamination is taken very seriously due to historical industrial activities. The "Bodemattest" is issued by the OVAM (Openbare Vlaamse Afvalstoffenmaatschappij).

As a buyer, you must ensure that the seller provides you with this certificate before the sale is concluded.

The absence of a "Bodemattest" or the presence of soil contamination can lead to significant legal and financial complications. You might find yourself responsible for expensive soil remediation processes if the contamination is discovered after the purchase.

This issue is particularly pertinent in areas with a history of industrial activity, such as around Antwerp or parts of Limburg. Although the "Bodemattest" is a well-known requirement among locals, many foreigners are unaware of its importance.

Failing to obtain this document is not a common mistake, but when it happens, it can be quite costly.

The concept of "Preemption Rights"

Another specific pitfall to be aware of when buying residential property in Belgium, especially as a foreigner, is the concept of "Preemption Rights" (Voorkooprecht in Dutch).

This is a legal right that allows certain entities, usually government or municipal bodies, to purchase a property before anyone else when it is put up for sale. This right is particularly relevant in areas where the government has an interest in land use, such as for urban planning, environmental protection, or public housing projects.

In practice, when a property is sold in an area subject to preemption rights, the sale is conditional for a certain period (usually a few months).

During this time, the entities with the preemption right can decide to step in and purchase the property at the agreed-upon price. If they exercise this right, your purchase agreement becomes null and void.

The challenge for you, as a foreign buyer, is that the existence of preemption rights is not always transparently communicated.

You should, therefore, make it a point to investigate whether the property you are interested in is subject to such rights.

This is particularly important in cities like Brussels or Ghent, where urban planning and development are active.

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"Kadastraal Inkomen" or cadastral income

Another lesser-known but significant pitfall you should be aware of when buying residential property in Belgium is related to the "Kadastraal Inkomen" (Cadastral Income).

This is a unique concept in Belgian real estate and tax law. The Kadastral Inkomen is an estimated annual income value of the property, calculated by the government, and used as a basis for property taxes.

The catch here is that the Kadastral Inkomen is often outdated.

It may not reflect the current market value of the property, as these values are usually based on historical income assessments and are infrequently updated.

This can lead to surprises in property taxation, especially if the property has been recently renovated or if the neighborhood's value has significantly changed.

When you buy a property, the Kadastral Inkomen may seem attractively low, leading to an assumption of low property taxes.

However, be aware that the government can reassess this value, particularly after a sale or major renovations, potentially increasing your tax liability.

This issue is especially relevant if you're looking at properties in rapidly developing areas or cities like Brussels, Antwerp, or Leuven, where real estate values can fluctuate significantly.

The risks related to "Urbanistic Certificates"

A unique and potentially challenging aspect of buying residential property in Belgium, particularly for foreigners, involves understanding and dealing with the "Urbanistic Certificates" (Stedenbouwkundig Uittreksel in Dutch, Extrait du Plan d'Urbanisme in French).

These certificates are essential documents that provide detailed information about the zoning and planning regulations applicable to a property.

The urbanistic certificates contain information about the planning permissions, land use designations, and any building violations or irregularities associated with the property.

In Belgium, especially in cities like Brussels, Antwerp, or Ghent, there are stringent regulations regarding building codes and land use.

Any non-compliance with these regulations can lead to legal issues and substantial costs.

As a buyer, you should be vigilant about obtaining and thoroughly reviewing the urbanistic certificates before proceeding with the purchase. This is crucial to ensure that there are no outstanding building violations or irregularities that could affect your use of the property or lead to fines.

For example, if a previous owner made modifications without proper permits, you, as the new owner, could be held responsible for rectifying these irregularities.

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Risks of "Co-ownership Charges"

In Belgium, a specific and often overlooked aspect in residential property transactions, especially for foreigners, is the importance of understanding the "Co-ownership Charges" (Gemeenschappelijke Lasten in Dutch, Charges Communes in French) in multi-unit buildings like apartments or condominiums.

This concept is crucial in the context of Belgian real estate, particularly in urban areas like Brussels, Antwerp, or Ghent, where apartment living is common.

Co-ownership charges refer to the shared costs incurred by all residents in a multi-unit building for maintenance, repairs, and management of common areas.

These costs can be significant and vary widely depending on the building's size, age, condition, and amenities (such as elevators, communal gardens, or a concierge service).

As a prospective buyer, it's essential to thoroughly understand these charges before purchasing an apartment in Belgium. These charges are typically outlined in the building's co-ownership agreement and can include regular maintenance fees, contributions to a reserve fund for major repairs, and administrative costs.

It's not uncommon for foreign buyers to underestimate the impact of these co-ownership charges on their overall budget.

The charges can significantly affect the affordability of an apartment, especially if the building requires substantial maintenance or upgrades.

The "Usufruct" concept

A unique and potentially challenging aspect in the Belgian real estate market, especially for foreigners, is the concept of "Usufruct" (Vruchtgebruik in Dutch, Usufruit in French).

This legal concept is more prevalent in Belgian property transactions than in many other countries and can significantly impact your rights and responsibilities as a property owner.

Usufruct in Belgium refers to the right to use and enjoy the benefits of a property owned by someone else. For instance, a parent might transfer the ownership of a house to their children but retain the usufruct, meaning they can live in the house or rent it out until they pass away.

Only then do the children, as the bare owners (blote eigenaar in Dutch, nu-propriétaire in French), gain full rights over the property.

This arrangement can lead to complexities in transactions.

If you're buying a property where someone else holds the usufruct, you're essentially buying only the bare ownership. This means you wouldn't have the right to use the property until the usufruct expires (usually upon the death of the usufruct holder).

The concept of usufruct is particularly important to understand when purchasing older properties or estates, especially in areas with a higher elderly population.

To navigate this, you should always check the property's title deeds to see if there are any usufruct rights attached to it.

You also need to understand the implications of buying a property with existing usufruct rights, including potential limitations on your use of the property and responsibilities for maintenance and taxes.

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"Erfpacht" or "Emphyteusis"

Another unique aspect to consider when buying residential property in Belgium, particularly for a foreign buyer, is the impact of "Erfpacht" or "Emphyteusis" (ground lease).

This is a long-term lease arrangement that can significantly affect property rights and values, yet it's often overlooked or misunderstood by those unfamiliar with the Belgian real estate market.

In Belgium, "Erfpacht" is a system where you can own a building or structure on land that is not your property. Instead, you lease the land, usually for a long period (often between 27 and 99 years). This arrangement is common in certain parts of Belgium, especially in cities with limited space for expansion, like Brussels or historic towns like Bruges.

As a buyer, it's crucial to understand whether the property you're interested in is under an "Erfpacht" arrangement.

Owning a property on leased land can have significant implications. For example, when the lease term ends, the landowner may regain control of the land and any structures on it, unless the lease is renewed. The conditions of renewal, including the cost, are often predetermined in the original lease agreement.

Additionally, the value of a property under "Erfpacht" can be affected by the remaining term of the lease.

A property with a short lease remaining can be less valuable than one with a longer term, as the uncertainty of lease renewal and potential changes in lease conditions can be a risk.

"Bouwverplichtingen" or building obligations

Another specific aspect to consider when purchasing residential property in Belgium, particularly as a foreigner, is the potential presence of "Building Obligations" (Bouwverplichtingen in Dutch, Obligations de construire in French).

This is especially relevant if you're buying a plot of land or a property that's due for significant renovations or redevelopment.

In some areas of Belgium, particularly in newly developed or designated zones, there can be stipulations attached to the land or property requiring the owner to build or complete construction within a certain timeframe.

These obligations are often put in place by local municipalities to encourage development and prevent land speculation.

For example, if you purchase a plot of land in a developing area, you might be required to start construction within two years and complete it within five years.

Failing to meet these obligations can lead to penalties, fines, or in some cases, the municipality might even have the right to repurchase the land at a predetermined price.

This issue is particularly important to be aware of if you're considering buying property in suburban or rural areas around cities like Brussels, Antwerp, or Ghent, where development is actively encouraged.

To avoid any surprises, you should thoroughly investigate any building obligations attached to a property before making a purchase.

This can be done by consulting the local municipality's planning and development office or by seeking advice from a local real estate agent or legal advisor.

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The importance of the "Three-Year Rule" risk

In Belgium, a particular aspect that can be a pitfall for foreign buyers of residential property is the "Three-Year Rule" related to property resale.

This rule is unique to the Belgian real estate market and can have financial implications if you're not aware of it.

The Three-Year Rule in Belgium states that if you sell a property within three years of purchasing it, you will be subject to a substantial capital gains tax. This tax can be as high as 16.5% of the profit made on the sale, in addition to the standard transaction costs and taxes.

The intent behind this rule is to discourage speculative buying and selling of properties.

This rule is particularly important to consider if you're buying property in Belgium as an investment or if you're not sure about your long-term plans in the country. In cities like Brussels, Antwerp, or Ghent, where the property market can be quite dynamic, it might be tempting to sell a property after a short period due to market changes or personal circumstances.

However, the financial impact of the Three-Year Rule can significantly affect the profitability of such a sale.

To navigate this, you should carefully consider your long-term plans and the potential implications of the Three-Year Rule before purchasing property in Belgium.

If there's a chance you might need to sell the property within three years, calculate the potential costs and taxes to assess whether the investment is worthwhile.

"Division of Property Rights" system in Belgium

A unique and potentially complex aspect for foreigners buying residential property in Belgium is understanding and navigating the "Division of Property Rights" system, especially prevalent in the Flemish Region.

This system involves splitting the full ownership of a property into two distinct parts, such as the "bare ownership" (blote eigendom in Dutch) and the "usufruct" (vruchtgebruik in Dutch).

In this arrangement, the usufructuary has the right to use the property and receive any income from it (like rent), while the bare owner holds the title to the property but cannot use it or receive income from it until the usufruct ends (usually upon the death of the usufructuary).

This division of property rights is particularly relevant in estate planning and intergenerational property transfers in Belgium.

For example, an elderly person might sell the bare ownership of their home to a buyer while retaining the usufruct, allowing them to continue living in the home for the rest of their life.

As a foreign buyer, it's crucial to understand exactly what you are buying. If you purchase the bare ownership of a property, you won't have the right to use the property or benefit from it until the usufruct expires. This could impact your plans if you intend to live in or rent out the property.

This system can be particularly complex in areas with a high concentration of elderly populations or in family-friendly cities like Ghent or Leuven.

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