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Buying property in Holland: scams and pitfalls

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Everything you need to know is included in our The Netherlands Property Pack

The Netherlands is becoming a preferred destination for foreign real estate investors, drawn by its stable economy and high-quality living standards.

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

Our network of customers who bought properties and our on-site local advisors have highlighted several issues. We've listed them all in our Netherlands Property Pack.

This article provides a brief overview of potential pitfalls that may arise during the property buying process in this country.

Is it safe or risky to invest in real estate in the Netherlands?

In the heart of the country, Amsterdam's housing scene is as bustling as its bike lanes.

Particularly in the sought-after canal belt area, properties are in high demand. The phenomenon of ‘overbidding’ has become a norm.

Take, for instance, a two-bedroom apartment in the Jordaan district in 2019: Listed at €450,000, it sold for a staggering €525,000 within a week. This rapid-paced market, driven by the fear of missing out, can push buyers, especially foreigners, into hasty decisions, making it a terrain where caution is paramount.

The 'erfpacht', or the leasehold system, is a Dutch specialty that has stumped many.

Consider the tale of Alice, an American expat, who almost bought a home overlooking the Amstel River. To her astonishment, just before finalizing, she unearthed that the house was on leasehold land. The looming annual canon payments, which could be recalibrated, were an unexpected financial twist.

While the Dutch notarial system stands as a beacon of transparency, it doesn’t offer an all-encompassing safeguard.

A case in point is the Smiths, a British couple in The Hague, who were ecstatic about their 19th-century townhouse purchase. Their joy was short-lived when they stumbled upon unauthorized attic renovations, plunging them into a quagmire of legal disputes.

This incident drives home the message that a notary, though ensuring the sale's legitimacy, might not always flag all potential issues..

Dutch banks, while open to lending to foreigners, come with a set of stipulations.

Tom, a non-EU expat, learned this the hard way. His application was turned down by three banks, owing to his temporary employment contract. Only upon securing a permanent contract did the financing gates open, albeit with a hefty down payment.

The Dutch government’s interventions, although aimed at stabilizing the property market, have a spectrum of impacts.

Amsterdam’s 2016 regulation, which restricted new homes from being rented out, was a bid to combat spiralling rental prices and unchecked Airbnb listings. While it did temper the rental frenzy, it also clipped the wings of foreign investors targeting rental returns.

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Avoid these pitfalls when purchasing property in the Netherlands

The concept of "erfpacht"

One pitfall in buying residential property in The Netherlands, especially for foreigners, involves understanding the concept of "erfpacht" or ground lease.

This is a unique aspect of Dutch property law where the land on which the property is built may not be owned outright but is leased from the landowner, often a municipality.

In this context, you should be vigilant about the terms of the erfpacht.

It's not uncommon for properties in cities like Amsterdam to be on leased land. The lease terms can vary greatly – some are for a fixed period (often decades long), while others can be perpetual. The cost associated with these leases can also vary, and in some cases, they can be adjusted periodically, which might significantly affect your costs over time.

The frequency of encountering erfpacht in The Netherlands can depend on the region and the type of property you are interested in. In major cities and especially in Amsterdam, it's a common scenario.

As a buyer, you are advised to thoroughly investigate the terms of the erfpacht before proceeding with the purchase. This includes understanding the duration of the lease, any conditions for renewal, and how the lease fee (canon) is calculated and adjusted over time.

It's crucial to factor these costs into your overall budget and future financial planning.

The concept of "VVE"

Another unique aspect to be aware of when buying residential property in The Netherlands is the concept of "VVE" (Vereniging van Eigenaren or Homeowners Association).

This is particularly relevant if you're buying an apartment or a property within a shared building.

In the Netherlands, most apartments are part of a VVE, which is responsible for the maintenance and management of the shared parts of the building, such as the roof, facade, and common areas. As a member of the VVE, you will be required to pay monthly or annual fees for these maintenance costs.

You should carefully review the financial health of the VVE before purchasing a property.

This includes understanding their reserves for future maintenance, the maintenance plan, and any upcoming large expenses that might require additional contributions from the owners. A poorly managed VVE with insufficient reserves can lead to unexpected and significant additional costs for you in the future.

Moreover, you should be aware of the rules and regulations set by the VVE, as they can impact your ability to make changes to your property. For example, some VVEs have strict rules regarding renovations, the use of communal spaces, or even the type of window coverings you can use.

It's not uncommon to encounter VVEs in Dutch cities, especially in places like Amsterdam or Rotterdam, where apartment living is more prevalent.

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"Bodemverontreiniging" or soil contamination

A less commonly discussed but significant aspect to consider when buying residential property in The Netherlands is the potential impact of "bodemverontreiniging" or soil contamination.

This is particularly relevant if you're considering older properties or those in industrial areas.

In The Netherlands, historical industrial activities, certain agricultural practices, or even previous construction work can lead to soil contamination. This contamination can range from mild to severe, and in some cases, it can significantly impact the value of the property and the safety of living there.

Before purchasing a property, you should investigate whether there has been any soil contamination on the site or in the surrounding area.

This is especially crucial if you plan to renovate or extend the property, as remediation of contaminated soil can be a costly and lengthy process.

In some cases, municipalities have records of known contaminated sites, but these records may not always be comprehensive. Therefore, it's advisable for you to conduct a soil investigation, especially for properties in areas with a history of industrial activity or in regions known for intensive agriculture, such as certain parts of Rotterdam or areas in the vicinity of chemical plants.

The frequency of encountering soil contamination issues in The Netherlands is not extremely high, but it is a risk that should not be overlooked, particularly in certain regions or with certain types of properties.

Risks related to "bestemmingsplan" or zoning plan

A unique and often overlooked aspect in the Netherlands real estate market, especially relevant for foreigners, is the concept of "bestemmingsplan" or zoning plan.

This is particularly important if you're considering buying property with the intention of renovation, extension, or change of use.

A bestemmingsplan is a detailed plan set by the municipality that dictates how the land and properties within its boundary can be used. This includes regulations on the types of buildings that can be constructed, the purposes for which buildings can be used (residential, commercial, etc.), building heights, and even the percentage of the land that can be built upon.

Before buying a property in The Netherlands, you should check the bestemmingsplan for the area where the property is located.

This is crucial if you have specific plans for the property that involve changes to its structure or use.

For instance, if you're buying a property with the intention of converting it into a commercial space or adding an extension, the bestemmingsplan will determine whether or not this is permissible.

These plans can be quite specific and vary greatly from one municipality to another, and even from one neighborhood to another within the same city. They are often available on the website of the respective municipality or can be requested from the local planning department.

Not being aware of the bestemmingsplan can lead to costly mistakes, as you might purchase a property with intentions that are not allowed under the current zoning regulations.

This could result in denied permits, legal challenges, and a loss of investment.

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"Waterschapsbelasting" or water board tax

Another specific aspect to consider when buying residential property in the Netherlands, particularly relevant for foreigners, is the potential impact of "waterschapsbelasting" or water board tax.

This is a unique element of the Dutch tax system due to the country's extensive water management infrastructure.

In the Netherlands, a significant part of the land is below sea level or prone to flooding, making water management crucial. The water board tax is a levy imposed by regional water authorities ("waterschappen") to finance the management of water levels, flood defenses, and water quality.

Before purchasing a property, you should be aware of the waterschapsbelasting that applies to the property. This tax varies depending on the location and size of the property and the specific tasks of the water board in that area.

For example, properties in low-lying areas like parts of Zeeland or near major rivers may have higher water board taxes due to the increased need for water management.

This tax is an ongoing expense that you will be responsible for as a property owner.

It's separate from regular property taxes and is not always immediately apparent to buyers, especially those unfamiliar with the Dutch tax system.

You are advised to inquire about the waterschapsbelasting for any property you are considering. This information can typically be obtained from the local municipality or the regional water board.

"Spookfacturen" or fake invoices

Another distinct aspect to be mindful of when buying residential property in The Netherlands is the influence of "spookfacturen" or fake invoices.

This is particularly relevant for foreigners who might not be familiar with local practices and languages.

Spookfacturen are fraudulent invoices that appear to be from legitimate companies or government entities. These can be particularly deceptive in the context of property transactions, where a range of services and administrative processes are involved. Scammers may take advantage of the complexity and unfamiliarity of the process to target new homeowners with fake bills for taxes, utilities, or services related to the property.

As a property buyer in The Netherlands, especially if you are not fluent in Dutch, you should be cautious about any unexpected invoices or requests for payment.

Verify the legitimacy of any invoice by contacting the supposed issuer directly through official channels.

Be wary of invoices that arrive soon after your property purchase, as this is a common time for scammers to target new homeowners.

The prevalence of such scams can vary, but being aware and vigilant is crucial.

It's important not to make payments or provide personal information without confirming the authenticity of the request.

To safeguard yourself against such fraud, you are advised to work closely with your real estate agent, notary, or a legal advisor who understands the Dutch property market and can help you identify legitimate expenses.

Additionally, educating yourself about the typical costs and procedures involved in buying property in The Netherlands can help you spot inconsistencies or suspicious requests.

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"Recht van overpad" or right of way

Another specific issue to consider when purchasing residential property in The Netherlands is related to "recht van overpad" or right of way.

This is particularly important if you are buying a property with shared access or in close proximity to other properties.

Recht van overpad refers to a legal right that allows someone to pass through another person's land. This is commonly seen in situations where a property is only accessible through a neighbor's land or when a garden or driveway is shared between two properties. In densely built areas or in cases of older properties, such rights of way are not uncommon.

Before purchasing a property, it’s essential to verify if there are any rights of way associated with it.

These rights can significantly impact your use and enjoyment of the property. For instance, if your property has a right of way in favor of a neighbor, it might limit your ability to modify certain parts of your land or might mean regular passage of people close to your living space.

In some cases, rights of way are not clearly documented or may be based on long-standing practices rather than formal agreements.

Therefore, you should conduct thorough due diligence.

This can involve reviewing property deeds, consulting with the local Kadaster (the Dutch land registry office), and speaking with neighbors or previous owners.

It's also advisable to understand the legal implications of these rights.

In The Netherlands, rights of way are legally binding and can be enforced, which means you might have limited ability to alter these arrangements after purchasing the property.

"Monumentenstatus" or monument status

Yet another unique aspect that can impact residential property purchases in The Netherlands is related to "monumentenstatus" or monument status.

This is especially relevant if you are interested in older or historic properties.

Monumentenstatus refers to a designation given to buildings or structures that are considered to have historical or cultural significance. In The Netherlands, properties with this status are protected under heritage laws. This includes not only grand historic buildings but can also apply to more modest residential properties that are of historical interest.

Before purchasing a property, it's crucial to check whether it has monument status.

This status can impose restrictions on what you can and cannot do with the property, particularly concerning renovations, restorations, and alterations. For example, if you plan to renovate a property with monument status, you might need to adhere to specific guidelines to preserve its historical features, and this could significantly increase the cost and complexity of the work.

Properties with monumentenstatus are found throughout The Netherlands, but are more common in historical city centers like Amsterdam, Utrecht, or Maastricht.

The frequency of encountering such properties depends on the area and the age of the buildings in question.

You are advised to carefully consider the implications of buying a property with monument status. While owning such a property can be prestigious and offer unique charm, it also comes with responsibilities and potential limitations.

It's a good idea to consult with the local municipality or a specialized real estate agent to understand the specific requirements and restrictions associated with the property.

Additionally, hiring an architect or contractor experienced in working with monument properties can provide valuable insights into what changes can be legally and practically made to such a property.

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"Kadastrale kaart" or cadastral map discrepancies

A further unique aspect to consider when buying residential property in The Netherlands is the impact of "kadastrale kaart" or cadastral map discrepancies.

This is especially important when dealing with property boundaries and sizes.

The kadastrale kaart is a detailed map maintained by the Kadaster, the Dutch land registry office. It provides crucial information about property boundaries, sizes, and the location of registered properties. However, there can be discrepancies between the actual physical boundaries of a property and what is recorded on the cadastral map.

Before purchasing a property, it's important to verify that the physical boundaries and the size of the property match the details recorded in the kadastrale kaart.

Discrepancies can lead to disputes with neighbors over property boundaries or issues with local planning permissions.

For instance, if you plan to build an extension or modify the property, accurate boundary information is essential to ensure that you are complying with local regulations.

Such discrepancies are more likely to be found in older properties or in areas where boundaries have changed over time. They can occur due to historical inaccuracies, changes in the landscape, or previous alterations to the property that were not accurately recorded.

To address this, you are advised to conduct a thorough check of the property boundaries. This can involve hiring a surveyor to measure the property and compare it with the details on the cadastral map.

If discrepancies are found, you may need to work with the Kadaster and possibly a legal advisor to resolve these issues

Issue of "clausules in koopcontract"

Another important aspect to be aware of when purchasing residential property in The Netherlands, especially for foreigners, is the potential issue of "clausules in koopcontract" or clauses in the purchase contract.

These clauses can have significant implications for the buyer and may include unique conditions not commonly encountered in other countries.

In The Netherlands, the koopcontract or purchase contract for a property is a legally binding document that outlines the terms and conditions of the sale. It's essential to thoroughly understand all the clauses included in this contract, as they can include specific conditions or obligations that impact your rights and responsibilities as a buyer.

The koopcontract is a legally binding document with specific conditions, such as "Ontbindende voorwaarden" which allow contract dissolution under certain conditions like financing failure, and "Boeteclausules" which impose penalties for non-compliance.

The "Asbestclausule" addresses asbestos liability in older properties, while the "Ouderdomsclausule" pertains to accepting age-related defects in older properties.

Another important clause is the "NEN 2580 Clausule", which concerns property size measurements and potential discrepancies. Given the legal complexities and possible language barriers, having the contract reviewed by a legal professional familiar with Dutch real estate law is critical.

They can assist in understanding, negotiating, and potentially amending the contract terms, ensuring you are fully informed of your obligations and the risks involved in the property transaction.

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