Ownership or freehold (eigendom) is the most comprehensive right a person can have to real estate in the Netherlands. The owner has the exclusive right to use the real estate. Ownership of the land extends to all that is permanently connected to the land, such as the buildings and subterranian works. This concept is referred to as vertical accession (natrekking).
Under Dutch law, real rights are part of property law (goederenrecht). Besides ownership, there are also limited rights (beperkte rechten). A limited right is obtained from a more comprehensive right, in this case form the right of ownership, which is encumbered with the limited right. There are several limited rights which can encumber the ownership of the real estate. Below a short overview of the (most common) limited rights.
The right of ground lease is the right to hold and use the real estate owned by someone else. The party entitled to the right of ground lease is usually referred to as the ground lessee or leaseholder (erfpachter) and the counterparty is usually referred to as the ground owner or ground lessor (grond eigenaar of erfverpachter). In most cases where a right of ground lease exists in the Netherlands, a municipality is the owner of the land.
The right of superficies is the right to own certain buildings, works or plants in, on or above the real estate of another party. The right of superficies breaches the vertical accession which normally applies to constructions on land owned by another party.
A division into apartment rights creates joint ownership of the divided property. An apartment right (or a condominium right) is for each owner a share in the divided property, which contains:
Common ownership (mandeligheid) is a special form of joint ownership of real estate. It exists when the owners of two or more real estate properties have a joint ownership to another property and designate that property to serve for common use.
Common ownership is a dependent right, which cannot be separated from the ownership of the real properties it serves and the undivided share in the communal property transfers by operation of law together with the relevant real property.
The exclusive right an owner has to use its real estate can be limited by rights of others. Limitations may follow from (amongst others):
* An easement is an obligation in which a plot of land – the serving land (dienende erf) – is encumbered for the benefit of an adjecent plot of land of another party – the dominant land (heersende erf). An easement is a dependent right that transfers with the ownership of the dominant land and cannot be disposed of separately from that property.
** The right of usufruct (recht van vruchtgebruik) is the right to use goods which belong to another party and to enjoy the fruits of such. The right of usufruct is a transferrable interest and can be encumbered with a security right but a transfer does not affect the term of the right.
Transferring title to Dutch real estate (immovable property) requires three things:
The most common agreement to transfer real estate is the sale and purchase agreement (“SPA“). Dutch law requires consensus between parties to establish a legally binding agreement. In principle, there are no formal requirements that have to be satisfied. For instance, an oral agreement is valid and legally binding. This is also the main rule of Dutch contract law concerning real estate. In deviation thereof, the sale to a non-professional buyer of residential property (a consumer) requires a written agreement.
The deed of transfer is drafted by a Dutch civil-law notary (”notary”). The seller and the buyer are parties to the deed. The parties can be represented by their authorized corporate representatives or through a power of attorney. It is common practice in the Netherlands that parties are represented by an employee of the notary’s law firm (also if this firm represents the other party as legal counsel in this transaction) on the basis of a power of attorney drafted by the notary.
The deed must mention the amount of the purchase price and give a clear description of the immovable property involved. In the event that no purchase price is payable, the deed needs to mention an amount attributed to the property, for RETT purposes.
The notary has to ascertain that the persons appearing before the notary to sign the deed of transfer, are authorised to represent the parties to the deed. If the authority is based on a power of attorney, this will be noted in the deed.
The notary has to take due care that the power of attorney is valid and will result in due representation of the relevant party.
The transfer of real estate – including of Dutch Property Rights to which it is subject– is exempt from VAT, unless:
For VAT purposes, a part of real estate that is physically independent and can commercially be used or operated independent from another part of real estate (a “Unit“) is considered real estate by itself.
In principle, the acquisition of real estate in the Netherlands is subject to 8% RETT (applicable rate as of 2021). This could be different if:
For RETT purposes, the acquisition of real estate has been broadly defined and includes not only the acquisition of the legal title/ownership, but also:
RETT rules, particularly in relation to shares in real estate entities, are heavy on anti-abuse clauses. However, there are exemptions – such as the internal reorganization exemption – that ensure that under circumstances intra-group transfers of real estate are not subject to RETT.
The taxable base for RETT is either the highest of (i) the purchase price or (ii) the fair market value of the real estate. The fair market value should be determined by means of a third-party valuation.
For Dutch Property Rights, the taxable base must in principle be added with the net present value of future payments or charges in connection with the transferred Dutch Property Right (e.g. ground lease payments). The RETT basis for Dutch Property Rights is maximized at the fair market value of the freehold of the real estate.
It is possible that both VAT and RETT are due on the same transfer of real estate. If VAT is due, the Dutch law on RETT (the “RETT Act“) provides that the acquisition of real estate is exempt from RETT if:
Moreover, even if the real estate is used as a business asset and the Buyer is entitled to a full or partial deduction of input VAT, the RETT exemption still applies if:
This exemption also applies if the transfer of real estate takes place within a fiscal unity for VAT purposes, or in case the transfer qualifies as a ‘transfer of a going concern’ (“TOGC“) (algemeenheid van goederen), provided that all other conditions are met.
The RETT rules follow the VAT qualification of Units.
Government and private entities are increasingly seeking to protect our country’s overall health, natural environment and quality of life through strategies such as smart growth, new urbanism, and green and smart building. Our Real Estate team increasingly assists clients with legal issues relating to developing sustainable real estate projects.
Last updated May 2022