Castle, Bird’s Nest or… Pitfall

Sometimes you want a castle, sometimes a bird’s nest and sometimes just a safe roof for a limited time, but what you certainly don’t want is a pitfall. The question to buy or not to buy can therefore not be answered In general.

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Recently you have been able to read in the papers about how – finally, after five years of decreasing purchase prices – house prices in the Netherlands no longer exceed their market value. In other words, this could be the moment to buy, also if you are an expat. However, do not forget to take into account the so-called ‘buyer’s costs’ (meaning the buyer of a house bears all the expenses related to its purchase), as a consequence of which buying will presumably only be attractive, in terms of financial return of investment, if you plan to stay here at least four years.

On the other hand, renting is also becoming more attractive now that many house owners, who have to move themselves, are putting up their house up for rent, as the wait for a buyer can be a long one.

Buying


Whenever you decide to buy it is highly advisable to contact an agent first who can inform you about the market, the maintenance condition – especially in connection with the typically Dutch challenges regarding subsoil and water – but certainly also about purchase contracts, common dissolution conditions, etc. Being an expat with no or little knowledge of Dutch law, it might also be wise for you to contact a lawyer. Even if you have already been living here for several years. Especially as buying a house involves so much more than just selecting a property.

One issue that frequently arises is that of erfpacht (long-lease). To some, it may seem a ‘pitfall’, however, it is quite common in the Netherlands, particularly in the Western part of the country and in the vicinity of train stations. Just make sure you obtain expert advice on its consequences for your mortgage and legal rights and obligations.

Marriage and Divorce


If you are already married or planning to do so, you should be aware of the legal regulations regarding ownership as well as the consequences of your marital property regime for any entitlements either of you may have to the value of the house, the right to stay in it, etc. When seeking advice on the type of marriage contract, the issue of the home is always a major item on the agenda.

Should you be in a divorce situation, and looking for a new house, be sure to have an extra clause added to the purchase contract, stating that the purchase is subject to the condition that a mortgage loan will be possible taking into account the alimony due or received pursuant to the upcoming court order or divorce covenant. Of course all other clauses are also to be read thoroughly.

Unfortunately, just recently a German client failed to consult with me on time. When she indeed proved unable to obtain a mortgage based on her lower-than-expected alimony as determined in a German court order, she was faced with a penalty for not taking the property. It turned out that there had indeed been a clause on this matter in the purchase contract, however she had failed to inform the seller of this by registered mail within the period mentioned in the resolutive condition.

Binding Verbal Contract


It is also important to know that, according to Dutch law, a verbal contract is binding. This means that, unless you are absolutely sure that you can afford the property, you should not make any verbal commitment.

Renting


Renting appears to be a simpler option, however it does not come without its own pitfalls.

Terminating the Contract


Tenants of rented residential accommodations are very well protected in the Netherlands. Nonetheless they are all too often unaware of their rights and obligations. Such as those regarding the termination of the tenancy agreement.

A landlord, particularly a private one, can be faced with major challenges when trying to terminate a rental contract, as it does not by any means terminate automatically upon reaching the end of the agreed term. The same should be kept in mind by tenants; though you may have entered into a tenancy agreement for a specified period of time, it will not simply end upon reaching the end of this term. The grounds for the termination of a rental contract are listed exhaustively in Dutch law, which means that the termination of a tenancy agreement is only possible on the basis of one of the grounds listed there. The only exception is when both parties agree to the termination.

Diplomatic Clause


One of the grounds listed in Dutch law is the so-called ‘diplomatic clause’. Pursuant to a diplomatic clause, the landlord can terminate a rental contract at the end of a rental period, if the landlord wishes to:

  • occupy the residential unit himself, or
  • give a previous tenant the opportunity to reoccupy the residential unit.

The tenancy agreement must expressly provide for termination under these conditions, whereby the condition remains that the landlord must have sufficient interest in having the property vacated.

However, even if the above requirements are met, the tenancy agreement will only end if there is a court ruling to his effect or if the tenant has agreed to the termination. If the tenant does not agree to termination, the landlord will have to start proceedings. This will allow the tenant to win some time.

Original State


At the end of the tenancy agreement, the rented property is to be vacated by the tenant. Often the rental contract will include the stipulation that the accommodation must be returned to its original state. The question then arises; when is this requirement considered to have been met? And who has the burden of proof?

Dutch law specifies that, in case of a dispute, the landlord is to prove that the state of the property was ‘better’ at the start of the tenancy agreement than it was when the tenant handed it back over.

The best way to avoid discussion, for both parties, is to have a description of the original state, and for the parties to agree that the property must be handed over in that particular state. The description of the state must therefore be fairly detailed. For instance, a statement that it is in ‘good condition’ will not suffice.

If there is no such description, Dutch law assumes that the tenant has handed over the residential unit correctly. The landlord has to prove otherwise, which is very difficult – unless there is serious damage; in which case the tenant is obligated to demonstrate that he or she is not responsible and therefore not liable for the damage done.

If you plan to rent or rent out property, it is advisable to have a report drawn up by an independent professional party, such as a real estate agent, prior to the occupancy of a residential unit and shortly prior to its handover. Of course the tenant enjoys extensive protection regarding the state of the property at the time of termination of the rental contract, yet no tenant wishes to be faced with a rather tedious discussion, especially when he or she is about to leave the country.

Author
Edith van Ruitenbeek
Issue
2013 Spring

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