Buying a house? Be aware of these aspects!
When buying real estate it is always wise, as a buyer – especially as a foreign buyer – to obtain the right advice. An estate agent for the purchase can be valuable during the negotiation process (e.g. to be sure about the condition of the house and the right price). Also, a tax consultant can advise on any applicable schemes for tax residents from other countries. Finally, a real estate lawyer can also be useful. Dutch property lawyer Onno Hennis addresses a number of crucial issues for a foreigner wishing to buy a house.
When real estate is sold in The Netherlands, in almost all cases standard documents are used. For residential properties, the best-known and most-used model by far is the purchase contract of the NVM (The Netherlands Association of Real Estate Brokers and Real Estate Experts). The VBO (Association of Real Estate Agents) model is also often used. The stipulations in the model agreements are based on mutual consultations between the different interest groups, such as estate agents, home owners, governmental agencies and other parties. The stipulations (and the explanation of these) have proven very useful in practice. However, no two sales are the same and it is more a rule than an exception that specific stipulations are included in the standard contract.
3 Day Cooling-off period
Dutch law stipulates that a purchase contract, provided the buyer is a consumer, has to be concluded in writing. Oral agreements on the purchase (price) do not oblige the buyer to buy the house. Under very exceptional circumstances – if there was an oral agreement, but no contract – the buyer can be liable to compensate certain losses incurred by the seller.
Also, the consumer-buyer has the possibility, during 3 days, to withdraw from the purchase without stating reasons. This 3-day cooling-off period starts when the buyer receives the signed purchase contract. It is also common that the parties include a financing arrangement clause or other resolutive clauses in the purchase contract. A financing arrangement clause means that the buyer is only bound to the sale if he obtains the required financing. However, this is not an hidden ‘cooling-off period’. A buyer wishing to invoke the financing arrangement clause, will have to show satisfactorily that he could not obtain financing (e.g. by submitting rejections from banks).
Transfer bij designated notarial deed
In The Netherlands, real estate is transferred by a designated notarial deed. This means that a civil-law notary is involved in each (execution of a) sale (the transfer of title) of a Dutch house. Usually the buyer bears the fees of the civil-law notary and he is therefore often the party appointing the civil-law notary.
Deposit of of 10%
Most model contracts include the clause that the buyer, prior to the transfer of the real estate, shall have to deposit an amount equal to 10% of the purchase price on the civil-law notary’s clients’ account or provide a bank guarantee for that amount, as security that he will comply with his obligations. This deposit shall be paid to the seller if the buyer fails to comply with his obligations, or is reimbursed to the buyer if the seller fails to comply with his commitments.
Penalty: max 10% of purchase price
Also, model contracts often stipulate that a penalty is due if the buyer or the seller does not comply with his obligations. In that case the other party shall have to send notice of default (possibly by summons). If the default has not been remedied within 8 days after the service of the notice of default, the penalty becomes due and payable. This penalty is often equal to 0.3 percent of the purchase price for each day the default continues, with a maximum of 10% of the purchase price. In most cases the injured party can claim additional damages compensation, provided (and to the extent) that the total damages do not exceed the 10% maximum.
The buyer should realize the easements
Real estate is always sold including the easements (obligations attached to the property) and other rights attached to the property with which the house is encumbered, and a stipulation to this effect is included in the purchase contract. During the sales process the seller shall provide the buyer with the deeds including these easements (e.g. former notarial deeds). It is important that the buyer realizes what these easements entail, because once the deed is signed, the buyer cannot renege on this.
Part of Dutch real estate is on land owned by owners who lease this land to leaseholders as a ground lease (erfpacht). The leaseholders are most often municipalities. This so-called ground lease system can mean that when someone buys real estate in The Netherlands, he also owes a regular payment to the municipality for the ‘lease of the ground’, the so-called ‘ground rent’. The ground rent has usually been bought out for a longer period (e.g. 50 years).
(Co) signing of selling spouse
Under Dutch law, the spouse or registered partner of the seller has to co-sign the purchase contract, if the spouses live together in the house being sold. If this spouse fails to do so, the purchase contract can be terminated, which means that the sale is considered not to have taken place.
What about hidden defects?
Under Dutch law the seller has a duty to inform and the buyer has a duty to investigate. In principle the seller’s duty to inform takes priority over the buyer’s duty to investigate. However, in certain circumstances a buyer has to gather information, e.g. based on information provided by the seller. It is therefore always advisable to gather as much information as possible about the condition of the house, the obligations attached to the house, the contents of the zoning plan, whether there is any pollution of the soil, and many other issues a buyer has to be aware of.
If it is found later that the house has a hidden defect, there shall be an inquiry into whether the seller breached his duty to inform or whether the buyer failed to comply with his duty to investigate. In the first case the buyer could dissolve the sale or receive damages compensation. However, if it is shown that the buyer should have investigated (further), it is possible he cannot make any claims on the seller.
Dutch law firm AMS : have your purchase contract checked
The lawyers of the AMS Lawyers law firm in Amsterdam are experienced in advising and litigating for foreign clients in real estate cases. We offer the possibility to check the purchase contract for a sharp, fixed price. We can also offer more intensive guidance during the purchase process. Please contact us without obligation to discuss the options.