Landlease is not so common in other countries, so hence a short explanation could clarify the basics of landlease (erfpacht).
In most of the big city centers the municipality wants to have “foot on ground” regarding (destination of) the land. If you buy an apartment on “erfpacht” (landlease) basis, you buy in fact an exclusive right to live in your apartment but the land below your apartment still is owned by the municipality. For the use of the land you will pay a periodical compensation (called “canon”).
Roughly and focussed on the duration of the landlease contract there are 3 types of contracts – temporary, continuously and perpetual. For getting a mortgage loan the type of landlease of the apartment you are interest in, can be relevant (Perpetual and continuously are better than temporary). At the end date of your current temporary landlease contract, the municipality could have another destination with the land in mind and decide to buy you out. You will receive a financial compensation (uitkoop) offer then from the municipality.
Sometimes the “canon” (periodical financial commitment) can also be bought off (afgekocht) by the erfpachter (“tenant”) by paying a lump sum to the municipality, as a result there is no financial commitment any more.
All aspects above can have influence on your mortgage loan application. Therefore it is important to discuss your options – in case of buying your apartment based on landlease – AHEAD – with us.
PS Next to governmental landlease contract there are also private label landlease contracts. Other rules apply for these types of contracts.