Real Estate Law in the Netherlands

In the Netherlands, the main relevant legal code governing the purchase and sale of real estate is the Civil Code. The Civil Code comprises several books. Its most relevant books governing the purchase and sale of real estate are:

• Book 3: Real estate law in general;
• Book 5: Rights in rem;
• Book 6: General part of contract law; and
• Book 7: Specific contracts, such as purchase agreements, lease, and construction contracts.
  

The government regulates the use of real estate. Environmental rules are established at the national level under formal laws. Local governments decide on zoning and planning regulations as well as on the acquisition of permits.

Under the Money Laundering and Terrorist Financing (Prevention) Act (in Dutch: Wet ter voorkoming van witwassen en financieren van terrorisme, or WWFT), the Dutch law implementing the European Union (EU) directive 4AMLD, the civil law notary is obliged to conduct a client screening and to investigate the origin of money. If a civil law notary suspects money laundering of criminally obtained money in order to finance terrorism, the civil law notary is obliged to report this to the relevant authorities.

A real estate transaction results in the transfer of the right of ownership. In the Netherlands, ownership is the most encompassing right known in its legal system. An owner may do almost anything with their property within the limits of the law. However, an owner must take the interest of third parties into consideration, and the law therefore includes provisions limiting their powers. It is possible to transfer parts of the ownership to another person or to give another person certain rights to what one owns. Such rights are referred to as proprietary rights, and such rights derive from a more comprehensive right. Proprietary rights remain vested on the real estate in case the real estate is transferred to another owner. This also means that it may be the case that real estate is purchased encumbered with a proprietary right.

The following are proprietary rights:

Leasehold (erfpacht)

Leasehold means that someone has the right to hold or use a piece of land owned by another person. The leaseholder pays an amount to the owner of the land, the so-called ground rent (erfpachtcanon). If a leasehold is issued, a building may be owned by someone other than the owner of the land. It is the norm in Amsterdam that real estate stands on land issued on leasehold

Right of superficies (recht van opstal)

Right of superficies is the right to own or acquire buildings and/or structures and/or vegetation in, on, or over another person's (real) property.

Easement (erfdienstbaarheid)

An easement is the right to use a piece of land (plot), even if you are not the owner. It may also mean that the owner of a piece of land (plot) is not allowed to do something.

Therefore, while an easement may involve tolerating or refraining from an action, it can never involve a duty to do something.

Usufruct (vruchtgebruik)

Usufruct is a right to use another person's real estate and ‘enjoy the fruits’ of doing so. These fruits can be anything from actual fruits, such as apples from an apple tree to someone living in the house of another.

Mortgage (hypotheek)

The right of mortgage is a security right vested on (real) property which is linked to a loan. The owner of the real estate may establish this mortgage right on the real estate for the benefit of a legal entity (such as a bank) or person and is usually a condition for granting the loan. If the borrower fails to meet their (payment) obligations, the lender may foreclose on the real estate. Once the real estate has been sold, the lender (such as a bank) may recover its claim against the proceeds of the real estate in priority to all other creditors.

Besides purchasing real estate (by means of an asset deal), it is possible to acquire real estate by purchasing shares of the entity that owns the real estate (share deal). In a share deal, the purchaser acquires (the shares of) a legal entity, while under an asset deal, the assets and liabilities acquired can be transferred directly to the purchasing legal entity.

Most real estate transactions (whether assets or shares) start with a letter of intent (LOI), usually granting parties a specific term of exclusivity, during which the buyer has the time to do their due diligence. The LOI ensures that parties do not accidently enter into a binding contract. In the Netherlands, a binding contract is formed when parties agree upon the essentials of the transaction. For real estate, these essentials are, in general, the object and price of the transaction.

The terms of the deal will be recorded in a purchase agreement, including any conditions precedent (CPs), payment structure, transfer date, etc.

At this stage, therefore, legal assistance can be of fundamental importance.

The last step in any transaction is the transfer of the ownership title by a civil law notary. The involvement of a civil law notary is a procedural requirement that needs to be fulfilled; without it the transaction is void.

From a civil law perspective, there are generally no restrictions on ownership or occupation by foreign entities.

The Land Registry (het kadaster) is the public register in which the rights with regard to immovable property (i.e., real estate, ships, aircraft, topography, and coordinate points) are recorded.

For each plot, the Land Registry records the deed of delivery, and/or the right of superficies, and/or the right of mortgage, including other rights in rem (as also mentioned in the deeds of delivery).

The Land Registry also records whether the plot includes a monument and whether the plot is subject to any public law restrictions.

The Land Registry contains information dating back to 1832 and details of the current ownership and, if available, any previous transfers.

The ownership recorded in the Land Registry is seen as the legally accurate representation of ownership. An acquiring party needs no further confirmation of ownership.

Without the involvement of the civil law notary (notary), no transfer of ownership of real estate or the establishment of a right in rem is possible.

The notary draws up the deed of delivery and the mortgage deed, if any, and has the parties involved sign those deeds in its presence. Afterwards, the notary will register the aforementioned deeds in the Land Registry.

The notary is obliged to screen the parties involved in the transaction in accordance with anti-money laundering laws.

The seller of real estate must be the owner of the real estate and have power of disposal. For example, the real estate may not be subject to any seizure.

The seller has an obligation to provide information during a transaction. Under this obligation the seller is obliged to notify the buyer of any defects the real estate may have and the nature of these defects. If the defects are obvious and the buyer can see them, no obligation exists for the seller to separately mention the defects.

It is the obligation of the seller to provide a valid energy label for the real estate. An energy label indicates a building’s energy efficiency and which energy-saving measures could still be implemented. From 2023 onwards, every office in the Netherlands larger than 100 square meters will be required to have at least an energy label C. With regard to ‘utiliteitsgebouwen’ such as hospitals, schools etc., an energy label F will most likely be applicable as from 2027 onwards.

Furthermore, the sale and delivery of real estate requires a purchase agreement. The seller is obliged to fulfil the obligations imposed on them and the guarantees given by the seller in the purchase contract.

When purchasing real estate, it is common to take out a loan from a bank or other lender. To secure repayment of the loan, a mortgage may be established on the real estate. If the borrower does not repay the loan, the bank can sell the real estate and recover the loan from the proceeds.

Even in the event of the borrower's bankruptcy, a mortgage right offers a high degree of security for recourse. “Ordinary” creditors are paid from the estate in proportion to their claims. But the lender of the mortgage is allowed to foreclose on the real estate outside of the bankruptcy.

A mortgage deed must be signed before a civil law notary. The notary must then ensure that the deed is registered in the land register.

When loans are acquired for the financing of projects, most arrangements require the pledging of all future cash flows derived from the project, ensuring the loans are redeemed before any other payments are made.

In the Netherlands, real estate rental can be divided into three regimes: residential real estate, 290 business premises, and 230a business premises. These ‘names’ are derived from the clauses in the Dutch Civil Code where the respective regimes can be found.

Residential real estate

A tenant of a residential real estate has rent protection, unless one of the statutory grounds for termination applies. This means that the landlord cannot terminate the rental agreement of a residential real estate without reason. The landlord can only terminate the agreement on the grounds specified by law.

The lease of an independent accommodation (zelfstandige woonruimte) must be agreed upon for an indefinite period of time. Furthermore, the rent level must be determined based on a number of points attributed to the dwelling. Also, existing rent levels may be adjusted if the dwelling does not score a certain number of points.

290 business premises

A 290 business premises involves a building, or part thereof, that is rented out for the purpose of running a retail business, a restaurant or pub, a take-away or delivery service, or a craft business. The premises rented out must have a place accessible to the public for the direct supply of goods or services. Hence, business premises where customers can physically buy, or order things fall under the 290 regime. Hotels and campsites also fall under this regime.

The tenant of a 290 business premises has relatively high tenant protection. This is reflected, among other things, in the term of the agreement. The first term is for five years, and without notice, it is automatically extended by another five years. In addition, the termination options of the lease are limited. Both landlord and tenant can only do so at the end of the agreed term. A notice period of at least one year applies. A contract of indefinite duration can be cancelled at any date (taking into account the payment term). In all cases, termination by the landlord is only possible if they state the reason(s) for termination. This does not apply to the tenant.

230a business premises

If a leased real estate does not fall under the residential real estate or 290 business premises regime, the 230a regime applies. Examples of 230a business premises are office spaces, factories, storage spaces, and showrooms.

The tenant of a 230a business premises has considerably less legal protection than the tenant of a 290 business premises. The rental period, for example, is free of form and can therefore be entered into for a limited period. However, in the event of termination by the landlord, the tenant may extend their stay by invoking their eviction protection, for example, they need time to move to another business accommodation. This period is capped at three years after the date on which the notice of eviction has been issued.

It is important to know that in rental law, the sale of real estate does not affect the rental contract. When the real estate changes hands, the new owner becomes the landlord of the tenant.

With the introduction of the Environmental and Planning Act (Omgevingswet), several significant changes have been made to the procedures regarding real estate development. It is not possible to develop every kind of real estate at every location. Each location has a zoning plan (omgevingsplan), which specifies the permitted uses for that particular area. A zoning plan may also contain rules on building percentages, building heights, and other construction regulations. If someone wants to transform or develop real estate in a way that deviates from the zoning plan, an amendment to the plan or an extensive zoning permit is required. But, even if an intended construction project is in accordance with the zoning plan, a zoning permit is almost always required. In that case, a regular procedure for the zoning permit must be followed.

Under the Environmental and Planning Act, procedures have been simplified and are more integrated, meaning that all aspects of the living environment can be included in a single zoning permit application. When applying for a zoning permit, the municipality assesses the building or conversion on the basis of, among other things, the Decision on Building and Living Environment (Besluit bouwwerken leefomgeving or Bbl), the zoning plan, and the municipal policy rules for external appearance. These documents outline what is and is not allowed on the site and whether the design fits within the framework set by the municipality.

Applications for a zoning permit involve costs and take a certain amount of time. A zoning permit that has been granted may be subject to objections by other parties. Depending on the kind of permit, any court proceedings consist of either one or two instances.

A lot is happening in terms of ESG laws and regulations, especially at the EU level. This will primarily affect sizeable real estate organizations, which will need to adapt to these new requirements and demonstrate compliance with stringent sustainability criteria. The European Commission's Action Plan for Financing Sustainable Growth represents a significant step forward in aligning financial flows with sustainable development goals. Released on 7 March 2018, the action plan aims to transform the financial sector to support sustainable, inclusive growth. It focuses on three primary objectives:

• Reorient capital flows towards sustainable investment to achieve sustainable and inclusive growth;
• Mainstream sustainability into risk management; and
• Foster transparency and long-termism in financial and economic activity.

This comprehensive strategy encompasses several key instruments, including the EU taxonomy, Corporate Sustainability Reporting Directive (CSRD), Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Due Diligence Directive (CSDDD), and Enhanced Transparency Requirements. Each of these components work together to foster a more resilient, sustainable financial ecosystem. As these regulations come into force, large real estate companies will be at the forefront of this transformation, driving forward the agenda for sustainable growth in the sector.

EU taxonomy

The Taxonomy Regulation was published in the Official Journal of the European Union on 22 June 2020 and entered into force on 12 July 2020. It establishes the basis for the EU taxonomy by setting out four overarching conditions that economic activity must meet to qualify as environmentally sustainable. These conditions have been further updated to include:

• Significant contribution: The activity must make a significant contribution to at least one of the six environmental objectives;
• No significant harm: It must do no significant harm to any of the other environmental objectives;
• Minimum social safeguards: It must comply with minimum social safeguards; and
• Technical screening criteria: It must comply with the technical screening criteria set by the EU.
  

Corporate Sustainability Reporting Directive

On 21 April 2021, the Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which amends the existing reporting requirements of the Non-Financial Reporting Directive (NFRD). This regulation mandates organizations to report on non-financial indicators (ESG topics).

CSRD reporting became mandatory from 2024 for large companies that meet at least two of the following three requirements:

• 250 employees;
• €40 million in revenue; and
• €20 million in balance sheet assets.
  

Additionally, from 2024, the scope of CSRD has been extended to include listed small and medium-sized enterprises (SMEs), though they will have slightly simplified requirements to ease the transition.

Sustainable Finance Disclosure Regulation

Effective from 10 March 2021, the regulation on the provision of information on sustainability in the financial sector (SFDR) applies. This regulation enables the comparison of green investments and attracts financing for transition.

The regulation requires investment funds to report on their sustainability at both the entity and product levels. This allows investors to compare different funds based on their sustainability. The categorization remains:

• Article 6: Non-sustainable investments must report that they are not sustainable;
• Article 8: Investments that promote environmental or social characteristics but do not have sustainability as their core objective; and
• Article 9: Investments that have sustainable investment as their objective.
  

Corporate Sustainability Due Diligence Directive

The Corporate Sustainability Due Diligence Directive (CSDDD) was adopted in 2023. This directive mandates that companies must carry out due diligence concerning their operations and supply chains to identify, prevent, mitigate, and account for adverse human rights and environmental impacts. Key requirements include:

• Human rights: Companies must ensure that their operations and those of their suppliers respect human rights, including labor rights.
• Environmental impact: Companies must identify and mitigate significant environmental risks associated with their operations and supply chains.
• Reporting and accountability: Companies must report on their due diligence processes and findings and be accountable for their impacts.
  

The directive applies to large EU companies and non-EU companies with substantial operations in the EU.

Enhanced Transparency Requirements

The Enhanced Transparency Requirements, updated in 2023, aim to improve the reliability and comparability of ESG ratings and benchmarks. Key elements include:

• Disclosure obligations: ESG rating agencies must disclose their methodologies, data sources, and the rationale behind their ratings;
• Standardization: Introduction of standardized metrics and criteria for ESG ratings to ensure consistency and comparability across different providers; and
• Regulatory oversight: Enhanced regulatory oversight to ensure the integrity and transparency of ESG ratings and benchmarks.
  

These requirements are designed to provide investors with more reliable information to make informed investment decisions and to hold companies accountable for their ESG performance.

The Netherlands’ role

The Netherlands continues to be closely involved in developing and adopting EU legislation, often leading the way in implementation. Dutch companies are expected to fully comply with the EC’s guidelines, and additional national measures may be introduced to further strengthen ESG commitments.

Indirect tax on Dutch real estate transactions

Asset deal

In principle, the delivery of real estate in the Netherlands is value added tax (VAT) exempt. If the real estate qualifies as ‘building land’ or the real estate has been taken into use for the first time ultimately two years ago, the supply of the real estate is VAT taxable.

If real estate is transferred together with the existing lease agreements and the lease agreements are continued by the buyer, the transfer may qualify as a transfer of going concern (TOGC). As a result of the TOGC regime, a transfer is considered out of scope for Dutch VAT purposes and does not trigger Dutch VAT.

Share deal

If real estate is transferred through a share deal (i.e., the buyer acquires the shares in a real estate company), the supply of the shares is either not subject to Dutch VAT or VAT exempt

Dutch real estate transfer tax on real estate transactions

Asset deal

In general, Dutch real estate transfer tax (RETT) is levied on the acquisition of the legal and/or beneficial ownership of real estate located in the Netherlands or certain rights in rem with respect to such real estate.

For commercial real estate, Dutch RETT is levied at 10.4% on the purchase price (or the fair market value of the real estate, if higher) and is payable by the purchaser.

Share deal

RETT is also levied on the acquisition of shares or similar rights in real estate companies if, in general, the acquirer obtains at least one third of interest in a real estate company. A company qualifies as a real estate company in case its assets consist of real estate. assets for 50% or more and, at the same time, are located in the Netherlands for 30% or more (assets test) and these assets as a whole are held mainly for the purpose of exploitation or trading of these assets (purpose test).

General

There are several exemptions for Dutch RETT. The main one deals with specific real estate transactions involving newly-built properties and building land.

Download: Handbook for Real Estate Transactions