Erfpacht, usually translated as ground lease or long lease, is a real right that entitles the holder to hold and use land belonging to another, normally against payment of a periodic ground rent. The holder can sell, mortgage and bequeath the right, but the land itself remains the property of the grantor, often a municipality.
Statutory basis
The right is governed by title 5.7 of the Civil Code, beginning with article 5:85. The statutory rules are largely default rules: the grant deed and the general conditions attached to it determine the term, the ground rent, the permitted use and what happens on expiry. Article 5:99 provides for compensation to the holder on termination, and article 5:87 allows the grantor to terminate for serious default such as long-term non-payment.
How it works in practice
Municipal ground leases dominate in the older cities, Amsterdam above all, where perpetual ground lease has replaced the continuing system with periodic revision. The two variables that matter are the review mechanism for the ground rent and the position at the end of the term. A right that runs for decades with a rent fixed long ago can be revised upwards sharply at review, and lenders will only finance a right whose remaining term comfortably exceeds the mortgage term.
Where it goes wrong
Buyers look at the current ground rent and not at the review date. A rent that is due for revision in three years, on a formula linked to land value, can multiply. A second point is the general conditions: older sets contain use restrictions, consent requirements for alterations and even for sale, and provisions that make a building’s residual value payable to the grantor. Finally, a right that is close to expiry is difficult to sell and to finance, which affects the valuation long before the end date.
Related terms
Transfer of title, easement and apartment right.
Are you buying a leasehold property or facing a review of the ground rent? Our real estate lawyers read the deed and the conditions before you commit.
