We have put together some helpful information on buying off the ground lease on your home. Already bought off your ground lease?
Count your blessings. Still haven’t gotten around to it? Then take a minute to read through this crucial information.
Experts recommend buying off
Recently, we have been recommending that clients apply for a perpetual ground lease at the very least, and the MVA and Erfpachtbelang are saying the same thing. With a perpetual ground lease, you have two options:
Buying off in one go;
or locking in, pay an annual ground rent and buying off later. But just locking in your perpetual ground lease isn’t the most efficient option.
Buy-off price including inflation
If you have just locked in the ground lease and later decide to buy it off completely, the City will calculate the buy-off price including inflation.
Remember that the City calculates inflation plus a 2.5% surcharge, calculated retroactively from 1 October 2017, which is already 18.5% extra if you want to redeem this year. If you don’t buy off, you will pay 18.5% more the moment you sign the contract at the civil-law notary. In 10 years, the buy-off price will double, and with rising inflation, it will increase even more.
Still need to see the civil-law notary to lock in or buy off your ground lease? You have two options:
Option A) Buy the whole ground lease in perpetuity.*
Option B) Buy off the ground lease from the end of the period and continue to pay the current ground rent until then.
* You may want to consider borrowing from the bank, family or from your limited company to pay the lump sum. Borrowing is now cheaper than the City’s current indexed interest rate.
Already have the financial means? When it sits in the bank, you pay interest on your assets, and you may have to pay capital gains tax of 1.4%. By buying off the ground lease in a lump sum, you will avoid paying interest and capital gains tax on that amount.
Have you already been to the notary?
Option A) Already bought off the ground lease in full or from the end of the period? Then there is nothing left to do, consider yourself lucky.
Option B) You just locked in. Apply to buy off now (and keep in mind the extra 18.5%).
Recently bought a property?
Still need to have the transfer notarised, or owned the property for less than 6 months? Email us your ground lease details, and we can help you map out next steps.
There are so many things to consider and choices to make. Need help navigating things? Feel free to email us.