Local politicians in Amsterdam are concerned that people with low Dutch language skills – such as first-generation migrants – may have been under-informed about a new ground rent system by the city of Amsterdam.

If you buy a leasehold property, on land owned by the city, the council has a right to levy rent or erfpacht on this land. In 2017, the way this ground was valued was changed and leaseholders were given a choice to do nothing, pay off their lease or switch to a more expensive, permanent eeuwigdurende annual ground rent.

Now, however, the local CDA party believes that the council did not explain in a crystal clear way what would happen if home owners who are liable for ground rent did nothing.

At the end of their 50-year lease period, the council now reassesses the ground rent using a system that puts up annual payments by far more than the rise in house prices – the discredited “residual method”, previously used by developers in England.

“It is a complex financial product,” said CDA councillor Laurens Lochtenberg. “Most people don’t understand. This especially affects those with a lower level of education and internationals who don’t have mastery of the language. The ruling is like saying that next to your mortgage, the ground loan is €80,000…but if you don’t do anything, it will go up to €400,000.”

Unaffordable

Dutch papers have reported a case in Amsterdam where an 87-year-old leaseholder’s ground rent will go from €315 a year to €35,000 because he did not make the switch in time.

In Rotterdam, the head of housing Chantal Zeegers has announced that she will lower ground rents and lease purchasing costs for around 25,000 leasehold houses because the new rates are unaffordable. In October, Rotterdam announced a policy to restrict ground values.

But in Amsterdam, where there are around 160,000 leaseholders on council land, the CDA is campaigning to allow them all to switch to permanent annual ground rent – because this option has been closed. It wants the offer to be resent, signed post, in “simple and clear” English as well as in Dutch.

Lochtenberg said if he wants to invest in stocks via his bank, he has to take a course to prove that he understands the risks – but he believes that with leasehold products, Amsterdam council may have breached fair trading and compliance obligations. He has also raised questions about whether the council made mistakes in calculating ground values.

Consumer protection body the ACM has said that Amsterdam council was probably “not clear enough” in explaining that it would multiply ground values to make a much greater sum if leaseholders did not pay off their lease or move voluntarily to the new permanent rent.

Report

A report in 2022 found that the city did not use open data in calculating street values, so residents could not check their home’s calculations, made “arbitrary choices” in its sums and charged much higher levies than banks use to reduce “the risk that consumers can no longer pay their mortgages”. The multiplier effect was not “clearly and explicitly” communicated, it said.

In addition, says Lochtenberg, in the group that did not switch, “[almost] 40% of people said they did not get the letter, 40% did not understand it and 6% didn’t have the money to pay for a lawyer.”

Every year, he claims, some of them are now faced with extreme rises in ground rents, because property prices in Amsterdam have doubled in the past decade. “I get letters with people saying that they cannot sleep at night,” he said.

The CDA has calculated that in the next seven years, around 10,000 leaseholders will be forced to switch to the “residual method” valuation – especially in Nieuw-West, Zuidoost and Noord.

“All Dutch”

In city research from 2023, one international is quoted as being totally confused. “All information is in Dutch without translation,” she said. “The first letter dates back to 2020. Even though I immediately applied, it took three years before we received another letter.

“I again immediately applied on the website, and now it is on hold until an undefined date. We have never received any estimate of what we will have to pay.”

Opposition party the VVD also disagrees with the system, because many homes that are built on their “own land” do not pay anything, and ground rents vary from hundreds of euros to thousands, depending on when leasehold property was built.

“The left of the city council wants to keep the system because it brings in a lot of money, but it’s an unfair, unbalanced system,” said Daan Wijnants, head of the local VVD.

The CDA, VVD and JA21 have proposed new bylaws to protect consumer rights in leasehold agreements, which will be discussed at a council meeting on Wednesday 18. Amsterdam council has been asked for a response.