real estate newsletter - microsoft...and measurement of the plot in the land registry did not take...

Civil• New legislation on forced sales takes effect

• Stricter requirements for reserve fund for apartments

• Partial plots become a thing of the past

• New regulations for Netherlands Arbitration Institute

• New RAW standard provisions for construction

• Rent guarantee moves with property

• Litigation funding in real estate practice

• Dutch security of tenure and rental measures pass ECHR test

• Rentingresidentialaccommodationtemporarily:finallypossible?

Tax• Change in VAT valuation of real rights

• Period for additional assessment upon expiry of reorganisation exemption

• Refund of transfer tax due to satisfaction of condition subsequent

• Parts of former school building subject to 2% transfer tax

28 January 2015 - Edition 25

Real Estate Newsletter

2

CivilNew legislation on forced sales takes effect

The Forced Sales Act (Wet executieveilingen) came into force on 1 January 2015. This new legislation aims to

improve the transparency of forced sales and make them accessible to a wider public. The ultimate intention is to

increase the proceeds from real estate.

An important part of this new rule is that it now stipulates explicitly that an auction can be organised via the internet as well

as in the auction room.

Other changes include:

• the risk associated with any damage to an auctioned property cannot be transferred to the buyer until it actually

becomes his or her property;

• for residential properties, the costs of the forced sale will be borne largely by the vendor;

• for residential properties, the vendor is obliged in principle to invoke what is known as the letting clause. This ensures,

as far as possible, that the buyer is not confronted with unknown tenants retrospectively;

• owners and users of the property to be auctioned are obliged to cooperate with viewings;

• if the auction does not go ahead because the court permits a private sale, the court can issue a simultaneous ruling

demanding eviction of any and all occupants of the property;

• it is no longer compulsory to enlist the services of a lawyer for various acts of procedure. From now on, these can also

be carried out by a civil-law notary.

Further information:

Christian Bijl

e-mail: [email protected]; tel. +31 (0)20 578 5707

TOP

Stricter requirements for reserve fund for apartments

In the future, stricter requirements will apply for the reserve fund that owners’ associations must maintain in an

apartment complex. Minister Blok (Housing and Central Government Sector) has announced plans to amend the

law in this respect.

In an apartment complex, the owners’ association is responsible for maintaining communal areas, for example. Each

owners’ association is obliged by law to maintain a reserve fund for this purpose and all owners make a regular contribution

towards this. However, in practice many owners’ associations fail to abide by this, as a result of which maintenance cannot

actually take place when it is needed. In early December, Minister Blok announced his intention to introduce a draft bill to

address this problem. Whereas the Netherlands Civil Code currently only stipulates that a reserve fund must exist, in the

future the minimum amount that must be saved on a regular basis will need to be regulated in advance.

mailto:[email protected]

3

It remains unclear how much this minimum amount will be. It is likely that every owners’ association will be obliged to set

asideaspecificpercentageofwhatisknownastheWOZvalue(thevalueinaccordancewiththeImmovableProperty

Act) or alternatively, the reconstruction value of the property. The exact details will only become clear when the Minister

puts forward the legislation in 2015.


Fokke Jan Vonck


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Partial plots become a thing of the past

From 1 January 2015, the Dutch Land Registry (het Kadaster) will no longer process ‘partial plots’. In the future,

only complete plots will be processed and these will be given a definitive, provisional or administrative boundary.

This will ensure that boundaries can be more effectively specified than in the past.

Old situation

Until very recently, it was possible to transfer pieces of land without the exact boundaries being determined in the Land

Registry. When these kinds of ‘partial plots’ were sold, the notarial deed included details of the exact piece of land to which

thetransactionrelated.ThiswasthereforenotimmediatelyreflectedontheLandRegistrymapsincetheactualdivision

and measurement of the plot in the Land Registry did not take place until after the transfer. In this respect, the Dutch

system was very different from that in certain other countries, such as Germany and France, for example, where it is not

possibletotransferplotswithoutclearly-definedLandRegistryboundaries.Inthosecountries,theboundarieshavetobe

determined before the transfer can take place, which causes delays.

Situation as at 1 January 2015

As a result of an amendment to the Land Registry Decree (Kadasterbesluit), the Dutch system has been moving closer

towards the systems used in these other countries. However, efforts have also been made to prevent delays as far as

possible by also processing plots that have ‘provisional’ Land Registry boundaries only. The civil-law notary can, on behalf

of the owner, enter the boundaries digitally using what is known as the SPLITS application. This kind of ‘provisional plot’

can also be part of the division into apartment rights, something that was not possible for the ‘partial plots’ used before.

After the transfer, theboundarieswill stillbeverifiedbyaLandRegistryofficial,whowilldetermine thedefinitiveplot

boundaries.

If the SPLITS application is not applied, the Land Registry will formally determine what is referred to as an ‘administrative

boundary’. This will be based on the points of reference that the deed must provide, including a drawing indicating where

the boundaries are, which is now mandatory. As a result, the determination of ‘provisional’ Land Registry boundaries using

the SPLITS application is much more precise than what was done in the past. Using a provisional boundary in this way

alsoworksoutcheaper:thefeechargedforverificationisEUR785,whereasEUR1,200ispayableiftheLandRegistry

has to determine the boundaries itself.


4

In summary, as of 1 January 2015, people should be aware that it is no longer possible to transfer partial plots and that the

alternativeinvolvesdeterminingdefinitive,provisionaloradministrativeboundaries.


Suzanne Meertens


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New regulations for Netherlands Arbitration Institute

In contracts in real estate and construction, the Netherlands Arbitration Institute (Nederlands Arbitrage Instituut,

NAI) is often designated as the competent authority to resolve disputes. The advantages of this compared to a

conventional court include the confidentiality it offers and the fact that an arbitrator with specific expertise on

the subject of the dispute will be appointed. With effect from 1 January 2015, the NAI has a new set of arbitration

rules. These supersede those introduced in 2010. This has been triggered by the amendment to the Act on 2 June

2014 involving the modernisation of arbitration law; this new Arbitration Act (Arbitragewet) also entered into force

on 1 January 2015.

In addition to numerous editorial amendments and updates (such as the submission of requests, announcements and

documents by e-mail) the NAI rules also include the following substantive amendments of relevance:

1. A new article on challenge (wraking). This involves the appointment of a committee by the NAI board to decide on

requests for challenges.

2. Anewarticleonconfidentiality:thearbitrationitselfisnotonlyconfidential,allpersonsdirectlyorindirectlyinvolved

nowalsohaveadutyofconfidentiality,unlessandinsofarasthelaworanagreementbetweenthepartiespermits

publication.

3. An amended article on the appointment and dissolution of an arbitral tribunal, which stipulates among other things that

dissolutionispossibleifthearbitraltribunalisunacceptablyslowinfulfillingitsbriefdespitereminders.

4. The articles on witnesses and experts (party and arbitral tribunal) have been merged and extended. There is also a

new article stipulating the possibility of remission during a setting aside procedure.

5. Finally, the basic principle governing the measure for decision-making is now that the arbitral tribunal decides according

to the rules of law and only as amiable compositor if the parties have authorised it to do so by agreement.

The new NAI rules, with the exception of the measure for decision-making mentioned, will apply to disputes brought after

1 January 2015.


Eileen van der Wiel


Timo Huisman


TOP




5

New RAW standard provisions for construction

The new edition of the so-called RAW standard provisions is available from January 2015. These are widely applied

in construction contracts in the civil engineering sector. The updated standards consist of legal, administrative

and technical provisions that apply to new RAW specifications, unless these are departed from.

Most important changes

The National Information and Technology Centre for Transport and Infrastructure (CROW) points out that not only the

provisionshavebeenupdated,butalsotherelatedRAWcatalogues(whicharerequiredtowritespecifications).According

to CROW, the most important changes concern (i) alignment with the latest (European) standards, (ii) amendments

to reflect theUniformAdministrativeConditions forConstructionContracts2012 (UAV2012, rather than theprevious

UAV1989),(iii)theinclusionofphotographsandothervisualsinspecificationsand(iv)theimproveduseofframework

agreements by means of changes to current practice.

Modified standard announced for integrated contracts

Inmid-2015,theCROWalsoplanstoissueamodifiedstandard,fromwhichallprovisionsrelatingtotheUAV2012have

been removed.This version of the standard can be used forRAWspecifications in integrated contracts (design and

implementation) to which the UAV 2012 have been declared inapplicable, and the UAV-gc applies instead (where gc is

the Dutch acronym for integrated contracts). It has emerged that commissioning parties have a need to specify parts of

the work only very approximately, and to have the contractor carry out the actual design work. According to the CROW,

thiscanbeachieved through theuseof thebasicagreement for theUAV-gc2005,with theRAWspecificationbeing

designatedasthetenderspecification.

Finally

However, irrespective of the conditions, standard or model used, it remains imperative that every contract be tailored to

suitthespecificsituationintheproject.


Annicka van de Laar


Timo Huisman


TOP

Rent guarantee moves with property

In accordance with Section 7:226 of the Netherlands Civil Code, a tenancy or lease agreement is automatically

transferred along with the property when the landlord/lessor transfers it to a new owner. In other words, sale

does not mean an automatic end to the lease. On the issue of whether the rights of the lessor based on a bank

guarantee (rent guarantee according to the Real Estate Council of the Netherlands -ROZ- model) – drawn up by

the bank at the request of the lessee – are also transferred together with the property, the Court of Amsterdam

gave its view on 3 September 2014 (ECLI:NL:RBAMS:2014:6153): the bank guarantee is transferred, provided it

is worded appropriately.



6

Facts

Inthiscase,thelesseehadthebankdrawuparentguarantee(accordingtotheROZmodel)formorethanEUR50,000

in order to meet its obligations pursuant to the lease agreement. The lessor then transferred the ownership of the leased

property to the current owner, who then became the new lessor in accordance with Section 7:226 of the Netherlands

Civil Code. Some years later, the lessee faced bankruptcy as a result of which the lessor asked the bank to pay it the

bank guarantee amount. The bank honoured this request and paid out the full amount. The lessee’s bankruptcy trustee

disagreed with this.

Dispute

The disagreement between the parties relates to the interpretation of the section in bold in the following clause of the bank

guarantee: ‘the bank, […], by way of independent obligation, hereby declares that it will act irrevocably and unconditionally,

as guarantor towards the lessor or its legal successor(s) […]’.

According to the bankruptcy trustee, the term legal successor refers to the person or entity to which the rights under the

bank guarantee have been transferred. Simply transferring the leased property does not necessarily entail that the rights

have also been transferred. In the view of the bankruptcy trustee, a second act of transfer is required for that. As such, the

bank should not have been permitted to pay out under the bank guarantee.

Ruling

The court did not follow the reasoning of the bankruptcy trustee. The court ruled that, the most obvious interpretation of

this bank guarantee is that the term legal successor refers to the person who or entity that succeeds the original lessor in

the capacity of lessor. As a result, the current owner can demand payment by virtue of the guarantee.

Conclusion

The term (bank)guarantee isnotaclearly-defined legal concept.Thismeans that thepartiesareat liberty togivea

guaranteewhateverformtheychoose.Modelguarantees,suchasthoseprovidedbytheROZ,oftenserveasthestarting

point, but departures from such models are standard practice now. This ruling makes it clear that in interpreting a bank

guarantee the expression ‘lessor or its legal successor(s)’ provides a strong foundation for concluding that the bank

guarantee can also be invoked by successive lessors. However, the court stresses that this expression alone is not

sufficient toreachthisconclusion. Itwillalwaysbenecessarytoconsider thewholetextbeforedrawinganydefinitive

conclusions with regard to the transfer of a bank guarantee.


Marijn Bruins


TOP

Litigation funding in real estate practice

Litigation funding is a relatively new phenomenon in the Netherlands. However, this concept that has reached

this country from abroad will sooner or later make an appearance in real estate practice, if this has not already

happened. In short, litigation funders take on the costs of a legal procedure in exchange for a percentage of the

proceeds. Without arguing for or against litigation funding, our aim here is to provide a brief explanation of what

litigation funding means and what it may entail for disputes in your practice.


7

What is litigation funding?

Litigation funders do not provide a loan, but make a risk-based investment: they bear the costs of a legal case. They start

by estimating the likelihood of the case succeeding and whether the counterparty has the necessary assets. If a litigation

funder invests in case, it takes over the risks related to the costs from the party making the claim. The percentage of

the claim awarded and/or settlement result demanded by the litigation funder in return varies from case to case, partly

depending on the level of the claim. Because litigation funders are not themselves lawyers, they are not subject to the

prohibition on no cure/no pay.

Litigation funding in real estate practice

Litigation funding can provide a solution for private individuals or companies who cannot afford the costs of a legal

procedure (or have run out of money) or would prefer to spend their money elsewhere. Bankruptcy and liability claims are

particularly suitable for litigation funding and occur relatively regularly in real estate practice. A consequence of this will

be that the parties will have an interest in a dispute between real estate businesses or, for example, between a landlord/

lessorandatenant/lessee.Whetherornotthisisdesirableisnottheissuehere,butitwillcertainlyhaveaninfluenceon

the parties’ attitude towards litigation.

Litigation funders can also play a role when various parties join forces because they have similar claims. It will not only be

parties involved in major real estate projects, but also housing associations who can expect to see this kind of class action.

For example, this could happen on the grounds of the Heating Act (Warmtewet) introduced on 1 January 2014, which

includes a compensation scheme for disruptions to the heating supply lasting longer than four hours. Private individuals

– possibly acting as a group – may be more willing to initiate legal proceedings if they have the support of a litigation

funder. Project developers, investors, housing associations and other businesses within real estate practice will need to

be aware of this.

Finally

Although litigation funding is still very new to the Netherlands, it is likely to become more prevalent partly in view of its

success in other countries. It is therefore increasingly likely that you will face a counterparty whose legal costs are paid for

by a litigation funder. You may even consider using a litigation funder yourself sometime in the future. In both cases, it is

sensible to be aware of the role of a litigation funder in a legal process.


Matthijs van Bohemen


Timo Huisman


TOP

Dutch security of tenure and rental measures pass ECHR test

Dutch legislation includes measures governing security of tenure and the level of rentals. These measures place

limits on the owners of residential accommodation when renting it out. Is this actually permissible? Recently, this

has been the subject of regular legal proceedings, including in the European Court of Human Rights (ECHR) and

the Supreme Court of the Netherlands. The answer is affirmative.



http://hudoc.echr.coe.int/sites/eng/pages/search.aspx?i=001-122988#%7B%22itemid%22:%5B%22001-122988%22%5D%7D

http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:HR:2014:826

8

In this case, the claimant’s main issue is the rule that the maximum permissible starting rent is determined by means of

the so-called ‘points system’. The rule applies to residential accommodation, unless it is in the free-market sector, which

currently means anything with a monthly rental in excess of EUR 710.68 for new tenancy agreements. In addition, the

landlord – in the case of residential accommodation not in the free-market sector – can in principle only increase the rent

once annually by a percentage determined by the Minister. The claimant argues that these restrictions infringe ‘Every

naturalorlegalperson’sentitlementtothepeacefulenjoymentofhispossessions’pursuanttoArticle1ofthefirstprotocol

in the European Convention on Human Rights (Art. 1 EP), because of the inability to earn a reasonable return.

In summary, the ECHR judgment is as follows:

a. The statutory provisions on rent protection and security of tenure are in themselves a restriction on the peaceful

enjoyment of possessions.

b. However, the Dutch State is fully at liberty to place restrictions on the protection offered pursuant to Art 1 EP. Restrictions

arepermittediftheyhavealegalbasis,withajustifiedpublicinterest:inthiscasethesocialprotectionoftenants.

c. In addition, the level of the rent easily exceeds the costs of maintenance and taxation. As such, this does not constitute

an unreasonable return or an unreasonable burden for the landlord.

The court applies a similar test and reaches the same judgment as the ECHR. The court then argues that the mere fact of

not being able to achieve a reasonable return does not also entail that Art. 1 EP has been breached. The Supreme Court

judges that the ECHR has applied the appropriate test and therefore, in common with the ECHR and the court, reaches

the judgment that the regulation is not at odds with Art. 1 EP.

The fact that the judgment in this case was that security of tenure and rent protection measures pass the test of Art. 1 EP

does not mean that this may not be different in individual cases. For example, if the rental proceeds and operational costs

are so out of proportion that this results in a permanently negative return, this can mean that Art. 1 EP has in fact been

breached.


Margot Dadi-Tailleur


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Rentingresidentialaccommodationtemporarily:finallypossible?

In the newsletter of June 2014, we reported about the Housing Market Reform Agenda (Hervormingsagenda

Woningmarkt). One of the most interesting parts of this is the draft bill on a temporary tenancy agreement for

residential properties. This has recently been the subject of internet consultations in which people were able to

comment on the draft bill. It is high time for an evaluation.

Current framework

Caution is currently advised with regard to the temporary letting of residential accommodation. The law assumes a

permanent tenancy agreement with security of tenure for the tenant; temporary letting is possible only in exceptional

cases. In order to be able to let despite this, landlords are seeking refuge in complex constructions that need to correspond

with these exceptions. However, case law has revealed many of these constructions actually involve the regular letting of

residential property, with all the consequences that involves.

http://www.rijksoverheid.nl/onderwerpen/huurwoning/vrije-sector-huurwoning

http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:GHAMS:2012:BW3682


9

Temporary tenancy agreement

Sowhatdoestheproposedoptionforatemporarytenancyagreement involve?Therentalagreement includesdetails

of how long the tenancy will last. If it is less than two years in duration, the lease ends by operation of law on expiry.

Contrary to the situation for a conventional tenancy, the tenant is not entitled to protection against termination and eviction.

However, it is still important for the landlord to observe caution; if the landlord allows the tenant to stay for longer than two

years, an unlimited tenancy agreement is the result, providing security of tenure.

Although the tenancy agreement indicates the duration of the tenancy, the tenant has the power to terminate the agreement

in the interim. This is a remarkable power that is at odds with the basic principle that if a party enters into an engagement

fora specifiedperiod,heor shecannotescape from it in themeantime.The landlord isnotpermitted togivenotice

prematurely. Finally, temporary tenants also enjoy ‘conventional’ rent protection, in other words the tenant can have the

rent assessed by the rent assessment advisory committee.

Temporary letting: a welcome addition?

The temporary tenancy agreement presents an alternative to the risky constructions that the market occasionally uses at

the moment. As such, it is a welcome addition to existing legislation for owners of rental properties.

But it has also been subject to some criticism. It is feared that the (private) owners of rental properties in areas with a

high-pressure market will always opt for temporary tenancy agreements. Initially, this will result in an increased supply

of (temporary) rental properties and the intended throughput. However, a side-effect of it is that a large group of tenants

will not be able to invoke security of tenure. In addition, the temporary tenancy agreement may also encourage misute.

Tenants who are hoping to stay in the temporary rental property for more than two years may forego a rent assessment

by the rent assessment advisory committee in order to achieve it. This criticism touches on the key foundations of tenancy

law for residential properties: security of tenure and rent protection.

Of course, there are possible solutions for this. One option would be an assessment of the temporary tenancy agreement

by the district court, as is also possible for retail space. An alternative or supplementary solution could be to restrict in

public law the number of temporary rental properties within a municipality by applying a permit system.

Since the draft bill does not yet include solutions for these side-effects, we expect the legislator to be subjecting the bill to

further critical scrutiny. The story will therefore be continued (most probably)!


Leen van der Marel


TOP


10

Tax Change in VAT valuation of real rights

A number of elements of the Turnover Tax Act 1968 Implementing Decree have been amended with effect from

1 January 2015. The amendment that is relevant to the real estate practice concerns the VAT valuation upon the

establishment, transfer, waiver and termination of perpetual real rights (such as a right of leasehold and a right

of superficies).

Amendment

Previously, the value upon the establishment of a perpetual right of leasehold was set, for VAT purposes, at the consideration

(if any) paid for that right, increased by 17 times the ground lease. With effect from 1 January 2015, for the purpose of

levying VAT the value of such a right is set simply at the economic value of the property to which the right relates.

Transitional arrangement

The old valuation method can continue to be applied if all of the following conditions have been met:

• the purchase agreement has been or will be concluded before 15 July 2015;

• the parties jointly opt for application of the old valuation rules;

• this choice is documented (possibly in arrears) in the purchase agreement, as well as in the deed;

• the establishment, transfer, amendment, waiver or termination must be effected legally on 31 December 2016 at the

latest.

If all the conditions above have been met, the old valuation rules will also continue to apply for all subsequent establishments,

transfers, amendments, waivers or terminations of rights that take place before 1 January 2017. There will then be no

freedom of choice in those cases.

Significance in practice

As a consequence of the change, the establishment, transfer, waiver or termination of perpetual real rights relating to a

taxablebuildingsite/newimmovablepropertywillmorereadilybequalifiedasasupplysubjecttoVATbyoperationof

law and entail application of the exemption from transfer tax owing to the concurrence with VAT. Under the rules applying

previously, 17 times the ground lease often proved to amount to a value that was lower than the economic value of the

immovable property to which the real right related. In that case, the establishment, transfer, waiver or termination will

qualify, on the basis of a legal assumption, as a lease rather than as a supply. A lease can only be subject to VAT if the

lessee is entitled to a VAT deduction of at least 90%. Therefore, under the old rules it was possible for the supply of a

taxable building site / new immovable property not to be subject to VAT and the acquisition not to be exempt from transfer

tax.

11

For the purposes of acquiring a taxable building site with a view to constructing investment property, it may in fact be

advantageous if a (perpetual) real right relating to the land is not subject to VAT, as 6% transfer tax is less expensive than

21% non-deductible VAT.

For further information:

Jérôme Germann

email: [email protected]; tel. +31 (0)20 578 5971

Luca van Silfhout


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Period for additional assessment upon expiry of reorganisation exemption

The Supreme Court has ruled that in the event of the expiry of an exemption from transfer tax upon internal

reorganisation, the period in which an additional assessment can be imposed does not start in the calendar year

in which the exemption was obtained. It starts the calendar year in which the conditions ceased to be met. The

Dutch Tax and Customs Administration can still impose an additional assessment for the unpaid transfer tax in

that year and the five (or twelve, in the case of acquisition of beneficial ownership) following years.

Certain transfer tax exemptions will be discontinued with retroactive effect if the conditions for applying that exemption

cease to be met. In the present case, the exemption due to internal reorganisation expired for an acquisition that took

place on 31 December 2004, because within three years (as of 1 March 2007) after that acquisition on 31 December 2004,

the acquiring company was no longer part of the ‘group’. An additional transfer tax assessment was imposed in 2010.

The dispute concerned the starting date of the period in which an additional assessment can be imposed. If that period

were to be based on the original acquisition in 2004, the option of imposing an additional assessment would already

have expired on 31 December 2009. The Supreme Court ruled that the tax debt arose at the time when the conditions for

the exemption ceased to be met (1 March 2007), and therefore the additional assessment had been imposed within the

applicable statutory timeframe for doing so, as this would have continued to be possible until 31 December 2012 at the

latest.


Jérôme Germann


Luca van Silfhout


TOP





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Refund of transfer tax due to satisfaction of condition subsequent

Transfer tax is payable if an immovable property is acquired subject to a condition subsequent. If the condition subsequent

is fulfilledand theparties’originalpositionsare restored in factand in law,a right toa refundof the transfer taxpaid

previously will arise. The Gelderland court decided on 18 November 2014 that there was a right to a refund in that

particular case.

Uponthesaleandtransferofanimmovableproperty,thesellerretainedtherightofuseandtherighttothefuturefinancial

results of the sold property until 1 June 2015. A non-recurring consideration of € 14,278 is payable for this by the seller.

That amount is set off against the purchase price. The sale is effected subject to the condition subsequent that by 1 June

2015atthelatestanirrevocablebuildingpermitforspecificallydeterminedresidentialaccommodationisnot issued.It

became clear on 10 August that the required building permit will never be approved. The deed in which the aforesaid

condition subsequent is ‘invoked’ was executed on 25 September. The purchase price was refunded, after which a request

for a refund of transfer tax was submitted.

The Dutch Tax and Customs Administration refused to refund the transfer tax. The Gelderland court however decided that

insufficientfactsandcircumstanceshadbeenpresentedthatcouldhaveledtoadecisionthatnoconditionsubsequent

applied and that the parties’ original positions had not been restored in fact and in law.

These types of cases are often very factual by nature. The term ‘condition subsequent’ is a civil-law term and must

accordingly be assessed as such with a view to the right to a transfer tax refund. It is not always possible to state exactly

in which circumstances the parties’ original positions have been restored in fact and in law. The most common condition

subsequent is the one included in what is referred to as the Groninger deed (“Groninger akte”). As a rule, a right to a refund

oftransfertaxmaybeassumedtoexistiftheconditionsubsequentitincludesisfulfilled.


Jérôme Germann


Luca van Silfhout


TOP

Parts of former school building subject to 2% transfer tax

On 2 October 2014, the Zeeland-West-Brabant court ruled that parts of a building that had been used as a school

and were purchased for use as residential accommodation could be acquired subject to a transfer tax rate of 2%

instead of 6%.

The accommodation concerned had been built in 1996 for residential purposes and was subsequently refurbished to some

extent and made suitable for use as a school building. For instance, a corridor was built and a gym was added. After having

been used as school accommodation for over twelve years, the building was vacant and was put up for sale for residential

use. The party concerned then bought and acquired two parts of the building. On the day on which the party concerned

acquired those parts, he transferred them to two married couples who, after refurbishment, each lived in the part they had

bought. The dispute concerned whether the party concerned was required to pay 2% or 6% transfer tax on the acquisition.



www.loyensloeff.com

The Real Estate newsletter is published by Loyens & Loeff’s Real Estate practice group. This group pools its specialist knowledge in civil law areas as diverse as civil engineering law, administrative law, spatial planning law, competition and procurement law, corporate law and financing, as well as in direct and indirect taxes. This newsletter is sent exclusively to Loyens & Loeff clients. Although this publication has been compiled with great care, Loyens & Loeff N.V. and all other entities, partnerships, persons and practices trading under the name ‘Loyens & Loeff’, cannot accept any liability for the consequences of making use of this issue without their cooperation. The information provided is intended as general information and cannot be regarded as advice.

Disclaimer

According to the court, in view of all facts and circumstances and their mutual connections, this was an acquisition

of immovable properties that qualified as residential accommodation. The court considered it to be important in this

connection that the properties were intended for residential use by their nature and had no longer been used as a school

building for two years. According to the court, the fact that the school building still needed to be refurbished is comparable

to the situation of a house in shell condition (“casco-woning”). The fact that the corridors and the gym had not yet been

removed at the time of acquisition did not detract from this.

In our view, the levy of VAT and transfer tax requires special attention in advance for any conversion of immovable

property. Appropriate and timely decisions can minimise the overall VAT and/or transfer tax payable, without the need for

artificialinterventions.


Jérôme Germann


Luca van Silfhout


TOP



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