What should I look for when buying an apartment?
Almost one in three sold properties are apartments. In the big cities, this number is higher. For example, in Amsterdam four out of five homes that are sold are apartments. But what should you look out for when buying an apartment?
- Analyse the division deed carefully
- Division regulations: your rights and obligations
- Homeowner’s Association: be aware of ‘sleeping’ Homeowner’s Associations!
1. Analyse the division deed carefully
As a buyer of an apartment you are given a share of the ownership of the property, plus exclusive use of part of the building. Who owns what part and what parts are jointly owned, is described in the division deed. The division deed and division drawing are both registered in the public registry of the Cadaster. The division drawing indicates the boundaries between the different apartments. These documents are public and can clarify who the actual owner is of, for example, a storage room.
In order to avoid misunderstandings, please carefully analyse these documents in advance. In principle, every property owner is allowed to divide his/her property. If there is no division deed, this must first be created by a notary before certain parts of the property can be sold. We therefore recommend you to always ask for the division documents, especially with newly constructed properties.
Tip when buying a newly constructed apartment:
In some cases, a division license from the municipality is required.For example, here you will find the regulations for the Municipality of Amsterdam. In some cases, the municipality may refuse the license to division or the process may take longer. Lenders often want to see this license before they can approve the mortgage application. We recommend you to always ask the sales broker about the current state of affairs.
2. Division regulations: your rights and obligations
Every division deed has division regulations. These often refer to model regulations. The division regulations describe the rights and obligations of the owners of the property. For example, about the use, management and maintenance of various spaces. In some cases, additional provisions are included in the regulations. For example, many division regulations include a provision that regular rental (also short-stay through Airbnb) of the property is only permitted after approval of the Homeowner’s Association or that it is not permitted to lay a parquet or stone floor. We recommend you read through the regulations in advance, so that you will not be faced with unexpected rules and obligations.
3. The Homeowner’s Association: beware of ‘sleeping’ Homeowner’s Associations!
The Homeowner’s Association is legally established as soon as a notarial division deed is signed. All ‘apartment owners’ will then join the Association. These owners will be joint owners of the entire property. The Homeowner’s Association not only exists on paper. The Association itself (name, address, establishment date) and its board must be registered in the Trade Register.
To avoid any unwanted surprises, it is important to regularly meet with the owners to discuss several common concerns. We talk of an ‘active association’ if:
- members gather at least once a year
- the association has a chairman and director
- a collective home insurance has been taken out
- the Homeowner’s Association is registered at the Chamber of Commerce. This is a legal requirement. Only if the property was divided before 1972 is registration at the Chamber of Commerce not required.
- a bank account has been set up in the name of the Association
- members pay a monthly fee (service fee)
- a long-term maintenance plan (MJOP = meerjarenonderhoudsplan) has been arranged. Please note: if there is no maintenance plan, an architectural report must be submitted that demonstrates the condition of the property, or it should be made clear that this report is unnecessary.
Take a look at the accumulated reserve fund and what it should be used for. Associations are required to have a reserve fund. From this fund, the Association pays non-annual expenses, such as major repairs. A large reserve provides a lower risk of shortages. The reserve fund must be healthy enough in relation to the long-term maintenance plan.
In the event of a considerable lack of maintenance, the municipality can invite all Association members for a meeting. It can also force an Association to set up and execute a maintenance plan.
Tip: The Tax Authorities (Belastingdienst) considers the Association’s reserve fund as savings or investments. When declaring your income tax, you must list your share of the reserve fund under Box 3.
What if the Homeowner’s Association is not active?
The Association must be created by law, legally registered, and have a reserve fund. If the property is not actively maintained, we speak of a ‘sleeping’ Homeowner’s Associations.
If the property is not actively maintained, this may have negative consequences for the state and value of the property. Furthermore, as an owner you may be requested to suddenly pay a huge sum for mandatory maintenance. This may pose a risk to the monthly mortgage expenses. The lack of an active Homeowner’s Association may be a reason for a lender to deny your mortgage application.
For this reason, a sleeping Homeowner’s Association can be an obstacle when applying for your mortgage. You can request all Homeowner’s Association’s documents in advance. Furthermore, the current state of the Homeowner’s Association will also be included in the appraisal report.
Discuss your possibilities
Do you want to discuss your possibilities for a mortgage for an apartment with an advisor? Feel free to schedule a non-binding consult. In half an hour you will be up to date about your options on the Dutch housing market.
Download white paper ‘Buying a home in The Netherlands’
Do you want to go on a home hunt well prepared? You will find all the information in this white paper.