Banks Now Cover Costs for Mortgage Deeds When Switching to Perpetual Leasehold

Discover how recent rulings have reshaped the perpetual leasehold landscape, with banks now bearing the cost of new mortgage deeds.

Banks Responsible for Mortgage Deed Costs in Perpetual Leasehold Transitions

When homeowners transition to a perpetual leasehold, banks are now required to cover the costs associated with modifying the mortgage deed. This follows a recent binding decision by the complaint institute Kifid, which sided with a homeowner in a dispute over who should bear these costs.

What is leasehold?

Leasehold is a form of land tenure where the land, including any buildings on it, remains the property of the leaseholder, such as a municipality, housing association, or the State Forestry Service. The lessee pays an annual fee, known as a ground rent, for the use of the land.

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Transitioning to perpetual leasehold: what changes?

In Amsterdam, homeowners have been given the opportunity to convert their continuing leasehold into a perpetual format. Banks initially viewed this change as risky, fearing that their existing mortgage rights could be compromised. However, according to a recent judgment from Kifid, the modification of the leasehold right to perpetual is not substantial enough to be considered a new right.

Minimal risk, maximum impact

This ruling significantly eases the financial burden on homeowners, as creating a new mortgage deed for such changes can often incur substantial costs. With the recognition that the risk to the bank is minimal, no new mortgage deed is required unless specifically requested by the bank. In that case, the bank must bear the costs.

This development is a crucial step in lowering financial barriers for homeowners wishing to switch to a perpetual leasehold, making it more attractive to consider this option.

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