Property rental risks and opportunities

Renting out property can be a good investment.  As a landlord, you do need to be familiar with the pros and cons of renting as tenants are well protected in the Netherlands. As a landlord, you also need to take into account your mortgage lender (the bank), insurance and co-owners in a homeowners association.

There are a few misconceptions about the legal position among landlords. You see, what is defined in the tenancy agreement does not always really represent the rights and obligations of the landlord and tenant. Below, we will explain a few points of interest about which uncertainties exist (based on our experience).  Please read the following carefully. Any questions about your specific situation?  Please contact the specialist.

Always ask yourself what your reason is for renting out. Are you thinking of long-term investment? Renting out until you can live there (again), or selling the property – vacant or rented out? This helps you easily determine which of the points below might apply to your situation.

The Property Valuation System / Scoring system

The Netherlands uses a property valuation system for rental properties – also referred to as the scoring system – to help establish the quality of the rental property.  This is used to help establish the maximum rent for – in short – the cheaper and smaller, less luxurious properties. Points are primarily awarded based on surface area, quality and energy index of the property in question. As of 1 October 2015, the new property valuation system took into effect, for which e.g. the energy label and the Valuation of Immovable Property (Dutch WOZ) play an important role.  An example of the scoring system can be found here.

Deregulation rent  

If the initial rent (of tenancy agreements after 1 July 1994) lies above the rent deregulation threshold (this is equal to the maximum rent of the Law on Housing Allowance (Dutch :Wet op de Huurtoeslag), rent protection for tenants is largely inapplicable.  For 2019, the threshold was set at € 720,42. This rent can be agreed upon if the property  has a score of 145 or higher.  If that’s the case, parties are free to agree on the price of (basic) rent.  However, there does need to be a separation between the rent and (the advance on) monthly service fees.  The service fees need to be paid annually on the basis of the actual costs made by the landlord. Curtains, hangings/furniture are also perceived as service fees.  The rent can be increased once per 12 months.

Under the rent deregulation threshold?  In that case, the tenant can hold the landlord to the maximum rent that the property valuation system indicates.  See this table.  A tenant of a property with deregulated rent is entitled to rent protection upon the termination of the rent.  Even for semi-furnished or furnished properties.

Energy label and energy index

When renting out property, it is mandatory to provide the tenant with an energy label. As of January 2015, the government will also be enforcing this rule, under penalties of up to 405 Euros. In principle, a simplified energy label suffices, available online via energielabelvoorwoningen.nl. However, one of the most important points for the scoring system is the energy index. A simplified label does not include the energy index. A physical inspection of the property by a certified party is necessary in this case. Please make sure you have the correct label.

Additional points are awarded for monuments: if you are renting out property that has been designated as a national monument, additional points may be awarded. This will probably deregulate the property faster.

Housing permit

In large cities, such as Amsterdam, a housing regulation applies. Cheaper and smaller, non-deregulated properties can only be rented out if the tenant is in the possession of a housing permit.  Anyone who does not obey this law is liable to punishment and runs the risk of the municipality of Amsterdam imposing an order for periodic penalty payment(s) or (in the future) an administrative fine of a maximum of € 18.500, for the tenant €340. A risk you don’t want to take! Want to know more about how this is set up for the Amsterdam housing market? Please click here.

Review by the Huurcommissie (Rent assessment committee)

In principle, you are free to agree on any rent with the candidate tenant.  However, the tenant always has the right to have the rent assessment committee review the agreed upon rent within six months after the start of the tenancy agreement.  If the rent assessment committee concludes that (based on several property valuation points) the rent is too high, the rent needs to be reduced until the maximum rent.  The landlord will need to refund the overpaid rent.  One may appeal against the decision of the rent assessment committee with the district court, although the court is also bound to the property valuation system.  If the initial rent was too high, damage can amount to thousands of Euros, regardless of whether a housing permit was required.

At the moment, tenants have the option under the law to have their rent reviewed by the rent assessment committee within six months after the tenancy agreement has been concluded.  In case of a temporary tenancy agreement, the six-month term is extended to the entire duration of the temporary agreement plus an additional six months (in case parties decide to extend the tenancy agreement).

Huurcommissie (rent assessment committee)

The Huurcommissie is an independent court that takes decisions in disputes between landlords and tenant about e.g. increase in rent, rent reduction or annual payment of service fees with respect to non-deregulated rent.  The rent assessment committee also makes decisions about any defects and rent reduction (as long as the defects have not been fixed).  Tenants and landlords contact them for any questions relating to renting (out) property.

Source:  Huurcommissie.nl

Scoring system

We strongly insist that people have a scoring performed prior to renting out their property.  This gives you a better chance to calculate your risks, and helps you determine whether you want to improve the property so that you can offer the property in the free sector housing, or ask non-deregulated rent. Of course, we can help you with this.

Insurances

An important and often underestimated point is the insurance of the rented property.  The owner needs to make sure the property is insured against fire or external damage (home insurance).  Are you a member of the homeowners association? In that case, your association takes care of this insurance. This type of insurance often includes a so-called ‘rental provision’.  This means that home insurance also applies if the property is rented out.  Make sure you verify this and contact the relevant insurance company when in doubt.  No homeowners association?  Please read your policy extra carefully and conclude a new or other insurance, if necessary.

In case of furnished rent, you also have to deal with your inventory insurance. This is often confused with fire and theft insurance.  A lot of insurance companies do not provide fire and theft insurance for rentals, because it has been taken out in your name.  However, it is often possible to easily change your insurance to an inventory insurance, which does cover rentals.  In this case, too, we recommend that you work this out with your insurance provider, to prevent any inconvenient situations.  A tenant needs to insure his/her own things.

Temporary rent

As of July 2016, thanks to a change in legislation, it will be possible to temporarily rent out property without the tenant being able to appeal to rent law.  For independent properties, it is possible to conclude the tenancy agreement for a maximum period of 2 years.  After this period (the period can be shorter), the tenancy agreement will expire without requiring any notice.  The landlord does need to warn the tenant in time before the end of the tenancy agreement, or the agreement will not expire after all.

In most cases, for instance in a period of more than 2 years, a tenancy agreement cannot be simply terminated by the landlord.  Even if a term of – for example – three years has been specified in the tenancy agreement.  Do you as the owner want to conclude a temporary tenancy agreement with the guarantee that the tenant will (have to) vacate after the agreed-upon period (longer than 2 years)? Then this obligation to vacate needs to be included in the tenancy agreement and the original occupant needs to return to the rented property after the agreed-upon tenancy.  This means that you can only rent out temporarily if you, for instance, are going abroad temporarily and want to return to your home after that period.  Or, if you bought a house you can't move in to (yet), but will be able to after termination of the tenancy.  Providing tenants with the possibility to extend the tenancy considerably diminish your intentions of returning to your home and make the possibilities to achieve the termination of rent considerably weaker.  If you decide not to return to the property after all, the tenant is no longer obliged to vacate.

Subletting

If a tenant wishes to temporarily sublet to someone else, he/she required permission from the landlord.  JLG does not offer any services in case of subletting.

Short-term rental under the Dutch Vacancy Act

Short-term rental is also possible with a permit from the mayor and city council members, under the Dutch Vacancy Act.  You can apply for this permit if e.g. you are unsuccessful in selling your house.  The minimum rental period of the property is at least six months.  The permit is granted for 5 years.  A tenant cannot appeal to rent protection in case of short-term rental under the Dutch Vacancy Act. The rental agreement needs to meet the necessary formalities that need to be strictly maintained.  The terms need to be taken into account as well.  We can help you with that.

Do you want to know more about the Dutch Vacancy Act and how we can help you with this?  Click here.

Please remember the following:


  1. A lot of private properties are mortgaged.  Most mortgage agreements contain a clause (rental provision) that forbids you from renting out your property without (written) permission from the mortgage bank.  We do not verify this permission with your bank.  It is your own responsibility to arrange this permission (in writing) with your bank prior to renting out.

  2. You need to inform your insurance company.  Notify your fire and theft insurance company, building insurance and any others about the fact that you are (temporarily) renting out your home.

  3. Verify whether you need prior permission from the homeowners association or cooperative society.

  4. Verify the tax-related consequences of renting our your property with your tax consultant.


 

Frequently heard inaccuracies of renting

  1. Expats cannot appeal to rental rights to which Dutch citizens can appeal. This is false.  The law applies to everyone, including expats. Foreigners can appeal to the exact same rights as any Dutch tenant.

  2. If I rent out a furnished property, I can demand significantly higher rent so that I can rent out property with of score of under 146 points at a commercial price. This is false.  You have to keep to the scoring rent.  New furniture can be deducted over a maximum 60 months.  This means that if you also include your new furniture in your rent with a purchase value of e.g. €10.000,-, you would only be able charge a maximum of €167,- per month.  For older furniture, this price is a lot lower, as the replacement value counts in those cases.  Please also be aware that if you’re renting out in the free housing sector, you need to divide the rent into the (basic) rent and the compensation for furnishings (and other matters and services) and that you do not set the rent for furnishings too high.  As far as service fees and fees for furnished rent are concerned, price protection exists and tenants can reclaim overpaid rent.

  3. I can temporarily rent out if I offer furnished property. This is false.  Renting out furnished properties does not have anything to do with being allowed to temporarily rent out or not.

  4. I can use service fees to considerably increase basic rent. This is false. Service fees for e.g. cleaning the stairs, or for gas, water and electricity expenses need to be estimated realistically at all times and are calculated annually on the basis of the actual costs.  As a landlord, you are required to provide the tenant insight into these costs.  It is not permitted to make any profit on these expenses.


Prohibition of all-in rent

NB:  NEVER offer ‘all-inclusive’ rent.  Even if the property scored over 146 points, tenants can still request the rent assessment committee to make a division in the (basic) rent and service fees.  In that case, the rent assessment committee needs to establish the (basic) rent on 55% of the maximum rent for the property, even if the property scored over 146 points and can be rented out above the price of € 710,68.  This rent reduction cannot be recovered.

Sale of the rented property

The rule is: rental agreements cannot be terminated by sale.  The new owner is bound to the existing tenancy agreement. Pay extra close attention when you need to vacate the rented property because you sold it in the meantime.  Even if a tenant has agreed to cooperate on vacating the house in case of a sale, he/she can still make it very hard for you.  He is usually not obligated to move out.  Therefore, you should always, before signing the deed of conveyance, have the tenant (and his/her partner) sign a notice in which he/she agrees to leave the property before a certain date.  Even more important:  verify before you rent out whether the tenant can be forced to vacate.

Finally:

Above-stated information is only a selection of the most important points of interest with respect to renting out your property.  Please take the time to read this information carefully before you decide to rent out. Consult an expert real estate agent who can assist you with any questions you may have and knows how the rental market works.  Unfortunately, in the rental industry of all places, there are agencies that are often insufficiently up to date (or totally out of the loop) of rent law.  This can result in major problems for you if they give you the wrong advice.  We would love to provide you with expert advice to prevent disappointments.

For more information and a very extensive file about rental properties, we would like to refer your to the website and rental file of Rijksoverheid (Dutch government).

For specific information about renting in Amsterdam, please click here.

If you are curious about the questions other people have, just click for the 10 most frequently asked questions.