Transfer of Real Estate Properties and the establishment of Mortgages

The sale-purchase agreement

A sale-purchase agreement must be in writing, but need not be drawn up by a notary. As it is binding on the parties it is wise to consult a notary at an early stage in order to obtain the necessary expert guidance and advice on legal details. Besides describing the property and recording the price, the contract of sale lists any other agreements between the parties. A sale-purchase agreement may include conditions subsequent, for example the condition that the sale will not go ahead if the buyer fails to obtain a loan. Often the contract also includes a penalty clause for the event that either party fails to comply with its obligations.

The sale-purchase agreement often stipulates that the buyer should pay a down payment to a notary, as an independent third party. This deposit is subsequently deducted from the purchase price. This down payment may not be higher than 10% of the purchase price. Because notaries are impartial, it is in the buyer’s interests to pay the deposit into the notary’s third parties account rather than to the seller.

The Transfer

The property is transferred by entering a certified copy of the instrument of transfer in the registers of the Registry. The instrument of transfer must be drawn up by a notary and signed by the latter and both parties. Before signing, a notary is required to investigate the title to the property and the seller’s power to dispose of it in the public registers (the so calles title search).

The purchase price is not transferred to the seller until the notary has confirmed that the property is not encumbered with any mortgages or attachments.

Creating Mortgages

If a buyer borrows money in order to purchase a property, the lender will often demand security in the form of a mortgage. Then the property becomes collateral for the borrower’s repayment obligations. The mortgage instrument necessary for this purpose must also be drawn up by a notary, who must then arrange for a copy of that instrument to be entered in the Registry. Where property is sold, the notary will also arrange for repayment of any existing mortgage loan from the proceeds of sale and for cancellation of the entry in the mortgage register.

Transfer tax and costs

When a real estate property is transferred the notary must collect a transfer tax of 4% of the value of the property, which is in normal cases the purchase price.

When establishing a mortgage on real estate properties the notary must collect a two per mil tax ("schuldbriefzegel") on the capital amount of the mortgage. The Registry also charges for its services and registration. These charges are in average Naf. 910.00 for a real estate transfer, and at least NAf. 725.00 but not more than NAf.3,000.00 for mortgages.

In order to compute the taxes, fees and other charges see the Chapter "Tarieven" and click on "Bereken tarief koopakte'  for transfer deeds and "Bereken tarief hypotheekakte" for mortgages.

Please note, that when you buy a real estate property, whether it is a house or a piece of land, the buyer has to reimburse to the seller the amount of ground tax and/or long lease, as the case may be, with regard to the remainder of the current year.

When establishing a mortgage, the financial institutions will also require the debtor to enter into a life insurance agreement and a fire insurance, of which the first year will be collected through the notary. The financial institution may also charge some costs.