About Davina
The aim of this text is to give you abrief overview of the tasks and the role of a Dutch civil law notary in relation to real estate transactions in The Netherlands.
What is a Dutch civil law notary?
Dutch notaries occupy a special place in the world of legal professionals in The Netherlands, alongside lawyers, bailiffs and tax advisors. Like a lawyer, a notary is a legal professional with clients who pay for his advice and services, but like a judge, a notary is appointed by the Crown for life (in other words until the age of retirement at 70).
A notary does not act for just one party. Instead he is required to weigh up and balance the interests of all the parties to a legal transaction. A notary is, as it were, above the parties. For example, when real property is transferred a notary acts for both the vendor and the buyer. He has a duty of secrecy in relation to his clients.
All notaries in the Netherlands are law graduates. In general they are not anly experts in family law, succession law, corporate law and property law, but they must also have knowledge of certain aspects of tax legislation and case law in so far as they relate to these fields. Apart from providing legal advice, a notary also records agreements, either because the law requires it or at the parties’ request. The formal document drawn up by a notary, which is known as a notarial deed. A notary is required to retain the original deed and to issue the parties with certified copies.
Dutch legislation dictates that the transfer of real estate and the establishment of a mortgage can only be done by means of a notarial deed followed by the registeration thereof at the office of the Dutch Land Registry (Kadaster). When transferring immovable property from the vendor to the buyer, a civil law notary must ensure that the buyer is able to become the owner of the property in question on the basis of the transfer to be arranged by the civil-law notary.
A valid transfer of ownership must meet three requirements:
- The vendor must have the authority to dispose of property;
- There must be a valid legal basis for the transfer of property and
- The notarial deed of transfer of title must be registered in the public registers of the Dutch Land Registry. The notarial duty of care comprises steps to ensure that all three requirements are the case.
The duty of care that a civil law notary has is not limited to the transfer of title to immovable property, but also extends to the corresponding financial settlement. This is done in such a way that the purchaser pays/transfers the purchase price into the trust account of the civil law notary before the execution of the deed, which amount is paid by the civil-law notary to the vendor as soon as the notary got the information from the Land Registry the purchaser is registered as the rightful owner.
Further explanation and considerations regarding the transfer of a residence or plot of land.
The purchase agreement creates mutual obligations between vendor and buyer. The vendor is obliged to transfer the house unencumbered, that is without mortgage or attachments, on the agreed date. This is also the moment the keys are handed to the buyer. On the date agreed on the buyer is obliged to accept the property and to deposit the purchase price into the notary’s trust account.
Signing the purchase agreement at the estate agent’s is essentially binding. A resolutive clause ensures the provisional nature of the agreement. As a rule, the buyer can terminate the agreement if he cannot obtain financing. After the date of the resolutive condition has expired, the buyer can no longer cancel the agreement without having to pay a penalty.
An important obligation of the buyer is the payment of a security deposit or the furnishing of a bank guarantee. If the buyer fails to meet this obligation he will owe 10% of the purchase price in compensation, as per the purchase agreement. As security for this payment, he has to pay a security deposit into the trust account of the notary from his own bank account or must furnish a bank guarantee. If the buyer does owe compensation to the vendor, the amount due can be paid from the security deposit or the bank guarantee. The final date by which the notary has to have received the security deposit or bank guarantee is mentioned in the purchase agreement.
Dutch law offers the option to have the purchase agreement registered with the Land Registry. This protects the buyer for a maximum of six months from the date of entry at the registry against attachment being ordered on the house or bankruptcy of the vendor, among other things. In general it is recommended to have the purchase agreement registered with the Land Registry as an additional safeguard.
The vendor has to transfer the property to the buyer unencumbered. The notary shall check with the Land Registry which mortgages, and possibly attachments, are established on the property. The notary asks the bank in question for a redemption note and shall take care of cancellation the mortgage after repayment.
In case an apartment right is attached to the purchased property, the notary will contact the Homeowners’ Association. Possible financial obligations arising from the membership of the Homeowners’ Association will be settled between vendor and buyer and/or charged. These amounts will be specified on the completion statement.
The purchase agreement usually states that all closing costs, including transfer tax and Land Registry charges, will be paid by the buyer. The costs not included in the closing costs are the charges the notary has to pay to third parties, such as the estate agent and the charges for the cancellation and redemption of the mortgage registration in the Land Registry register.
It is customary for the vendor and the buyer to conduct a final inspection of the property prior to the signing of the notarial deed of transfer. The signing of the deed takes place on the date mentioned in the purchase agreement.
Vendor and buyer may be represented by another person by power of attorney. Upon the signing of the deed, the risks attached to the property are transferred to the buyer. The buyer must, therefore, have taken out building insurance in order that the property is insured. As a rule, the insurance of an apartment is taken care of by the Homeowners’ Association. In such cases it is expedient to check the policy.
Payment of the vendor, the bank, the estate agent and possibly the buyer will be made after the deed of transfer has been registered with the Land Registry. This usually takes one or two working days.
If the buyer needs a mortgage to finance his new property, the bank will send the information needed for the deed of mortgage to the notary. The draft of the mortgage deed will then be sent to the buyer.
The notary is legally required to verify the identities of the parties against valid IDs.
If applicable, the notary must report his findings by virtue of the current stipulations of the Money Laundering and Terrorist Financing (Prevention) Act (Wwft), without being allowed to inform his client. Among other things, the Wwft comprises identification requirements, verification of the origin of the funds transferred and the duty to report any unusual transactions or intended unusual transactions.