Legal advice for building a house on your own land

Questioner

My parents want to build a house on our land, in the barn. We are also enthusiastic. We only wonder how we can best arrange and coordinate this financially. I also have a brother and sister who expect a fair inheritance later. We would like to remain the owner of our house and the land. If my parents move out/pass away, we want to use it ourselves or be able to decide what happens to it. My parents want to pay for the construction costs. We would also prefer this in order not to incur additional debts now. We believe that our house will certainly increase in value, but not as much as you would normally have a separate house built. Of course we want to pay a fair price for it later, but we also don't want to be worse off. What is a good arrangement and are there other things we should pay attention to?

Lawyer

I will leave the necessary permits aside for the moment and will only discuss a possible construction. There are various options. It is conceivable that a right of superficies is established for the benefit of your parents, which should then be terminable at the time that they leave the home to be built. Because there is a home, you as the landowner must then compensate the value of the superficies at the end of the term, that value then goes to your parents or their joint heirs (of which you yourself also belong). A similar construction is possible with a real right of use and occupation, with the difference that this can end without there being any compensation upon termination. Finally, you can consider selling the shed with subsoil and stipulating a preferential right to purchase for yourself in combination with an obligation to offer at the time that the home is no longer actually occupied. In that case, the purchase price to be paid by you will again benefit your parents or their joint heirs. In this case (unlike when terminating a building right as described above) there is no obligation to proceed with the purchase and pay the purchase price; you can then also decide that your parents or their heirs may sell to a third party. If there is currently a mortgage on your home, permission from the bank is required in all cases.

Questioner

Dear André Steijns, Thank you very much for your extensive answer. Both options would be workable for us. We will think about which option offers the best possibilities. In doing so, we will also take into account the fiscal consequences. We have also read somewhere that you do not have to pay inheritance tax or succession tax on a legacy. That may make option 2 an interesting option. In addition, we also need to think about a fair and transparent determination of the value of the new home to be built. In another topic/question, the suggestion was given to value the whole with and without the new home to be built. The difference is then the value of the home. An interesting option as far as we are concerned. Enough food for thought. In any case, many thanks for your thoughts.

Lawyer

Of course you also need to take taxation into account. It is not correct that no inheritance tax is due on a legacy, a legacy can be 'free of rights' if this is included in the testator's will, but in that case the inheritance tax is paid from the estate and the heirs pay it together. There are in fact 2 tax moments in this case: the first at the moment of establishing the rights for the intended construction. Here you will have to deal with transfer tax, where you must keep in mind that the barn will fall under the 6% rate, but if there is already a house at the moment of establishment, then the 2% rate is applicable. In addition, there is a tax moment at the moment of termination of the construction or the moment of death of the surviving parent. All in all, there is a fairly complex situation, it is absolutely necessary to hire an expert to work out the pros and cons of the various options and then, after the choice has been made, to include everything correctly in an agreement. How the value of the home is determined is part of that agreement, there are also various options for that.

Questioner

Dear André Steijns, Once again, many thanks for your extensive answer. We will take your advice to heart and will listen to experts. At least for now, we have received a good perspective of the possibilities.

Lawyer

If your parents build a house on your land, you become the owner by accession. I advise you to let your parents build under the enjoyment of usufruct. This usufruct also has a certain monetary value. That can be calculated. Your parents can give you the construction costs in the form of a mortgage and that repayment takes place annually with the value of your parents' living enjoyment. That can be calculated. This means that in the event of the death of your parents, a relative portion will still be included in the estate. An interesting case that certainly deserves further exploration. I am happy to help you