I have left the Netherlands and rented out my Dutch house. Now the mortgage provider is creating problems.

Article Number: 74 | Rating: Unrated | Last Updated: Sat, Nov 26, 2011 at 8:23 PM

Question:

I have a mortgage on a house which I have rented to students. I have now been informed by the bank that the property cannot be rented out & have been told that they need to be out by January. is this normal practice? I no longer live in Holland and would like to know what the options are if any.

Answer:

Your house acts as a security for the mortgage. This means that if you stop paying the mortgage, the bank has the right to sell the house to pay off the mortgage instead. This is the reason why the bank wants to make sure that the value of the property stays as high as possible.

As a consequence a bank will state in the mortgage contract what you are and what you are not allowed to do with the property during the contract. One of the statements in the contract is generally that it is not allowed to rent out the property, certainly not if you leave the country. If the bank will approve that the property is rented out they can request additional measurements like:

- require that the mortgage is paid off in a shorter period, meaning that the monthly repayments go up,

- require that the rent you charge is above a certain amount.

Why would the bank believe that the value of the property is affected?

If you are not living in the property yourself the bank assumes that the property is less taken care of. Certain problems may not be fixed, the house may be used for other purposes etc. Especially if the house is used by several students one can imagine that the property is not in optimal shape. Because of this the value may be affected in case the house needs to be sold.

Besides that the tenant is protected under Dutch law. This means that it can be difficult to just end a rental agreement. Besides that there is statement which says that "sale doesn't break rent", which means that if the property is sold, the rental agreement doesn't end (automatically). The buyer will have to respect the rental agreement. For most possible buyers it will therefore be less interesting to buy your house, leading to a much lower value.

The bank just wants to sell the house as quickly as possible for the highest price. This is not possible if it has to be sold including the students.

For some reason the bank has found out that you left the Netherlands and rent out the property. Because of this they contacted you to order you to end the rental agreement on short notice. There is no discussion possible anymore, which could have been possible of you discussed your plans with them upfront. Now you are in a difficult situation, especially if it turns out that you can't end the rental agreements, unless by paying a compensation to each student. It is therefore important that all consequences are clear before the date of emigration.

So what are your options?

Contact your bank to see if you can arrange anything. Chances are not high, but you never now. Check the rental agreements to see if you can end the rent on such short notice. If not ask the bank if they want to give you some extra time, for example till the end of the study year in June. This way the students will have more time to find another place to live and can focus on their study in the mean time. But in the end we don't expect that the bank will allow you to rent the house out, especially if you are not coming back to the Netherlands shortly. In that case you may have to try to sell the property instead.

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Comments (2)

Comment by arjan enneman on Mon, May 14th, 2012 at 1:43 PM

if the purchase price is lower than the outstanding mortgage the owner will indeed be faced with a remaining debt. the owner will still owe this amount to the bank. the bank will keep chasing the owner for payment of the 10,000. so it doesn‘t disappear.

Comment by lizzyb124 on Thu, May 10th, 2012 at 8:26 PM

what happens if bank forces the owner to sell the property but its worth less than the original purchase price? say the property was originally bought for 100,000 but you sell it and only get 90,000 for it. as the owner is out of the country and doesn‘t have 10,000 to pay the bank, what would happen?