Real estate and housing
Educational institutions that develop, let or make their property more sustainable face a wide range of legal and tax rules. These span tenancy law and the separation of educational and residential functions, permits under the Environment and Planning Act (Omgevingswet), green leases, and tax questions relating to VAT and chain liability. The various rules are interlinked and call for an integrated approach.
Student accommodation: the legal framework for educational institutions
The housing shortage has led educational institutions to become increasingly involved in the delivery of student accommodation. This raises legal questions concerning the institution's core remit. Residential and educational functions must be kept legally separate.
Buildings that are wholly or partly funded by public money are subject to strict rules governing disposal and letting. A municipality's economic claim right (economisch claimrecht) may constrain the scope for manoeuvre in redevelopment projects.
Campus development under the Environment and Planning Act
When expanding or redeveloping their premises, educational institutions must take account of locally tailored requirements and mandatory public participation processes. Administrative law proceedings can cause delays and place pressure on development capacity.
By addressing the relevant legal frameworks and participation obligations early in the process, delays at the permit stage can be kept to a minimum.
Sustainability and green leases in educational property
Sustainability commitments must be embedded in tenancy and construction contracts in the education sector. Property that does not meet the applicable energy performance requirements may face restrictions on its use.
A green lease gives contractual effect to sustainability commitments. Under such a tenancy agreement, the landlord and tenant make concrete arrangements both for improving the sustainability of the leased building and for using it in a sustainable manner. Whether a green lease works in practice depends on careful drafting and clear, workable provisions.
The tax impact of property development
The tax aspects of property transactions have a direct bearing on the viability of a new-build or refurbishment project. A number of these aspects are frequently considered too late in the process. Does the transaction attract 21% VAT, which is largely non-deductible, or 10.4% transfer tax? Without a tax assessment, the financial viability of a project cannot be properly evaluated.
Points that are often overlooked until it is too late:
- The exemption for educational accommodation. This exemption can have a significant impact on whether transfer tax is payable on transactions involving existing property.
- VAT recovery on new builds and refurbishments. A sound assessment at the outset ensures that the tax impact is factored into the budget or coordinated with the Tax and Customs Administration in good time.
- Chain liability and hirer's liability. For both VAT and, in particular, payroll taxes, it is important to establish whether the institution falls within the scope of these provisions. This point requires explicit attention when contracting with service providers such as building contractors and installers.
Precisely because these issues bear directly on the project budget, it is prudent to address them from the outset. Where optimisation remains possible, that opportunity should be taken.
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