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What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?
Real estate financing in the Netherlands is provided by Dutch and foreign banks, insurance companies, pension funds, private equity and hedge funds.
Activities in the field of real estate financing are regulated by De Nederlandsche Bank NV and the Netherlands Authority for the Financial Markets.
What are the most common structures used to secure real estate financing and how are these security interests perfected?
Generally you see the following securities in real estate financings:
- A mortgage over the property/real estate (including movable assets), which is taken by way of a notarial deed and executed before a notary. Mortgages must be registered with the Land Registry.
- A pledge of shares in the property companies and, if applicable, the holding companies. This security is taken by way of a notarial deed and executed by or before a notary. No registrations or notifications are required.
- A pledge over bank accounts (eg, rental income accounts, general accounts or Opex accounts) and rights (eg, leases, intercompany loans or management agreements). This security is usually a private disclosed deed, which means that the banks and other relevant counterparties should be notified. This deed may also be registered with the Dutch tax authorities (which involves no registration costs).
What covenants are typically made in financing agreements?
In real estate financing, the following financial covenants are regularly included:
- loan to value;
- debt service cover ratio; and
- interest cover ratio.
Enforcement of security
How are security interests enforced in the event of default?
Pledge and mortgage rights are enforced through a sale by public auction, although some exceptions are possible:
- in case of enforcement of a right of mortgage, the property can also be sold by a private treaty, provided that this is approved by the court in preliminary relief proceedings after a request for these from the mortgagor or mortgagee;
- in case of enforcement of a right of pledge, the sale can also be concluded other than by a public auction, at the request of the pledgor or pledgee and after approval by the court in preliminary relief proceedings, unless the deed of pledge stipulates otherwise;
- in case of enforcement of a right of pledge, the pledgee can also request the court in preliminary relief proceedings that the pledgee will acquire the encumbered property against a sum to be determined by such court; and
- in case of enforcement of a right of pledge, the pledgor and pledgee can agree to conclude the sale other than via a public auction after the pledger has become entitled to enforce its rights under the right of pledge.
What is the typical timeframe for the enforcement of security?
Between 10 and 12 weeks.
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