The first time I learnt about ground lease, it shocked me.

I suddenly felt transported back to those law lectures that taught you that the airspace above a country doesn’t actually belong to that nation, or that nations only have sovereignty over territorial waters up to a certain distance from the coast. Every law lecture from university flashed before me, but I had never once heard the story of the ground beneath a house — despite having studied international and European law.

It was one of the biggest cultural shocks I’ve had in this country.

My first reaction was that, with all the money I already pay, they might as well guarantee me the airspace and the territorial waters too, so I could go found my own independent state. But then I had to accept reality.

So when I bought my first flat, I slalomed between the properties that didn’t come with a separate ground lease payment attached, and ended up buying in a municipality that doesn’t apply ground lease at all. That’s actually the first distinction worth knowing: some municipalities simply don’t apply it. And even within the municipalities that do, there are areas where it isn’t applied, or where the ground lease has already been bought out in perpetuity.

It turns out this isn’t some obscure Dutch quirk. Once I started digging, I found versions of the same split — land owned by one party, building owned by another — scattered across Europe, each with its own name and its own history:

• The Netherlands: my own situation. Around 80% of homes in Amsterdam sit on municipally-owned land under erfpacht, with homeowners paying an annual canon for the right to use it.
• Germany: Erbbaurecht, heritable building rights, used widely by municipalities, churches, and foundations in cities like Munich, Freiburg, and Berlin. Even landmark buildings like Munich’s Allianz Arena sit on leased land under this exact structure, with an annual Erbbauzins paid instead of an outright land purchase.
• The United Kingdom: a majority of flats in England and Wales are sold as leasehold, with terms ranging from 99 to 999 years and ground rents that, in recent years, have become notorious enough that the government has moved to restrict the practice on new builds.
• Sweden: land leaseholds (tomträtt) are common enough that they’re split into separate legal categories — residential, commercial, and agricultural — each governed by different rules on fees and termination.
• Ireland: leasehold ownership has deep historical roots too, closely tied to the same British ground-rent tradition, though reforms over the decades have pushed much of the market back toward outright ownership.

The mechanics differ — term length, whether the rent is fixed or reviewed, what happens when the lease ends — but the underlying idea is the same everywhere: someone decided, at some point, that separating land ownership from building ownership served a purpose worth the complexity it creates for homeowners generations later.

Why erfpacht in the Netherlands, but not everywhere

Here’s something that surprised me just as much as discovering the system existed: erfpacht doesn’t apply across the whole country, and it doesn’t even apply to all of Amsterdam. It’s a municipal choice, city by city, sometimes neighbourhood by neighbourhood — not a national law.

The story starts in 1896, when Amsterdam decided to stop selling municipal land outright and instead lease it long-term. The city was doubling in population within decades, land values were rising fast, and the municipality wanted to capture that rising value for the community instead of letting it accrue entirely to private landowners — an idea closely tied to the economist Henry George’s writing on land value. The policy also gave the city a lasting grip on how neighbourhoods developed, since a landowner who still holds the ground can attach conditions a one-time land sale never could.

Other Dutch cities followed at very different speeds and with very different levels of commitment.

The three options on the table

Last year, with my new flat, it was my turn to make this choice. I was handed exactly this decision, with three concrete options from the Municipality.

	Current situation (do nothing)	Option 1 — switch to fixed annual canon	Option 2 — buyout of perpetual ground rent	Option 3 — full redemption
One-time cost	€0	€0	€54,255	€55,289
Annual cost until 15 Oct 2036	€120.25	€120.25	€120.25	€0 (immediately)
Annual cost after 15 Oct 2036	unknown	€1,678.62 + inflation	€0	€0

The first thing that jumps out: “do nothing” isn’t actually a neutral option. It’s the only row in the table with a genuine question mark — what happens to the canon after 2036 under the current situation is unspecified. For someone who thinks in terms of risk before return, that alone rules it out.

What I decided: Option 1, for now

I’ve decided to accept Option 1 — switching to the fixed annual canon, which means paying the current €120.25/year until 2036, then €1,678.62/year (plus inflation) after that. I’m not buying out yet, but I’m keeping the door open to revisit a buyout later.

A question of pure math. The same math I apply to me and my friends anytime that they wonder to buy a holiday house for personal use. I will talk about it another time.

Simple payback (no discounting, no inflation): dividing the buyout cost by Option 1’s post-2036 canon gives 32-33 years of Option 1 payments to match the cost of buying out — and those years start counting in 2036, so the real breakeven point from today is closer to 42-43 years out.

Adjusted for inflation on the canon (2%/year): since Option 1’s payment grows over time while the buyout cost is fixed, the breakeven arrives sooner — around 25 years from 2036, so roughly 35 years from today.

Even in the more favorable version, we’re talking about a horizon far longer than my own FIRE timeline. On paper, waiting stays the better bet for longer than gut instinct would suggest.

The pure math doesn’t favor buying out either

I have to be honest here, because it’s the same exercise I already ran on my rainy day fund. If you discount Option 1’s future payments at a realistic ETF return (8% nominal), the present value of everything I’d pay over time — the canon until 2036, plus the growing perpetuity after — comes out to roughly €13,700. Far less than the €54,255-€55,289 buyout would cost today.

In pure expected-value terms, buying out isn’t the optimal move right now either way — the market, on average, returns more than what it costs to keep paying the canon. This is actually part of why I’m comfortable sitting on Option 1 rather than rushing into Option 2 or 3: the numbers don’t currently justify locking up €54k+ of capital to eliminate a liability whose discounted value is a fraction of that.

Why “for now” and not “never”

The reason I’m not closing the door on a future buyout is the same unknown that ruled out “do nothing” in the first place: the canon after 2036 is fixed under Option 1, but ten years is a long runway, and my situation — mortgage payoff pace, portfolio size, risk tolerance — will look different by then. Revisiting the decision closer to 2036, once the time value of a buyout has shrunk (fewer years of canon left to “buy out”), is a more efficient moment to make that call than locking in €55k of certainty a full decade too early.

This mirrors the exact same tension I wrote about with my rainy day fund: certainty has a price, and sometimes it’s worth paying long before you strictly need to. This time, the math and the timeline both point the other way — so I’m taking the optionality instead, and keeping the buyout on the table as a live decision for later, not a closed one.

Two more things push me toward “not yet”:

• If a decision doesn’t make sense over a 30-year horizon, it doesn’t make sense at all. A 32-43 year payback period isn’t just long — it’s longer than any planning horizon I can commit to. When a breakeven point stretches that far out, that’s not a horizon, it’s a sign the decision isn’t actually convenient in the first place.
• I don’t even know if I’ll still own this property when I retire. I might sell it, or keep it and rent it out from wherever I end up — I’m not planning to retire in the Netherlands. Buying out the canon “so it’s gone for good” assumes a permanence I can’t honestly promise myself.

So, my dear reader, always keep in mind that change is inevitable and you can’t stop.