Your own selfbuilding plot in the middle of the city, so you can build a home exactly the way you want it? With stacked selfbuild buildings you make this dream come true including an amazing view. How about this list of the financial, organizational and legal challenges for you. This Helsinki example shows you how, but The Hague shows how too. Handy especially in large cities, square meters are scarce and expensive. With stacked buildings you can use that same square meterage more than once.
The Hague municipality launched a competition of ideas, and has rewarded a shared first place to the design Light, Air, Space, Freedom of STUDIOHECHT in collaboration with ABT ltd. This design also consists of stacked plots. Future residents can both customize their own plot and the home they want to build on it. Have a look at the promotional movie (in Dutch) of STUDIOHECHT if you want to get an idea what it looks like. The movie shows very clearly that technically stacked buildings are no problem. Whether you construct the building in one go or add plots over time, everything is possible.
What are the challenges in stacked buildings
Financially and legally it makes a big difference whether you build the building in one go or in parts over time. The Hague has asked for a concept that can be built in stages over time. Thus giving several small-scale private owners the opportunity to build what they want over the years, just like earlier buyers. In case of organic expansion current financial and legal frameworks are problematic. Problems BRIQS has excellent solutions for in collaboration with professors and notary public specialists.
How about a building as a whole?
When a building is built and delivered as a whole, the legal situation is as follows:
The land and the building are one entity and can only have one owner. Unless the division is described otherwise at the notary public and land registry. The owner may give others a business (commercial) right to the whole or a part. Think of usufruct or tenancy.
If we want multiple owners to buy a part of the building each, then the building must first be divided into precisely defined parts. A horizontal division is possible through an area right or division into apartment rights. With vertical, stacked, buildings a division into apartment rights is the only possibility right now.
Surface rights are often used to separate the (underground) parking from the parent homes, and / or to separate the parking and homes from the land ownership. A division into apartment rights allows separate ownership of homes. Condition in both cases is that each of the parts has a separate and visible identity. For example, each unit has its own entrance and is separated by walls and floors.
Changes in this subdivision of the building require written permission of all the individual owners. Additionally, other registered parties, such as mortgage lenders, must consent in advance. Therefore owners and all other formal stakeholder are publicly recorded in the register.
How about an organically expanding building?
What we want is maximum freedom for the buyer to realize his or her own home. Separating the base building from the fit-out gives both user and investor this maximum freedom and the best opportunities, both legally and financially. Since it is their different, primary interests that are the starting point.
The base building consists of the structure , the facade, the joint access and the building related installations up to the meter cupboard of the individual home. With stacked buildings the fit-out consists of the interior and the fit-out related MEP-systems for ICT, light and climate of the house itself.
Two parts – separate cadastral numbers
Legally someone can buy two immovable properties; there is one cadastral number for the fit-out and another cadastral number for the total base building, or a part of it or interest in it. There are more options than just buying, by the way:
A buyer or tenant as a private individual or organization can have two roles that are easy to distinguish, namely investor and user. These two roles provide four options:
- Buy: The user is also an investor and therefore owner of both parts.
- Rent: The user is neither an investor nor owner.
- Rent-Buy: The user owns the fit-out and rents the base building.
- Buy-Rent: The user rents the fit-out and owns of the base building.
With Rent-Buy you can think of suppliers who rent out an entire kitchen, bathroom or installations on performance. As energy companies formerly rented out water heaters and still do with boilers. The base building is your security or investment in value development.
Of course, all parties have multiple opportunities for change.
- As an investor in the fit-out and / or the base building, you can abstract or just reimburse by installments in time, without having to move or live there.
- As a resident, you can abstract or just reimburse by installments over time, with or after moving.
What legal entity best serves the purpose?
So the split between base building and fit-out gives residents the maximum freedom to shape their own home in a building that can organically expand over time. Then, the part of the base building associated with the plot and the part of the fit-out can be sold separately. An Inc. or Ltd. as a separate legal entity for the base building has the advantage that the joint owners of the base building, separate from the individual owners of the fit-outs, can close a loan from a bank or through crowd funding. A Homeowners Association (HOA) can not. When you want to know more on the financial possibilities you can look into the BRIQS blog on smart financing.
In addition, a separate apartment right is registered at the Land Registry for each fit-out. At the pace in which the homes are sold and then built, these apartment rights are later filled physically, each by a separate home. By applying for a registry number for the maximum number of separate physical fit-out elements possible, meaning the actual homes, directly at the beginning, there is no need to alter the strata title plan later on. So when adding a new home, earlier owners do not need to apply for a new split in apartment rights and the new mortgage that comes with it.
Right of consent
An Inc. also provides the opportunity for free trading of base building shares without right of consent of the other shareholders. By right of consent previous buyers have to decide whether a candidate can buy the next home. That is a formal review by cooperatives, but not by the Association of Owners of apartment buildings. With a Ltd. that right of consent is automatic and gives incumbent owners right of first buy, this seems only confusing and delaying to me. Conditions on to whom you may sell or who may buy obviously reduce the market price of the shares.
In short: When we design a base building as a separate legal entity then we can sell shares to investors and residents alike and possibly provide it as collateral to a financial institution that provides a loan to the buyer. In this way, we secure maximum flexibility for the future. We also create the opportunity for a municipality or a building society to participate as a (social) investor in this vertical street.
We are looking forward to hearing from you what possibilities you see for stacked buildings in an organic expanding building. We are especially interested in your questions about the legal side of ownership while building homes.
Take the next step and share your experiences
Do you want to take a next step? Come to the FREE* Masterclass. We will work with practical tools to instantly implement the actions of my ebook in your organizational, fiscal or financial projects and organization.
Join the conversation
Do you know how to build that new way and what you need? What opportunities do you see for stacked buildings? Share it in the comments below.
To your health and wellbeing,
Remko Zuidema
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This post is also available in: Nederlands
