KNB: 'Three-stage rocket' must prevent deception in land trading

The Royal Dutch Association of Civil-Law Notaries (KNB) proposes a three-step approach to protect consumers from speculative land trading. The proposal provides for oversight by the Netherlands Authority for the Financial Markets (AFM) of these transactions, the mandatory requirement for a notarial purchase agreement, and the prompt and proactive prevention of consumer deception.

In practice, due to their ministerial duties, it is currently very difficult for notaries to refuse to cooperate in the transfer of real estate if it does not violate the law or public order. In speculative land trading, land traders divide agricultural plots and sell them to small investors, often with the (false) promise that they will eventually be allowed to build on the land. The notary generally only becomes involved after the purchase agreement has been concluded, i.e., at the time of the transfer of ownership.

Previously involved
To prevent consumers from being misled by land speculation, notaries want to be involved in transactions at an earlier stage. They also want more options to refuse to cooperate in dubious land transactions, Annerie Ploumen, chair of the Royal Dutch Bank (KNB), told the FD .

AFM licensing requirement
To protect consumers from this deception, the Royal Dutch Bank (KNB) proposes a three-step approach in a position paper to the House of Representatives. The first measure is to ensure that these types of transactions fall under AFM supervision and are therefore subject to a licensing requirement. This is achieved by abolishing the exemption from the licensing requirement for providers of these types of land investments. Currently, exemptions from this licensing requirement still apply, for example, if the provider offers a plot of land to fewer than 100 consumers, if the investment property is part of a series of fewer than 20 investment properties, or if the investment per investment property is €100,000 or more. Furthermore, the definition of investment property needs to be adjusted, as previously stated in a letter to the House of Representatives . A plot of land is currently not considered an investment property if the acquirer becomes responsible for its management (maintenance). Providers of land investments cleverly exploit this, so no AFM license is required.

Notarial purchase agreement
The second measure is having the purchase agreement for these types of transactions drawn up by a notary. This allows the notary to warn the buyer in a timely manner—i.e., before the purchase agreement is concluded—of the risks of this transaction.

Relevant information
By requiring the notary to draw up the purchase agreement for these types of transactions, they can actively verify that the potential buyer has all the information relevant to the purchase beforehand. If the buyer nevertheless decides to proceed with the purchase, it represents a deliberate choice to speculate on this type of land.