As organisations look for flexible ways to expand or adapt their facilities, temporary buildings are becoming an increasingly attractive option. Yet these projects also raise important legal and tax questions. For GCs, early alignment on ownership, leasing, financing and exit arrangements is key.
Temporary and modular buildings are increasingly used in the Netherlands, particularly for housing, healthcare and education. Their temporary nature may appear straightforward, but from a legal and tax perspective these structures raise important questions regarding permits, leasing, ownership, financing and taxation.
Public law versus private law
Under the Building and Living Environment Decree (Bbl), a temporary building may remain at the same location for up to fifteen years and is subject to less stringent construction requirements than permanent buildings. In principle, it must be removed once that period expires.
However, the temporary status of a building under public law does not automatically extend to private-law relationships. As a result, questions may arise regarding tenancy rights, financing structures, ownership and the contractual arrangements between the parties involved.
Temporary buildings and tenancy law
A temporary permit does not automatically mean that a lease can also be temporary. Since the Fixed-Term Lease Agreements Act entered into force on 1 July 2024, indefinite-term tenancies have once again become the default position for residential leases.
Although the law provides a specific ground for terminating tenancies relating to certain temporary residential accommodation, strict conditions apply. The tenancy agreement must refer to the temporary permit and specify its duration, and the tenancy must be terminated before the permit expires.
Financing and ownership considerations
Financing temporary buildings can be challenging. Although many structures are modular and relocatable, this does not automatically mean that they qualify as movable property. If a building is intended to remain attached to the land, ownership will generally follow ownership of the land, irrespective of whether the modules could theoretically be removed.
This can create uncertainty for lenders regarding their security position. The limited lifespan of temporary buildings and uncertainty surrounding future rental income may also affect valuation and financing opportunities.
For that reason, parties should establish at an early stage how permits, ownership rights, security interests, rental income and termination arrangements are structured.
Planning for removal from the outset
For temporary buildings, the end of the project can be just as important as the beginning. Multiple stakeholders are often involved, including landowners, investors, contractors, operators and end users.
Parties should agree in advance:
- who is responsible for permits and renewals;
- who owns the building modules and associated components;
- who bears maintenance and repair costs;
- what happens if use ends earlier than expected; and
- who is responsible for removal, demolition and site restoration.
Where these issues are not addressed upfront, disputes may arise over costs, residual value, liability and risk allocation once the temporary permit expires.
Circular construction
Temporary buildings are often promoted as a circular solution because they can be dismantled, relocated and reused. However, circular construction models may introduce additional legal complexity.
For example, suppliers may retain ownership of modules, provide take-back guarantees or reuse materials at the end of a building’s lifecycle. While commercially attractive, such arrangements require careful documentation of ownership rights, maintenance obligations, collateral arrangements and residual value risks.
Tax implications
Tax treatment is another important consideration. A key question is whether a temporary building qualifies as real property or movable property for VAT and transfer tax purposes.
The distinction is not always clear, particularly for modular and relocatable buildings. The classification can have significant consequences for VAT recovery, leasing arrangements and future transfers.
If a building qualifies as real property, transfer tax may be due upon transfer and leasing is generally VAT exempt. If it qualifies as movable property, different VAT rules apply. Given the potential impact, parties may wish to seek certainty from the Tax Authorities in advance.
Conclusion
Temporary buildings sit at the intersection of tenancy law, property law, contract law, financing and tax law. While a permit may define a building as temporary, the legal and tax consequences will only be temporary if they have been deliberately structured as such. Careful planning at the outset can help avoid disputes and provide greater certainty throughout the building’s lifecycle. If you would like more information or wish to discuss this topic, please do not hesitate to contact our Project Development & Construction team.
