Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55The Dutch Supreme Court has determined when coronavirus measures entitle to a rent reduction. And how such a reduction must be calculated. When are you or your tenant entitled to lower rent? And how do you calculate it?
On 24 December 2021, the Supreme Court of the Netherlands answered questions about the impact of the lockdown for the rent of shops, hotels and restaurants. As a result, they have to close down completely or partially and the question is who is to bear the consequences legally: tenant, landlord, or both parties? And if the parties have to share the pain, how does a rent reduction have to be calculated? The Supreme Court’s answer is in line with previous rulings on this subject.
The first question is whether the forced closure of hotels and catering businesses is a defect of the leased property. In that case the inability to use the leased property could also be for the landlord’s account. According to the Supreme Court, lockdown is no defect. Defects concern matters that the landlord can remedy and that is not the case here. This immediately brushes aside the second question. As it is no defect, it does not have to be determined how rent reduction should be calculated on this ground.
The third question is whether a forced closure is an unforeseen circumstance that should not only be borne by the tenant. According to the Supreme Court, this is the case. Before 15 March 2020, when entering into a lease agreement for catering and retail space, it was not foreseeable that the government would close down shops and restaurants. Therefore, it is unreasonable for landlords to want tenants to pay the full rent. Even if they have agreed in the rent agreement, by means of an exoneration clause, that the tenant is not entitled to rent reduction in the event of a defect. After all, the lockdown is no defect. Even in the case of a partial turnover lease, there may still be an entitlement to rent reduction due to lockdown.
Please note: For leases concluded after 15 March 2020, a lockdown is not necessarily an unforeseen circumstance. In that case, it should be considered whether the parties have included this possibility in their negotiations.
The fourth question is how parties have to calculate the rent during lockdown. Starting point is that tenant and landlord have to share the consequences of the lockdown 50/50. This leads to a calculation model according to the fixed costs method with the following steps:
Depending on the circumstances of the parties, the court may decide on a different distribution on grounds of reasonableness and fairness.
Do you have any questions about the consequences of the lockdown for the rent of your retail or catering property? Do you have a dispute with a tenant or landlord and are you looking for legal advice? The real estate specialists at Russell Advocaten will be happy to assist you. Please contact us:
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