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niek.vandergraaf@russell.nl +31 20 301 55 55Special rules may apply to the termination of a lease of business premises, depending on the nature of the business. What rules apply to termination? How do these relate to the statutory lease terms? Are you entitled to compensation if the landlord terminates the lease? What are your rights as a subtenant?
How the lease of business premises must be terminated and the notice period depend on the type of business premises. Under Dutch law, there are two regulations that may apply to business premises: 290 business premises (small business premises) and 230a business premises (other premises). Below, we explain how to terminate a lease under these regulations. This includes the possibility of early termination, compensation, substitution of a new tenant and the position of the subtenant. In addition to the rules for termination itself, the legally prescribed lease terms must also be taken into account when giving notice. For more information on this, please refer to our previous blog on this subject.
The basic principle is that the lease agreement for 290 business space is entered into for a period of five years, after which it is renewed for the same term as the initial lease period. However, if a lease term of more than five years is agreed, the lease is extended by a term that ensures that the two lease terms together amount to ten years. Without interim termination, the standard lease period is therefore ten years.
Termination after the first term is only possible for the landlord if the tenant has not behaved as a good tenant or if there is urgent personal use. In both cases, the consent of the court is required. A notice period of at least one year must also be observed.
There is more scope for termination at the end of the second term (after ten years). However, a notice period of one year still applies and the termination must be effected by writ or registered letter. Termination at the end of the second term does not terminate the lease agreement unless the tenant terminates the agreement or agrees to termination by the landlord. Here too, a notice period of at least one year applies and the termination must be effected by writ or registered letter.
In all other cases, the court will have to decide whether the lease agreement is terminated. In such a claim, the court will weigh the interests of both parties and will only decide to terminate the lease agreement if the landlord’s interests in regaining possession of the leased property outweigh the tenant’s interests. The court will in any case grant the claim for termination:
If the court grants a claim for termination, it will also set a deadline for eviction.
The lease agreement for 230a business premises can be concluded for a fixed or indefinite period. A fixed-term agreement ends by operation of law when the lease term has expired, while an indefinite agreement ends by notice of termination on a date on which the rent is due, subject to a notice period of one month.
However, the termination of the lease agreement does not necessarily mean that the lease has ended. A fixed-term agreement is converted into an indefinite agreement if the tenant remains in the premises with the landlord’s consent. This consent may also be given tacitly. However, if the landlord has made it clear that the lease will not be continued, the tenant who nevertheless continues to use the rented property cannot invoke the landlord’s approval. In that case, no agreement for an indefinite period has been created.
In order to actually terminate the lease, the landlord must give notice that the tenant must vacate the rented property by a specific date. This date must be after the date on which the lease agreement ends by operation of law or has been terminated. After the notified eviction date, the tenant is still entitled to eviction protection for two months. Within this period, the tenant must decide whether or not to agree to the termination of the lease. As long as no eviction date has been given, the period of eviction protection does not start and the tenant does not have to vacate the rented property.
If the tenant does not agree to the termination of the lease, they can apply to the court for eviction protection within two months. The court can grant this protection for a maximum of one year. The tenant can submit a request for eviction protection three times and therefore has a maximum of three years of protection. The court will weigh up whether the tenant’s interest in continuing the tenancy outweighs that of the landlord. In doing so, the court will look in particular at the tenant’s ability to find replacement business premises.
Early termination of an Article 290 lease by either party is only possible in exceptional circumstances. This may be the case in the event of:
In addition, the parties may terminate the lease by mutual agreement by means of a termination agreement, while it is also possible to include a break option for the tenant in the lease agreement.
Regardless of whether the commercial space is subject to Article 290 or Article 230a, the tenant and landlord may decide to terminate the lease by mutual agreement. The termination agreement must expressly state that the tenant has clearly and unambiguously agreed to the termination of the lease.
It is also possible to include an interim break option for the tenant only in the lease agreement. This gives the tenant the right to terminate the lease agreement prematurely at one or more pre-agreed intervals. This could be after three years or every five years, for example. Because the landlord does not have the option to terminate the lease, the break option still complies with the statutory protection of the tenant of 290 business premises.
When terminating a lease agreement for business premises, a special compensation arrangement may apply, depending on the reason for termination and the nature of the business premises. These arrangements exist in addition to the general arrangements for compensation, for example if the lease is terminated without good reason, the notice period has not been observed or the leased property cannot be used for the purpose for which it was leased or rented.
Tenants and subtenants of 290 business premises may be entitled to compensation if the landlord benefits from terminating the agreement by letting the premises to a similar company at a higher rent. This claim must be submitted to the court. The court will reject the claim if the new tenant does not take possession of the property until more than a year after the end of the old lease.
If the leased property gets a new owner who wants to demolish it, the owner must pay compensation to the tenant or subtenant, because without this demolition, the lease would have continued. The tenant or subtenant may also be entitled to compensation if the lease is terminated because the rented property is not being used in accordance with the zoning plan and the landlord wants to ensure that the property is used in accordance with its designated use. In that case, the tenant or subtenant must claim this compensation in the proceedings before the court concerning the termination of the lease agreement.
The rules for compensation of the tenant (and the subtenant) in the event of demolition or implementation of a zoning plan apply not only to 290 business premises, but to all business premises.
Termination of a main lease agreement for 290 business premises has direct consequences for the subtenant. When the main lease ends, the main tenant loses his authority to lease the space to a third party. This can lead to liability towards the subtenant, for example when the sublease agreement continues while the right of use has actually expired. It is therefore important that sublessors make clear agreements about the dependence on the main lease and the risks involved in its termination when entering into a sublease agreement. If this has not been done, the subtenant may be entitled to compensation from the main tenant.
If a tenant no longer wishes to use a 290 commercial space, they have the option, under certain conditions, to substitute a third party as tenant, for example in the event of a transfer of the business. This substitution requires the consent of the landlord, unless the tenant obtains consent through the courts instead. The court will assess whether the proposed new tenant offers sufficient guarantee for proper performance of the lease agreement and whether the landlord has any reasonable objections. Substitution thus offers entrepreneurs the opportunity to transfer their business, including its location, which can be of great importance for the continuity and value of the business.
In addition to substitution, the lease can also be transferred to another tenant through subrogation. This occurs, for example, in the event of a merger, demerger or transfer of a business. Unlike substitution, subrogation often takes place by operation of law. This occurs, for example, when a legal entity ceases to exist and its rights and obligations are transferred to a legal successor.
Do you have questions about terminating the lease of commercial space or other real estate? Are you looking for legal advice in a dispute with a tenant or landlord? We are happy to be of service. Please contact us:
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