COVID-19 measures may be ground for rent reduction. However, the tenant will have to prove that his revenues and turnover have been reduced significantly.
In an earlier post we discussed that a reduction of revenue and turnover due to coronavirus measures can be ground for a rent reduction. In the meantime, new judgements have clarified this issue. When is a tenant entitled to rent reduction? How much will the reduction probably be?
Most judges consider the COVID-19 crisis and the measures taken by the government to be unforeseen circumstances. This means that there may be a ground for adjusting the rent. Even if changing the rent has been explicitly excluded in the rental agreement. The pandemic and the measures are unforeseen, therefore these could not have been included in the rental agreement and the general terms and conditions.
The judge is not obliged to adjust the rent in case of unforeseen circumstances. The judge will consider whether retaining the current rent is still acceptable according to the standard of reasonableness and fairness. To prove that the rent has to be reduced the tenant will have to demonstrate with financial data how much the revenues and turnover have been reduced and that there are no other means available to pay the rent. If the landlord does not want a rent reduction, he will have to prove that the loss of income is not acceptable to him.
The judge will usually assume there is reason to adjust the rent, if there is a substantial reduction of turnover and revenue. In that situation, professional parties will in principle have to share the pain. If there are no revenues left, this will in practice lead to a rent reduction of 50%. Depending on the circumstances, another amount of rent may be set by the judge.
Especially in situations like these, turnover rent can be an option. In that case, parties will share the loss of revenue/turnover. Jurisprudence shows that the judge will take account of turnover rent when calculating the amount of rent to be paid. However, using turnover rent as part of the rent will not preclude an adjustment of the fixed rent by the judge.
Do you as a tenant of office, retail or hospitality space want to know whether you are entitled to a reduction of the rent? And, as a landlord, if you need to agree with a proposal for lowering the rent? Do you want us to draft an agreement with turnover rent? Or do you require the assistance of a lawyer in issues concerning real estate and rent? Please contact us:
Because of the government measures against the coronavirus, tenants of retail and hospitality space have no or less income. Are they therefore entitled to a rent reduction? Sometimes they are, but often they are not. When are they entitled and when are they not?
On 28 June 2025, the European Accessibility Act will come into force. From that data, digital products and services must also be accessible to people with disabilities. Which companies, products and services does the Act apply to? What disabilities should you take into account? What are the consequences of not complying with the Act?
If a contract has ended, there may still be obligations you want your contract partner to fulfil, such as warranties or confidentiality. You can regulate this through survival clauses. What should you look out for when including such clauses?
The franchise agreement and the distribution agreement are very similar, but there are also important differences. What are the consequences if you conclude a franchise agreement when it is actually a distribution agreement or vice versa? How can you avoid this misunderstanding?
The use of general terms and conditions is something companies can no longer do without. Contracting parties refer to their own general terms and conditions in small print, often containing favorable clauses for their own benefit. But what is the power of general terms and conditions? And what should be considered when using them?
From 1 July 2024, the Affordable Rent Act came into force. Some additional provisions came into force on 1 January 2025. What obligations must landlords now comply with?
