Are tenants of retail or hospitality space entitled to rent reduction due to the coronavirus crisis?

A request for rent reduction is not necessarily futile, but the tenant will at least have to prove that the current rent is unacceptable. And even if that is the case, the court will also take the landlord’s interests into account.

According to two recent judgements, sometimes they are, but often they are not. A request for rent reduction is not necessarily futile, but the tenant will at least have to prove that the current rent is unacceptable. And even if that is the case, the court will also take the landlord’s interests into account.

Measures against coronavirus are defects leased property

The fact that a shop or hospitality space cannot be used or only be used to a limited extent because of measures against the coronavirus is considered a defect. The current general provisions in the ROZ model lease agreement for retail and hospitality space exclude that such a defect is a ground for rent reduction.

Unforeseen circumstances

In the case between football club Vitesse (tenant) and Gelredome (lessor), the Arnhem Subdistrict Court considered these measures to be unforeseen circumstances for which no arrangements were made in the lease agreement. Thus, despite the exclusion clause, there could still be an entitlement to rent reduction. But then Vitesse had to prove that maintaining the rent was unacceptable. That hurdle turned out to be too high.

Proof that rent is unacceptable

According to the Subdistrict Court, Vitesse did not provide enough information about its financial situation to be able to establish that the payment of the rent was unacceptable. For example, they indicated that there had been a reduction in revenue, but not whether this also applied to expenditure. In addition, the state of their financial reserves and reserves for future liability was unclear. Finally, the judge remarked that in the period for which a rent reduction was requested (April-August) few matches would be played anyway because of the summer break in football. Vitesse’s loss of income was therefore limited.

Vitesse had therefore not demonstrated that payment of the rent was unacceptable to them. And even if the payment would be unacceptable to Vitesse, the landlord’s interest must also be taken into account. In short: the door is ajar for tenants, but certainly not yet wide open.

Request for rent reduction successful

In a case before the North Netherlands District Court, the tenant was successful in achieving a rent reduction. An old rental agreement applied here, in which the exclusion clause had not yet been included. This meant that there was a defect that could provide an entitlement to rent reduction. Therefore, the landlord had to accept the tenant’s reasonable proposal to pay only 2/3 of the rent.

Our advice

• A request for rent reduction is not necessarily futile, but it must be well-substantiated.
• Discuss with your landlord whether rent reduction is possible. It’s always worth a try. Especially now that it is clear that the court will not necessarily reject such a request.

More information

Would you like to learn more about rent reduction or other options to steer your business well through times of COVID-19? Please contact our coronavirus crisis team:

• Reinier W.L. Russell, LL.M. (reinier.russell@russell.nl)
• Jan Dop, LL.M. (jan.dop@russell.nl)

Or call 020 – 301 55 55. Or ask your question using the form below: