Your lawyerReinier W.L. Russell, LL.M.
Reinier Russell advises national and international businesses on all facets of their day-to-day business operations. He has a broad range of specializations in questions regarding businesses, personnel, real estate, and government. He has been a lawyer since 1990. In addition, Reinier is certified as a mediator.
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Tenant and landlord must share pain of lockdown
We already discussed whether a tenant is entitled to rent reduction during the coronavirus crisis and the government measures in this context in previous blogs. Meanwhile, several judgements were given by courts about this topic and there is more clarity about the conditions for rent reduction. When does an entitlement to rent reduction exist due to the lockdown according to the court? And is the pain between tenant and landlord actually shared?
Courts have frequently dealt with the question whether the coronavirus crisis entitles the tenant of retail, catering or commercial premises to rent reduction. This may actually be the case. Several courts have established that tenants and landlords were not able to foresee the lockdown when concluding the tenancy agreement.
Even though it has been established that the coronavirus crisis is an unforeseen circumstance, it has to be assessed whether the circumstances have changed in such a way that the landlord must agree with a temporary rent reduction in accordance with the criteria of reasonableness and fairness.
The unforeseen circumstance of the coronavirus crisis can involve that it is not reasonable to stick to the agreement that the landlord is entitled to payment of the entire rent. The coronavirus crisis and the government measures created an imbalance in tenancy agreements. For this reason, landlord and tenant must share the pain fairly. But when is there a fair distribution?
Courts choose different ways to reach a fair distribution of the pain between tenant and landlord. A frequently chosen solution is to take the decrease in the turnover as a starting point and to equally distribute the consequences between the parties. The percentage of the rent reduction then equals half the percentage of the decrease in turnover. With a decrease in turnover of 100%, the percentage of the rent reduction is 50%.
However, the pain of the decrease in turnover is also relieved by government measures, such as the Allowance for Fixed Costs (Tegemoetkoming Vaste Lasten; TVL). This does expressly include the rent of retail and commercial premises. When determining the amount of the rent reduction, courts sometimes take into account the income from this scheme. The NOW-scheme is not included, as this allowance is only meant to be a compensation for wage costs.
It is not correct that the tenant only has to pay part of the rent in the event of decrease in turnover due to the coronavirus crisis. Many courts consider the coronavirus crisis an unforeseen circumstance, but the circumstances can differ from case to case. For example, think of the measures to compensate decrease in turnover. If a request for rent reduction is made, this must be substantially motivated and submitted to the court.
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