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Country - Netherlands
Commercial Leases
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A. SOURCES OF LEASE LAW
Applicable legislation
Property leases are governed by the Dutch Civil Code.
Do any specific rules apply to commercial leases?
There are three categories of property leases: residential leases; retail leases and leases of other property such as offices, storage space etc. Each category has its own specific rules.
Do different regimes apply to leases of commercial premises depending on the use of the premises by the lessee (offices, warehousing, industrial, retail)?
Yes, different regimes apply to each category of property lease.
B. DURATION AND TERMINATION OF LEASES
Is there a minimum or maximum obligatory term?
No, leases can be entered into for a fixed or an indefinite period of time.
Retail leases will usually be granted for five years, unless a longer term is provided for in the agreement.
Retail leases for a term of between two and five years will be deemed to have been entered into for a five-year period.
Retail leases entered into for a nominal period of five years (or more), but less than 10 years are automatically extended to 10 years unless the lessee terminates the agreement in accordance with its terms, or the lessor obtains a court decision ending the contract based on the limited grounds listed in the Code. Even after the 10-year period the lease will continue indefinitely until the lessor is able to obtain the necessary court decision.
Does the lessee have a right to renew the lease upon expiry of the initial contractual period?
The position with regard to leases of retail premises is covered above. In the case of office leases, the lease ends automatically when the term expires; if the parties wish to renew the lease, they can agree to do so.
Do lessees enjoy security of tenure (i.e. the right to remain in occupation after their lease expires)?
Retail lessees enjoy security of tenure as mentioned above and retail leases can only be terminated by the cantonal court on the limited grounds set out in the Code.
Lessees of other property are also protected. Rather than being required to vacate the premises at the end of the lease term, lessees are entitled to receive formal notice from the lessor specifying a final date.
Upon the expiry of this date, the lessee enjoys a two-month protection period during which it may ask the cantonal court to prolong this protection period up to a maximum of 3 x 12 months. The court will base its decision on an assessment of the interests of both parties.
The cantonal court's final decision can be executed against the lessee. During the protection period, the court will determine a "user's fee" (usually identical to the rent) which the lessee will be required to pay for as long as it continues to occupy the premises.
Do leases involve a lengthy procedure for the effective recovery of possession?
Retail leases can be terminated either by agreement, judicial dissolution (in cases of default), the lessee's decision to give notice, or a court decision after the lessor's notice based on one of the (limited) grounds listed in the Code.
Leases usually contain a provision allowing the lessor to terminate the lease early on non-payment of rent or breach of the lease. The insolvency of the lessee is also usually grounds for termination.
Courts, however, nearly always allow a lessee to rectify a breach and retain the premises, for example, by paying rent arrears.
The lessor can always try to terminate the lease at the end of its term, on the grounds listed in the Code. If the lessee challenges the attempt to end the lease, the lessor will have to obtain a court order. This can take several months.
Office leases end automatically. If the lessee does not use the protection period to extend the lease, the lessor may commence eviction proceedings.
Can government/local authorities require the compulsory termination of a lease?
Yes, local authorities have certain rights to acquire property by condemnation and this includes property held under leases. These powers may only be exercised for the benefit of the public. Lessees (retail or office) will receive compensation, which will vary depending on the type of lease.
If government zoning requirements conflict with the lease, the lessor has the right to terminate it (this is one of the limited grounds for termination mentioned earlier).
Is there a preferential right of acquisition?
The parties are free to contract as they wish. However, such provision is not common as the model for retail leases designed by the Raad voor Onroerende Zaken (Council for Real Estate Matters), which is generally used, does not contain such a clause.
C. RENT AND COSTS
Are variable rental agreements common?
The Code contains provisions relating to rent reviews in retail leases. An action for a rent review can be taken:
- on the expiry of the agreed term; or
- where the contract does not specify a fixed term, after five years from the date that the last rent agreed by the parties took effect or the last rent set by the court was demanded.
Most common indexation
In the case of non-retail leases it is open to the parties to agree provisions for adjustment of rent. Parties usually agree upon an annual adjustment of the rent according to the Consumer Price Index as published by the Dutch Central Bureau of Statistics.
Who usually pays the common expenses?
Lessees are usually required to pay service charges.
The lessor will also pass on the costs of insuring the building to the lessee, in the same proportion (based on the size of the leased space relative to the whole building) as the service charge.
Are there any other expenses connected with the lease?
Usually not.
Which indirect taxes are applicable?
VAT at 19% will only be payable if the lessor elects to charge VAT and the premises are used for taxable purposes.
D. OBLIGATIONS OF LESSOR AND LESSEE
Who is responsible for the different works on the premises?
In general, the lessor is responsible for major repairs, while the lessee has to carry out minor repairs at its expense, unless these have become necessary as a result of the failure of the lessor to repair defects. This provision in the Code is mandatory for residential leases; for leases of retail or other property, parties are free to agree upon a different division of costs and/or responsibilities.
Can the lessee alter or improve the premises?
The lessee may alter or improve the premises, provided that the alterations are non-structural and do not damage the value of the property. Alterations require the lessor's consent, though this must not be unreasonably withheld.
On termination, the lessor has the right to require any unauthorised improvements to be removed. It is advisable to stipulate that improvements have to be removed by the end of the lease, unless otherwise agreed, and to exclude the possibility of the lessee invoking the right to claim compensation for the improvements.
What restrictions are there on the lessee's right to use the premises?
Leases normally stipulate the permitted use of the premises. Specific activities which may cause a nuisance are also prohibited.
Is there a right to transfer the lease?
Under Dutch law, a lease is a property right, so it is legally possible to transfer it to a third party. Any transfer requires the consent of the lessor, however the Code requires that such consent should not be unreasonably withheld or delayed.
For retail leases, in the case of the sale of the business, a cantonal court decision can replace the lessor's consent.
Is there a right to sub-let the premises?
According to the Code, a sub-lease is allowed, unless the lessee should have known that the lessor would not agree. However, the parties are free to contract as they wish. Leases usually prohibit lessees from sub-letting the premises.
What are the usual guarantees?
Parties are free to contract as they wish. The lessor may ask for a guarantee from the lessee's parent company, a bank guarantee or a rent deposit (though usually not more than one of these). Deposits for breakages, damage etc. are not normal in commercial lettings.
E. PARTICULAR TYPES OF LEASE
Do office leases have any particular characteristics?
Yes, the statutory suspension of the lessee's obligation (referred to earlier) to vacate the property for a period of at least two months.
Do retail leases have any particular characteristics?
They may be subject to obligations which exist for the benefit of the shopping centre as a whole, such as an obligation to open and trade during specified hours.
Do hotel leases have any particular characteristics?
Hotel leases are similar to retail leases.
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