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The 3 most common breaches of contract by a tenant

A landlord can ask the court to terminate a residential tenancy agreement. This is possible in cases where the tenant breaches the agreement. The court can consequently order the tenant to evict (in Dutch: ontbinding en ontruiming) the property. A residential tenancy agreement can be terminated according to the statutory grounds for termination by giving notice (in Dutch: opzegging). Termination of  an agreement can also take place by mutual consent (in Dutch: wederzijds goedvinden). However, sometimes a breach of contract is also one of the grounds for terminating a residential tenancy agreement as well.  In the following I will discuss the three most common breaches of contract by a tenant.
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Renting out your property: management agreement or tenancy agreement?

Increasingly, property owners choose to outsource the management of their properties. There is often no proper definition of what is for whose account, with costly and sometimes irreversible consequences. The main cause of this problem are the often unclear drafted agreements between owners and property managers. When you’re renting out your property; Do you choose management agreement or tenancy agreement? Read more down below.

Lease or management agreement?

The title of the agreement is not decisive for the qualification of the agreement. This is also evident from a 2019 case. Here, the parties had called the agreement agreed upon between them a “rental agreement for living space”. A specific clause granted the tenant/manager the right to sublet the premises. When the property owner wanted to terminate the lease, the tenant/manager invoked rent protection. (As if he was a regular tenant).

If this appeal succeeded, the tenant/manager could continue to sublet the rooms for an indefinite period of time. Both parties referred to the agreement as a “rental agreement,”. However, the actual performance of the agreement led the Court to come to a different conclusion. They stated that the agreement could not be classified as anything other than a management agreement. The tenant would have rent protection if the court had ruled that there was a rental agreement. This would have made it more difficult for the property owner to terminate the rental agreement.

Company as resident

In a similar case, the District Court of Amsterdam ruled that there was a management agreement with, among other things, the consideration that a private limited company could not even occupy a property as a tenant.  This made it legally impossible to speak of a tenancy agreement, contrary to what the parties had agreed.

Notices to the administrator

(Non) given announcements can also lead to a discrepancy between the tenant, landlord/manager and property owner. In a case from 2012, the tenant believed that the manager had given him permission for a large-scale renovation. The manager in turn defended this. He was stating that the tenant could not even assume that he was authorized to give permission for large-scale renovations. The Court of Appeal of Amsterdam did not go along with the manager’s defence. The claimed that giving permission for a major renovation does indeed fit in with a manager’s job. The tenant was therefore entitled to assume that he was allowed to carry out the large-scale renovations.

In addition, the tenant thought he had permission to sublet the rooms. The court ruled that even if the manager had said that he gave permission for subletting, the tenant should not, in principle, have trusted that the owner had entrusted the manager with such powers. Such a communication concerns exploitation of the property, and one can not consider this to be part of the management by the manager.

Conclusion

These cases are frequent. They are also good examples of why it is important to draft an agreement between manager and property owner carefully. It is important to prevent a property owner from the confrontation of major renovations of his premises by the tenant. As well as the prevention of subletting by the tenant or a manager suddenly invoking rent protection.

If you have any questions regarding renting out your property, please do contact us.

 

The differences between renting or leasing commercial space

What are the differences between renting or leasing commercial space? If you rent or lease commercial space, Dutch law distinguishes between two ‘types of commercial spaces’. The so-called 230a-spaces and 290-spaces. The difference between the two types of business premises and the applicable legislation is important for both tenants and landlords. In this blog I will discuss some important differences.

290 business premises

Business premises qualify as 290 business space if you lease the building or part thereof for the operation of a retail business. Such as a restaurant, a café, a take-away or delivery service or a craft business. The relevant aspect or criterion is whether the space is a publicly accessible area and if you’ll use it for the direct supply of goods or services.

In simple terms, a commercial space qualifies as a 290-spaces if consumers can physically enter and buy or order things in the leased space. For example a supermarket or a hairdresser. Hotels and campsites also fall under this legal regime.

Duration

The tenant of a 290 business space has a relatively high level of tenant protection under Dutch law. The most striking aspect is the duration of the rental agreement. The initial rental period for 290-spaces is five years. If the contract is not terminated (in time) it will be extended for another five years by law. If the tenancy agreement has not been terminated after ten years, the tenancy agreement becomes a contract for an indefinite period by of law.

Possibilities of termination

In addition to the protective regulations for the tenant regarding the duration, the termination options of the lease contract for 290 business spaces are limited.

Both the lessor and the lessee can only terminate the lease at the end of the agreed term. This is however subject to a notice period of at least one year. The termination of a lease contract of a 290 business space can therefore not happen prematurely. However and for completeness I point out that premature termination by mutual consent is possible. One can terminate a permanent lease at any date. In all cases termination by the landlord is only possible if he states the reason(s) for termination.

The law only grants a few specific grounds for termination to the landlord. Which grounds for termination the landlord can use depends on the lease period(s) that have passed. The most common grounds for termination are: bad tenancy behavior and urgent own use by the landlord. Bad tenancy is, for example, if the rent is structurally not paid or not paid on time or if the tenant causes structural nuisance.

If the tenant does not agree to a termination by the landlord within six weeks, the landlord has to go to court to have the termination reviewed. Such a procedure is often time-consuming and costly.

230a business premises

If the leased property does not fall under the regime of residential or 290 business spaces, the 230a regime applies. Common examples of 230a business spaces are office space, factories, storage space and showrooms.

The tenant of a 230a space has much less legal protection than the tenant of a 290 space. The rental period, for example, is not subject to any form of contract. One can conclude it for a short(er) period. It is common practice that parties agree on a term of (only) one year, which period will automatically extend. An indefinite period is also possible.

A contract for a definite period ends automatically when the agreed period expires. A contract for an indefinite period ends by termination by the lessee or lessor. A reason for termination is not necessary. However, a notice period must be observed. Unless otherwise agreed, the notice period is equal to the term of payment. If the rent is paid monthly, the notice period is in general one month. However, an extended notice period could be applicable if the principles of reasonableness and fairness so require.

Note that the tenant can extend his stay in the event of termination by the landlord by invoking eviction protection. For example, because he needs time to move to another business accommodation. This period can be a maximum of three years after the date on which eviction from the leased property was given notice.

Conclusion on renting or leasing commercial space

The legislations that apply on the lease of a commercial space depend on the type of business space the tenant rents. When it comes to 290-premises, such as retail space, there is far more protection for the tenant than when it comes to 230a space.

Further agreements can be made in the tenancy agreement, for example regarding the termination of the contract. When it comes to 290-premises the legal rules may never be deviated from to the detriment of the tenant. However, when it comes to 230a space, parties have a lot of freedom to incorporate specific arrangements in their contract.

When entering into a commercial lease, both as landlord or a tenant, it is advisable to carefully think about the applicable legislations and the obligations by law and by contract. And when it comes to 230a space, I recommend to already incorporate agreements about, for example, the extension of the lease period, the notice period in case of termination and of course the actual possibilities of termination. When it comes to 290 commercial space, the landlord would do well to carefully organize the possible  termination of the lease.

More information?

In case you have questions about renting or leasing commercial space, ensure certainty and have your tenancy agreement assessed by a lawyer, please do not hesitate to contact us.