How does rent protection work for tenants of medium-sized business premises when terminating the lease?
There are two different lease regimes for the lease of business premises: lease for middle-range business premises, such as stores and catering establishments (7:290 business premises) and other business premises (7:230a business premises). This article discusses rent protection for tenants of middle business space, such as stores, catering and crafts (7:290 business space) . The rules that apply here assume a broad degree of protection for the tenant. This is because it is important for the tenant to be able to build up a business and generate income and goodwill. Rental protection is expressed in particular in the fixed lease terms, the limited termination options for the landlord, the system of rent adjustment and the right of substitution. This article specifically discusses the rent protection a tenant has when the landlord wants to terminate the lease for medium-sized business premises.
When may a lease be terminated?
A lease for medium business premises may only be terminated by the end of a specified lease term. The term regulation applies to such leases. The starting point is an initial lease term of five years. If the lease is not terminated, it is extended by five years. Notice of termination of the lease for a medium-sized business premises can only be given at the end of the lease term, for example, after the first five years.
From ten years, continuation is indefinite, unless a different duration is agreed upon in the lease. If the lease runs indefinitely, it can be terminated by any date.
How should a lease for medium business space be terminated by the landlord?
If a landlord wants to terminate the lease, he must send a registered letter or have a bailiff’s writ served. This way, the landlord can prove that the tenant has received the termination letter. The notice period for the landlord is always at least one year. If a shorter notice period is agreed upon in the lease, it is not valid. For a landlord, however, a longer notice period may be agreed upon, for example one and a half years or two years. For the tenant, a shorter notice period may be agreed upon, for example six months.
Example:
Thus, if a lease runs from April 1, 2020 to March 31, 2025, the landlord must ensure that the termination letter reaches the tenant before March 31, 2024.
The landlord must also state the grounds for termination in the termination letter. If there are no grounds for termination in the landlord’s termination letter to the tenant, the lease termination is not valid.
What are the grounds for termination in medium-sized business premises?
A lessor can only terminate the lease if one or more of the grounds for termination listed exhaustively in the law are present. For a medium-sized business premises lease with a duration of ten years or more, a landlord has more grounds for termination at his disposal than for a five-year lease.
Grounds for termination of lease agreement first five years:
- the tenant’s business practices are not as befits a good tenant; and/or
- the landlord wants to personally take the leased property into permanent use and urgently needs the leased property for that purpose (“urgent own use”).
Additional grounds for termination after 10 years:
- the tenant does not agree to a reasonable offer to enter into a new lease;
- the landlord intends, pursuant to a current zoning plan, to achieve a zoning on the leased property; and
- the landlord’s interests in terminating the lease outweigh the tenant’s interests in continuing the lease (“balancing of interests”).
What are the consequences of the landlord’s termination of the lease for medium business space?
If the landlord has terminated the lease, the lease will only end if the tenant has given notice of consent to the termination within six weeks. If no (consenting) notice is received from the tenant within six weeks, the landlord may ask the court to fix the termination date of the lease. In such proceedings, the landlord may only invoke the grounds for termination stated in the termination letter.
Is the tenant entitled to compensation for terminating the lease?
In four cases, the tenant may be entitled to compensation upon termination of the lease of a medium business space. These are:
- an allowance for moving and furnishing expenses;
- an allowance for goodwill;
- demolition of the leased property for the public interest; and
- rescission due to realization of zoning plan.
If the parties do not agree between themselves, they can go to court for this.
When temporarily leasing medium business space, a tenant has no rent protection
Importantly, when the tenant and landlord of medium-sized business premises enter into a lease for the duration of two years or less, there is no rent protection for the tenant. The idea is that parties are free to do what they agree for a certain duration. The tenant and landlord of medium-sized business premises may, in the case of a lease for two years or less, choose how the agreement ends. This can be done, for example, by giving notice, by the occurrence of a resolutive condition or by operation of law after the expiration of the agreed contract term. When the landlord terminates a temporary lease, the landlord is not bound by the legal grounds for termination. Nor does the temporary lease for medium-sized business premises end only after the court is called in to determine the end date (if the tenant does not agree to the termination). Thus, a tenant of a middle business space with a temporary lease has no rent protection.
Lease term of two years or less must be expressly stated in the lease for medium business space
A tenant of medium-sized business premises is not entitled to rent protection if the lease expressly states that it is a temporary lease (pursuant to Section 7:301 of the Dutch Civil Code). In practice, this does not always go well. For example, a five-year lease with an interim termination option after two years does not always prevent the tenant from claiming rent protection. It must also be explicitly stated that the first two years are intended to be a temporary lease for the duration of two years. If it is not explicitly stated that there is a temporary lease, the tenant of medium business premises does have rent protection.
Lawyer rental law business premises Rotterdam
Are you a landlord and want to terminate a lease for a medium-sized business space? Or are you a tenant of commercial space and have received a termination letter or want to know what your rights are?
If so, please contact Yvonne Jansen at jansen@lvh-advocaten.nl. She advises landlords and tenants of commercial premises on drafting, terminating and terminating rental agreements. She also regularly assists landlords and tenants of commercial premises in proceedings before the subdistrict court or the court of appeal.
