Supreme Court rules again on calculation method for rent reduction due to coronavirus for commercial leases
On 4 July 2025, the Supreme Court issued another ruling on the calculation method for rent reductions for commercial premises due to COVID-19. The Supreme Court ruled that, depending on the circumstances of the case, the court may choose which method to use to calculate the rent reduction in a specific case.
Rent reduction due to coronavirus: what was the situation again?
Earlier, on 24 December 2021, the Supreme Court ruled on preliminary questions about rent reduction during the coronavirus pandemic. The Supreme Court ruled that the circumstance that a tenant is unable to use the rented property, or can only use it to a limited extent, as a result of the coronavirus measures is an “unforeseen circumstance” that the parties did not take into account when concluding rental agreements before 15 March 2020. In such cases, the court may adjust the lease agreement by reducing the rent for the period of the loss of turnover. The reduction in rent had to be calculated in accordance with the fixed costs method. With the latter, the Supreme Court intended to provide a tool with which tenants and landlords of commercial premises could mutually agree to adjust the rent to the changed circumstances.
Deviating from the fixed costs method is permitted in the case of, for example, turnover-related rent.
In the case that led to the judgment of 4 July 2025, the dispute concerned the lease of a hotel. The rent consisted of a percentage of the turnover or a minimum rent (if the turnover was insufficient).
The tenant of the hotel claimed a reduction in the rent payment obligation for a period starting on 15 March 2020 (first lockdown) due to the coronavirus pandemic and the related government measures.
The court ruled that the hotel tenant’s turnover was so low that no turnover-related rent was due and that the fixed costs method and the 50/50 distribution should be applied to the minimum rent.
However, when the case was referred to the court of appeal, the court saw grounds to deviate from the calculation of the rent reduction according to the fixed costs method. After all, no fixed rent had been agreed, but a turnover-related rent.
Rent reduction must be based on change in value
The court explained that, under normal circumstances, the hotel would have had to pay a higher (because turnover-related) rent if its turnover had been higher. Due to the coronavirus measures, the hotel achieved a lower turnover, but this was offset by a lower rent.The disruption of the value ratio is therefore considerably less serious than in cases where a fixed rent has been agreed. The court therefore takes the lower rent into account when calculating the rent reduction.
The court explained that the landlord does not have to compensate the tenant for the fact that the latter is facing significant losses as a result of the coronavirus measures. A landlord of commercial premises must compensate the tenant for the fact that the coronavirus measures have reduced the “value” of the rented property for the tenant and the “value” of the rent has not decreased to the same extent.
Formula for rent reduction due to coronavirus in the case of turnover-related rent
The court ruled that when entering into the lease agreement, the landlord and tenant had assumed that the minimum rent would apply if the turnover did not exceed €13 million. The minimum rent and the percentage of the turnover were subsequently indexed.
To calculate the rent reduction, the turnover during the coronavirus period is compared with the turnover that would apply if the minimum rent were due. Before indexation, the turnover during the coronavirus period would therefore have to be compared with £13 million. This results in a percentage of turnover loss. This percentage is then divided by two and deducted from the minimum rent.
The Supreme Court upheld the court’s decision. This means that the court has the discretion to choose its own method for calculating rent reductions due to the coronavirus, if circumstances so require.
Conclusion
Not all tenants and landlords of commercial premises have yet made (final) agreements on rent reductions for commercial premises due to the government measures resulting from the coronavirus pandemic. This is still possible.
This also applies if a turnover-related rent had been agreed. Are you a tenant or landlord of commercial premises and would you like to know what this means for your situation? Please contact Yvonne Hilderink at hilderink@lvh-advocaten.nl.
