Must commercial tenants continue paying their rent in full?

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Whether or not retail tenants are obliged to continue paying rent during the current coronavirus crisis is the subject of heated debate at the moment. There is a great deal of discussion taking place, during which emotions are – understandably – running high. The position of retailers was addressed during a debate in the House of Representatives, at which point Rob Jetten of Democrats 66 (generally the picture of impeccable conduct) called on shopkeepers who “feel they are being screwed” to contact his office.  Interest groups of tenants and retailers who are in discussion with one another regarding a general guideline for the retail sector urge landlords and tenants to “apply their common sense”. On 25 March, they called for a deferment of rent for shopkeepers until at least 20 April 2020. Talks regarding a permanent solution are still in progress.

As in any situation, of course, it’s good advice to use one’s common sense. In this exceptional period, which no one predicted and which will have immense repercussions, it is vital that landlords and tenants remain in communication and – taking one another’s interests into account – attempt to arrive at a reasonable solution.

Tenancy law

Where such discussions are concerned, a bit of legal clarification is in order. In most cases, rental contracts are reasonably watertight and allow no room for the tenant to reduce or discontinue payment of the rent. This is particularly true for rental contracts drafted in accordance with the model drawn up by the Netherlands Real Estate Council (ROZ), which are used in the majority of cases.

On the other hand, tenancy law itself provides for the possibility of adjusting the obligation to pay rent. It is possible that the newly adopted government measures could be considered as a defect. The landlord, after all, will not receive the benefit they were entitled to expect from the tenant. This is especially imaginable in cases involving tenancy of a restaurant or other hospitality business, which has been required to close as a result of the government’s precautionary measures. But even in cases where the tenant was (in principle) allowed to remain open for business, but is generating virtually no income, the consequences of the government measures could possibly be viewed as a defect. By law, such a defect justifies a reduction in the rent owed.

On this point, however, the rental contract supersedes the statute – meaning that tenants who lease space based on an ROZ contract will be unable to invoke these provisions of law.

The court

Does this mean that tenants with an ROZ contract are completely out of luck? Not entirely. The Dutch Civil Code (Burgerlijk Wetboek) allows court judges the possibility of amending or nullifying contractual provisions. An example of this takes place when unforeseen circumstances occur, as we described in a previous entry. Yet the invocation of force majeure is a possibility as well, as is an appeal to the statutory provisions stating that the requirements of reasonableness and fairness may negate a contractual provision or be used to supplement a contract.

In determining whether a contract should be amended, the court will undoubtedly take into account the fact that no one saw the coronavirus crisis coming and that no party is to blame. The guiding principle in all cases will be: what have the parties agreed to in the contract? Yet in light of the court’s ability to intervene in a contract, even when it has been drafted in accordance with the ROZ model, a signed contract is hardly sacrosanct.

This is something for the landlord and tenant to keep in mind when discussing the question of how to proceed during this period.

Help desk

We have established a HELP DESK to answer all your corona-related questions. Feel free to contact us (at no obligation) for help with the questions on your mind today or in the weeks ahead. We can provide you with a brief indication of potential solutions for your current situation.

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