A landlord wishes to terminate a long-term lease of commercial premises within the meaning of Article 7:290 of the Dutch Civil Code (‘retail and hospitality premises’) because another party is prepared to pay a significantly higher rent. Several hundred thousand euros more per year! Is this possible? At the end of last year, the Dutch Supreme Court handed down a judgment on this issue.
Commercial premises used for retail, hospitality or craft activities are subject to the special protection regime under Article 7:290 of the Dutch Civil Code (DCC). Leases for such premises are generally entered into for an initial term of five years, followed by a further five-year term, and are often extended thereafter, either for a fixed or indefinite period.
A landlord may terminate such a lease only on a limited number of statutory grounds, such as urgent personal use or a breach of contract by the tenant.
A lease may also be terminated at the end of the second five-year term or, where the lease has been extended, at a later stage, on the basis of a reasonable balancing of the interests of the tenant and landlord.
Rent adjustments are governed by a separate statutory procedure (Article 7:303 DCC), under which the court determines the rent based on comparable commercial premises in the surrounding area over the preceding five years.
Ahold had leased commercial premises in Amsterdam since 1989 for an Albert Heijn supermarket, at an annual rent of €488,000. After the agreed lease terms had expired, the lease continued indefinitely from 2019 onwards. When a third party offered to pay €775,000 per year, the landlords terminated the lease on the basis of a balancing of interests, seeking to regain vacant possession of the premises so that they could subsequently enter into a new lease with the third party.
Both the subdistrict court and the Amsterdam Court of Appeal rejected the landlords’ claim. The Supreme Court dismissed the appeal in cassation.
The Supreme Court formulated its conclusion as follows:
“It follows from the statutory scheme and the legislative history that it is not possible to terminate a lease of commercial premises within the meaning of Article 7:290 DCC pursuant to Article 7:296(3) DCC solely for the purpose of securing a higher rent. The landlord may instead make use of the procedure under Article 7:303 DCC.”
The termination route therefore cannot be used as a means of forcing through a rent increase or replacing the existing tenant with a higher-paying third party. If a landlord wishes to increase the rent, the statutory rent review procedure is the appropriate route — even where the lease has been in place for several decades.
For tenants, this judgment confirms that statutory rent protection remains fully applicable even after a long period of tenancy.
For landlords, the judgment makes clear that a rent increase must be pursued through the statutory rent review procedure. The mere prospect of obtaining substantially higher rent from another tenant does not, in itself, justify termination of the existing lease.
If you have any questions, please contact Per van der Kooi, attorney specialising in real estate & government law.
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