The Amsterdam Court of Appeal has held that a 3% rent uplift clause may be unfair, and that the landlord must demonstrate that the increase is necessary

According to the Supreme Court, an uplift clause is not in itself unfair, and a clause providing for an annual increase of up to 3% is also not considered unfair. This is because such a percentage can reasonably be necessary to enable the landlord to achieve the objectives of the uplift clause—namely compensating for cost increases that exceed inflation and aligning the rent with the development in property value—while the financial consequences are foreseeable for the tenant at the time of concluding the lease, and an annual rent increase of up to this level generally remains within acceptable limits. However, this may be different in individual cases.

Facts of the case

The lease agreement included, among other things, the following provision:

Rent adjustment

(…)

5.2

If the leased property concerns self-contained residential accommodation with a liberalised rent (…), the rent will be adjusted for the first time on 1 December 2021 and subsequently on an annual basis in accordance with Article 16 of the general provisions. (…) In addition to, and simultaneously with, the annual adjustment under Article 16 of the general provisions, the landlord is entitled to increase the rent by 3%.

The tenant sought, in proceedings before the District Court, a declaratory judgment that the rent increase clause was void. The District Court upheld the tenant’s claims. The landlord appealed.

The Court of Appeal first noted that residential lease agreements are typically concluded for a longer period and can only be terminated by the landlord on limited statutory grounds. This was also the case here, as the lease was for an indefinite term.

In line with the Supreme Court, the Court of Appeal held that the landlord has a legitimate interest—given the statutory system of limited termination grounds—in being able to adjust the initial rent annually, while the tenant has a legitimate interest in ensuring that the rent remains affordable.

An annual increase of 3% may, at first glance, not appear significant. However, the Court of Appeal found that over the medium and long term—on top of CPI indexation—it results in a substantial increase in rent. The court illustrated this with a graph showing that, under such a clause, a rent of €1,000 would rise to nearly €3,000 over a period of 20 years.

A calculation further demonstrated this effect: with a starting rent of €1,500 as of 1 July 2019, an annual 3% uplift on top of inflation results in a rent of €2,121.45 by 1 July 2024—an increase of 41.43% in just five years.

In this case, it was not demonstrated that an additional 3% uplift on top of CPI indexation was necessary to achieve the objectives identified by the Supreme Court.

The landlord argued that market rent developments for comparable properties, higher operating costs, investment needs, and sustainability-related expenses historically tend to increase more than CPI. However, the Court of Appeal held that this had not been substantiated for this specific case. As a result, no such assumption could be made.

The Court of Appeal concluded that the clause was unfair. It was not sufficiently transparent, and a structural annual increase of 3% on top of CPI indexation leads, over the medium to long term, to a rent level that becomes unaffordable for the tenant.

Unlike the Supreme Court’s assessment of a 3% uplift in general terms, the increase in this case therefore does not remain within acceptable limits.

Landlords must now be able to demonstrate and substantiate that an uplift is necessary to achieve the objectives of the clause (such as cost compensation and value alignment). A generic reference to market developments will not be sufficient.

Please contact Per van der Kooi for further information.

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