The Rotterdam District Court recently ordered a VvE administrator to pay substantial damages to the VvE because the administrator had not exercised the due care of a good contractor when purchasing collective energy. What was at stake here?

The facts

Since 1 May 2015, an administrator has been performing management for the VvE on the basis of a VvE management agreement concluded between the parties. This agreement stipulates, among other things, that the administrator is obliged towards the association to perform his work in a timely, proper and careful manner, taking into account the provisions in the agreement, the division deed, the division regulations and instructions from the general meeting of members.

The agreement also stipulates that if the administrator does not perform his duties as VvE administrator as may be expected of a good VvE management organisation, or contrary to the provisions of the agreement, he will be liable for all resulting damage to the association and to third parties.

In 2017, the administrator made a proposal to the VvE to purchase electricity and gas collectively with other owners' associations affiliated to it in order to save costs. The general membership meeting mandated the VvE board to enter into a multi-year contract for electricity and gas consumption. Subsequently, a contract for the supply of electricity and a contract for the supply of gas for the period 1 January 2018 to 31 December 2020 were concluded between the VvE and Eneco.

In the summer of 2020, the administrator announced the possibility of fixing tariffs for a longer period that would possibly be even lower than the current ones. An extended authorisation was requested in order to achieve this.

In response, the VvE said it had noticed that there is not a lot of competition and that Eneco could have been keener and therefore wanted to look at rates itself.

After a reminder from the administrator, the building committee said it would give its approval to conclude a contract for 1, 2 or 3 years if that would be more advantageous than the current rates and if the contract was concluded before 1 September, preferably earlier.

In December, the administrator announced it had concluded new annual contracts with Eneco that would achieve an average price reduction of over 13% by 2021, excluding taxes and surcharges. Following this news, the VvE asked the administrator when the contracts had been concluded then. Indeed, according to the VvE, a contract could be concluded elsewhere without collective purchasing where the price was even more than 2 cents lower. It then turned out that Eneco was charging a rate that was almost double, namely €0.3227 instead of €0.15922 per m3.

This eventually turned out to be due to the type of gas connection which meant that the VvE could not use the collective purchase at all.

 After consultation between the administrator, the VvE and Eneco, a new gas supply agreement was subsequently concluded for the period from 2022 to 2025. For the delivery year 2021, a tariff of €0.24289 per m3 of gas was charged retroactively by Eneco as a courtesy.

The procedure

However, the VvE did not leave it at that and started proceedings against the administrator. The claim was that the court should rule that the administrator had imputably failed to comply with the management contract concluded with the VvE and had therefore become liable to pay damages to the VvE. It also claimed damages of €145,960.84 primarily, or alternatively €118,835.54, or alternatively an amount to be determined by the court in good court, plus interest and extrajudicial costs.

According to the VvE, the administrator had not performed as may be expected of a reasonably acting, reasonably competent administrator of an association of owners. The VvE had instructed the administrator to enter into the most favourable multi-year energy supply contract possible. However, the administrator had done the opposite. He had presented the VvE with an incorrect collective purchasing option and then piled error on error, as a result of lackadaisical and intransparent communication. As a result of the administrator's actions, the VvE will have to pay much more for gas over the period 2021 to 2025 than if the administrator had carried out its work properly.

The administrator sought dismissal of the claim, ordering the VvE to pay the costs of the proceedings.

Judgement of the court

The court first stated that the management contract is a contract for services. This is because the management contract relates to activities to be performed by the administrator other than pursuant to an employment contract, which consist in something other than the realisation of a material work, the storage of goods, the publishing of works or the transporting or causing the transporting of persons (Section 7:400 of the Dutch Civil Code).

In a contract for services, the contractor (the administrator) must exercise the care of a good contractor in his activities (Article 7:401 of the Civil Code). He must act as a reasonably competent and reasonably acting professional would. Whether he did so in a specific situation depends on the circumstances of the case.

First of all, the VvE blamed the administrator for having offered the VvE collective energy purchase in June 2020, when it was not eligible for this. The court understood this reproach to refer only to the purchase of gas. It was not in dispute between the parties that the VvE had concluded a new agreement for the supply of electricity with Eneco on the basis of the collective purchase.

It was established that the administrator had first offered to collectively purchase gas (and electricity) in 2017. Thereupon, a gas supply agreement was agreed with Eneco. According to the administrator, this agreement had not been concluded on the basis of collective purchasing, but on the basis of a separate proposal. This was related to the type of gas connection in the apartment complex. The VvE had explained at the hearing that the administrator himself entered into this contract with Eneco on behalf of the VvE at the time, so he must have been aware that the gas supply contract was bespoke. This was also not disputed by the administrator. The court therefore assumed that at the time of the collective gas and electricity procurement offer in June 2020, the administrator was aware that the VvE might not be eligible for collective gas procurement.

Neither has it been established that around June 2020, the administrator investigated whether the VvE would be eligible for collective purchase of gas. Nor did it appear that the administrator informed the VvE that the offer to collectively purchase energy applied only to electricity or that after the VvE authorised the administrator to purchase energy, the administrator had made efforts to obtain a separate proposal for a new gas contract on behalf of the VvE's gas connection. In December 2020, the administrator had notified the VvE that a new contract for the supply of both electricity and gas had been concluded. The administrator had not written in that letter that that applied to the VvE only for electricity. Nor was it apparent that the administrator had otherwise informed the VvE that no contract had been concluded for the supply of gas. It was only in April 2021 that it became clear that no new gas supply agreement had been concluded with Eneco at all, because the VvE did not qualify for collective purchase of gas in connection with its gas connection.

In the court's opinion, by making the VvE an (unconditional) offer to purchase gas collectively, while knowing that the VvE was (possibly) not eligible for this, and leaving the VvE in the assumption that this was eventually realised, the administrator had not exercised the care of a good contractor. The administrator had thus imputably failed in its obligations as a contractor and was therefore held liable for the damage suffered by the VvE as a result.

Damage estimate

In order to determine the extent of the VvE's damages as a result of the culpable breach, the court held that a comparison had to be made between the current situation and the hypothetical situation that the administrator had not offered the VvE to collectively purchase gas in June 2020. When estimating damages, it is sufficient that the existence of the damage is plausible, after which, if its extent cannot be accurately determined, it can be determined by estimation.

There was no dispute between the parties that the factual situation was such that the VvE finally agreed on a gas supply tariff of €0.24289 per m3 for 2021 and €0.42701 per m3 for the period from 2022 to 2025.

The court found it plausible that, in the hypothetical situation, the VvE itself would have entered into a new gas supply agreement at €0.13714 per m3 for the period from 1 January 2021 to 31 December 2021.

The court did not find it plausible that in the hypothetical situation the VvE would have entered into a multi-year gas supply agreement. After all, the quoted amount of €0.13714 was the lowest rate the VvE could get in quite some time and that rate applied for a contract duration of 1 year.

This meant that even in the hypothetical situation at the end of 2021, the VvE would have had to renegotiate the tariff for gas for the period after 1 January 2022. It was established that in the current situation, the VvE had agreed a tariff of €0.42701 with Eneco in November 2021 for the period 2022 to 2025. Given the developments in the gas market, it was not plausible that in the hypothetical situation the VvE would have negotiated lower rates than €0.42701 per m3 over that period. This meant that over the period 2022 to 2025, the VvE did not/will not suffer any damage.

Based on the above, the court estimated the damage for 2021 at €14,617.88. The administrator was ordered to pay this amount plus statutory interest, extrajudicial costs of €921.18 and legal costs of €4,141.41.

Would you like to know more or do you have questions or need advice on a management agreement or other VvE issues? Then feel free to contact one of our lawyers without any obligation. We will be happy to assist you!