Tenants of commercial space face hefty rent indexations due to high inflation. The rent increase for houses (in the free sector) has been capped by a change in the law from 1 January 2023. What about this for the rent of business space?

ROZ model

In order to determine the annual rent increase, the agreements in the lease must be examined. In practice, the ROZ model contract and its general provisions are widely used. It follows from these general provisions that the rent may be indexed annually on the basis of the monthly price index figure according to the consumer price index all households (CPI), published by Statistics Netherlands (CBS), which figure is in turn directly related to inflation. The CBS website contains a calculation tool that can be used to calculate the increase using the correct data.

Consumer price index

The consumer price index is the index figure reflecting the price movement of a basket of goods and services as purchased on average by all households in the Netherlands. The basket of goods and services includes food, energy, durable goods such as household appliances and cars and some government services. Last year, inflation was largely driven by increased energy prices.

The indexation clause in most leases aims to offset increased owner charges. The CPI is usually a good benchmark for calculating these costs. Given extreme inflation, indexation currently often results in a rent increase of 10% or higher.

Many tenants find this increase unreasonable and protest against it. However, under the lease agreement, the landlord has the right to adjust the rent in this way. Unlike residential property, the increase in rent is not capped by the legislator.

Core inflation

Several industry and umbrella organisations have called for the core inflation rate to be used in rent indexation instead of the CPI. The core inflation rate is lower than the CPI because that figure excludes price-sensitive components such as food and energy. The core inflation rate would therefore give a better picture of 'real' inflation. (Core inflation was 5.3% in October 2022). Cost of living and energy are mostly already borne by the tenant. A rent indexation that includes this cost increase would potentially put the tenant at a double disadvantage. In addition, an indexation based on this high inflation will have lasting consequences as the following years will have this new, sharply increased rent as the basis for the then applicable indexation.

Unforeseen circumstance?

When most leases were entered into, this extreme inflation could not have been foreseen. The starting point is that the parties have agreed on indexation in accordance with the CPI, but it cannot be ruled out that the current inflation can be regarded as an unforeseen circumstance within the meaning of Section 6:258 of the Dutch Civil Code, necessitating adjustment of the lease. Continuation of the lease in unaltered form may then not be expected of the tenant by standards of reasonableness and fairness. In Corona, this led to adjustment of the rent but in the context of indexation, this is not yet clear.

Consult

For now, the advice is: as tenant and landlord, enter into discussions with each other about the extent of rent indexation and try to arrive at a rent adjustment that does justice to the increased burden on the landlord but does not unreasonably disadvantage the tenant.

A landlord may benefit from (partially) waiving the annual rent increase, for example if the tenant can no longer afford the changed rent. Whether another tenant would be able to pay the changed price is questionable. It may not be easy for the landlord to find a new tenant at the same rent and the landlord does not benefit from an empty property. It may therefore be advisable to make arrangements by mutual agreement but this requires the willingness of both parties.

Do you have questions or would you like advice regarding a change of rent or other lease issues? If so, please contact one of our lawyers without obligation. We will be happy to assist you.