The North Holland District Court recently received a request from a tenant of commercial premises, who had accumulated substantial rent arrears, to suspend the eviction that had already been ordered. Whose interests did the court consider to be more important, those of the tenant or those of the landlord?

The facts

Since 1 April 2017, the tenant had been renting commercial premises in which he operated a business. After several years, the tenant was consistently late in paying the rent and the rent for the current month was paid in instalments. After a substantial arrears had accumulated, the landlord initiated proceedings and demanded payment of the arrears as well as eviction from the rented property. The tenant was ordered to pay, but the (joint) claim for eviction was rejected because the tenant had paid a substantial amount just before the hearing. As a result, there was no longer a significant rent arrears. As the rent arrears subsequently increased again and the tenant failed to pay despite repeated requests, the landlord again requested payment and eviction. This time, the preliminary relief judge also granted the eviction.

According to the preliminary relief judge, paying rent (on time) is one of the tenant's essential obligations. The tenant had repeatedly failed to do so. Despite the tenant's willingness to make up the arrears, there was no evidence that he was able to do so or that there was any prospect of improvement in the situation. The tenant had acknowledged that his business was not viable at the current rent level and that he also had other debts. Moreover, the landlord had given the tenant several opportunities over a long period of time to pay the rent in full, which had led to nothing. The landlord's interest in limiting the rental damage and vacating the rented property therefore outweighed the tenant's interest in continuing to use the rented property.

The landlord then served the judgment on the tenant and also gave notice to vacate the rented property. In addition, the landlord placed an executory attachment on the tenant's home. The tenant disagreed with this and appealed against the judgment.The tenant also initiated summary proceedings. The tenant requested that the enforcement of the judgment be suspended while the appeal was still pending.

The enforcement dispute

The tenant based his claim on the fact that the landlord did not have such compelling (legally respected) interests that the decision on appeal could not be awaited, while he did have a compelling interest in suspending the enforcement. Eviction would deprive him of the opportunity to generate income and to sell the business (privately), the proceeds of which (estimated at approximately €150,000 to €200,000) could be used to satisfy the landlord's claim. It would also cause him considerable additional damage. Enforcement sale of his home would lead to high enforcement costs and a low(er) purchase price.

The landlord argued that the basic principle is that a judgment can be enforced pending appeal and that the enforcement of the judgment is not unlawful. The rent arrears had not changed significantly since the judgment and, in view of the previous payment arrears, the landlord no longer had any confidence that the tenant would comply with further agreements. The tenant had not sufficiently substantiated his arguments as to why the enforcement of the judgment should be suspended, nor had he sufficiently substantiated the sale value of the business. Furthermore, it had not been demonstrated that there was already a buyer or investor for the tenant's business.

The judgment

The basic principle is that a final judgment, pending an appeal, must be enforceable and can be enforced without the condition of security. A deviation from this principle can be justified by circumstances that mean that the interest of the convicted party in maintaining the existing situation until a decision has been made on the legal remedy he has instituted, or his interest in security, even given this principle, outweighs the interest of the person who obtained the conviction in the judgment to be enforced, in the provisional enforceability thereof or in this enforceability without the condition of security being attached.

When applying this criterion in summary proceedings, the decisions in the judgment to be enforced and the findings and judgments on which they are based must be taken as a starting point. The likelihood of success of the legal remedy used or to be used against that decision is not taken into account, on the understanding that the judge in preliminary relief proceedings may take into account in his assessment whether the decision(s) to be enforced is (are) based on a manifest error.

The judge in preliminary relief proceedings found that the tenant had not been fulfilling his payment obligations under the lease agreement (in full or on time) for some time, that the arrears in payment were still as high as ever and that the tenant was still – even after the judgment had been handed down – failing to pay the rent on time. In addition, since the judgment, the tenant had not taken any concrete steps to sell the business. At that point, there was therefore no concrete prospect that the rent arrears could be paid to the landlord through the sale of the business. Moreover, the tenant had not demonstrated that the “repayment schedule” of €2,250 per week proposed by him was a structural payment option that he would (be able to) continue to meet until the appeal had been decided. In the opinion of the preliminary relief judge, the tenant did not have sufficient interest in a complete suspension of the judgment until the appeal was decided, given the landlord's interest in not running the risk of the rent arrears increasing further.

However, according to the preliminary relief judge, this was offset by the fact that eviction from the rented property would undoubtedly lead to a large loss for the tenant, because the business would then no longer be able to continue as a “going concern” by a potential buyer. The immediate eviction of the business operating in the rented property would therefore lead to an immediate cessation of (any possibility of generating) turnover, as a result of which the tenant would also no longer be able to meet its payment obligations to the landlord as of that same date. Furthermore, if the business's inventory were to be removed immediately from the leased premises as a result of the eviction, it would yield less goodwill than if the business were to be sold including all its accessories. In other words, immediate continuation of the enforcement of the judgment would in all likelihood lead to a large loss of capital for the tenant, with the additional disadvantage that the tenant's ability to repay its debt to the landlord would also be significantly reduced. In addition, the landlord had indicated at the hearing that he did not yet have a new tenant, so that even after eviction by the tenant, he would not generate any rental income, at least for the time being.

In view of the importance of preserving the value of the company for sale (and thus being able to repay the rent debt in one go) combined with the fact that the landlord would not receive any rental income for the time being in the event of immediate eviction, the preliminary relief judge ruled that the tenant's interest in temporarily maintaining the existing situation during the hearing of his appeal outweighed the landlord's interest in the immediate enforcement of the judgment.

On the basis of the above, the preliminary relief judge ruled that both parties would benefit from a temporary measure that did justice to everyone's interests. This included both the landlord's interest in collecting the rent and arrears, and the tenant's interest in generating sufficient turnover and finding a buyer in order to pay his debt to the landlord.

The preliminary relief judge therefore temporarily suspended the eviction from the business premises to give the tenant the opportunity to sell his business and use the proceeds from the sale to pay the rent arrears. In the meantime, the tenant had to continue to make his promised weekly payments of €2,250 punctually (on the Monday of each week). Failure to make timely payments would result in the suspension being revoked and the landlord being able to proceed with the eviction.

Conclusion

In this case, the preliminary relief judge therefore granted a conditional suspension in the interests of both parties. Despite the substantial arrears, the tenant was granted a temporary postponement of the eviction on certain conditions because there was a prospect of a structural solution that was also in the landlord's interests. The sale of the business would enable the rent arrears to be paid.

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