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21 May 2021 Preliminary questions to the Supreme Court on rent reduction during the corona crisis

The most recent case law on the subject of rent and corona follows that, in principle, a tenant is entitled to a rent reduction because there is either a defect or unforeseen circumstances, provided the tenant can demonstrate that he has been affected by the consequences of the corona crisis, including the government-imposed closure, and the tenant can demonstrate that he has lost turnover as a result. Other circumstances, such as the relief the tenant has received from the government, are also taken into account. However, there is still no complete clarity. The Court of Limburg has therefore recently submitted preliminary questions to the Supreme Court.

It concerned a dispute between the brewery Heineken as tenant and a landlord in Limburg. Heineken rents approximately 600 premises, which it in turn sublets to catering businesses. As a result of the government enforced closure, Heineken, urged by Koninklijke Horeca Nederland, decided to meet its catering customers halfway by waiving two months' rent. Heineken then sent a letter to its landlords, requesting them to agree to the proposal to pass on one of the two months' rent to them (the landlords). Heineken thus requested a rent reduction of one month.

However, the landlord of the premises in question refused to agree to Heineken's proposal. Heineken insisted on its proposal and implemented it by withholding the one-month's rent. The landlord did not accept this and instituted legal proceedings.

In the proceedings Heineken argued, among other things, that by virtue of the defects regulation (Section 7:204 of the Dutch Civil Code) it was entitled to a 50% rent reduction during a certain period. On the basis of that defect, the court should reduce the rent pursuant to Section 7:207 of the Dutch Civil Code.

The Subdistrict Court of Limburg wondered whether the mandatory closure should be qualified as a defect to the leased property and should lead to a reduction of the rent in connection with reduced enjoyment of the lease.

According to the Subdistrict Court, the legislative history can be interpreted differently in order to answer the question of whether the corona crisis qualifies as a defect. The legislative history stipulates that a defect does not only refer to the material condition of the property, but to any circumstance relating to the property that limits the enjoyment thereof. Mandatory state measures would then constitute such a circumstance. It could also be argued that the corona government measures relate to the exercise of the hospitality business and not to the property itself.

According to the Subdistrict Court, the legislative history can be interpreted differently in order to answer the question of whether the corona crisis qualifies as a defect. The legislative history stipulates that a defect does not only refer to the material condition of the property, but to any circumstance relating to the property that limits the enjoyment thereof. Mandatory state measures would then constitute such a circumstance. It could also be argued that the corona government measures relate to the exercise of the hospitality business and not to the property itself.

Although society feels a certain need to divide the enormous damage of the corona measures for shopkeepers in a certain way between tenants and landlords, it is not clear whether and how this can and may be legally shaped. In addition, there are currently many lawsuits on this issue nationwide, and it is expected that many more will follow.

The Subdistrict Court therefore deemed it useful to put the following preliminary questions (legal questions from a judge to a higher court concerning the interpretation of a legal rule) to the Supreme Court:

  1. Should the government-imposed closure of the catering sector as a consequence of the Corona Crisis be regarded as a defect within the meaning of Section 7:204 (2) of the Dutch Civil Code?
  2. If so, on the basis of which criteria should the degree of rent reduction be assessed?
  3. (Or) does the restriction on the use of the leased property constitute an unforeseen circumstance that may lead to a reduction in rent?
  4. If so, what circumstances of the case weigh in determining or apportioning the loss?

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At the moment, we have to wait and see how the Supreme Court will answer these questions.

Would you like to know more or do you have questions about your position as a tenant or landlord? Please feel free to contact one of our lawyers without any obligation. We will be happy to assist you and keep you informed of further developments.

SPEE advocaten & mediation Maastricht

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