Is it fair that a business owner who was forced to temporarily close their business due to the coronavirus crisis should pay less rent during that period? The District Court in the Northern Netherlands recently became the first to rule in a case in which a company only partially wanted to pay the rent for a commercial property due to the coronavirus crisis .
This case concerns a beer brewer who leases a catering property from a small real estate investor and sublets it to a client. The client operates a café in the building.
Due to the COVID-19 measures, the café has to close in mid-March. The brewer therefore seeks an agreement with the landlord to pay two-thirds of the normal rent for April and May. The landlord refuses and initiates summary proceedings.
Missing the pleasure of renting
The court stated in its ruling that the catering establishment was closed by order of the government, resulting in the brewer and subtenant losing the enjoyment of the lease. Moreover, this is not wholly or partially attributable to the tenant. Therefore, the court considers that the brewer’s proposed rent reduction of one-third of the normal rent in these summary proceedings does not appear to be unreasonable.
Unforeseen circumstance
In the summary proceedings, the court did not rule on the appeal to unforeseen circumstances, but it did indicate that it is logical to consider the “coronavirus crisis” as an unforeseen circumstance. As a result of this ruling, the brewer only has to pay two-thirds of the rent to the landlord for the months of May through August (as long as the hospitality closure remains in effect).
Preliminary judgment
Does this ruling mean that other tenants in similar situations can also expect a one-third rent reduction? No, that’s not the case. This is a summary proceedings procedure in which the court issues a provisional judgment. The court assumes a tenancy law defect and considers it obvious that unforeseen circumstances are involved. The court’s reasoning that the disruption of the tenant’s enjoyment of the lease cannot be entirely attributed to the tenant is easy to understand. But it’s also unfair to shift the entire burden of the consequences of the coronavirus crisis onto the landlord. Tenants and landlords will likely have to work together to find a solution.
Substantive proceedings
More rulings on these types of lawsuits will undoubtedly follow in the near future. The first substantive proceedings will also be concluded in a few months. Then it will likely become clear who is responsible in the event of a “closure of the leased property due to a government measure” and whether unforeseen circumstances may warrant amending an agreement.
Want to know more about this topic? Contact the rental law atto`rneys at RechtNet at info@rechtnet.nl or call 073-6154311 .