Netherlands

Updated on 30.04.2020.

1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?

On the basis of Dutch case law, a decline in footfall and turnover as a result of unforeseen circumstances, such as COVID-19 and the lockdown measures, was/is commonly considered (naar verkeersopvattingen) to be part of the entrepreneurial risk of a lessee and which do not constitute a defect (and therefore cannot lead to a claim for rent reduction). 

Having said this, the COVID-19 situation is unprecedented in scope, impact and duration and affects the communis opinio (de verkeersopvattingen). One may argue that the concept of generally prevailing opinion (de verkeersopvatting) changes in such way that the impact of COVID-19 crisis and the consequences of the guidelines on social distancing and governmental lockdown measures, are (no longer) an entrepreneurial/commercial risk for lessees only. The abovementioned Dutch case law may no longer apply or not apply in full. 

On the basis of the principles of reasonableness and fairness and the doctrine of unforeseen circumstances, the lessor may be obliged to offer a rent reduction of rental payments. The specific facts and circumstances of the case, such as the capacity of lessee, type of lease and asset play an important role in determining if and to what extent the lessee is entitled to a rent reduction. 

2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?

As to the rent reduction, see our comments above.

When closing on its own initiative (without an order by the Government), it should be noted that most lease agreements include an obligation to operate and that consultation with the lessor is advisable before such closing.

3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?

In addition to our comments under 1, a governmental order in connection with COVID-19 may constitute force majeure and may be one of the circumstances which cannot be brought for the sole risk of the lessee (please be also referred to the question about force majeure below). 

4. Is there any (binding) COVID-19 regulation applicable to commercial lease agreements?

The Dutch government has not adopted any (binding) regulation at the moment regarding commercial leases (yet). With regard to retail properties, please be also referred to the question below.

5. Are there any guidelines/agreements applicable to retail properties? 

On 10 April 2020, several relevant market players (Association of Institutional Property Investors in the Netherlands (IVBM), Netherlands Bankers' Association (NVB) representing ABN AMRO, Deutsche Bank, ING and Rabobank, Ministry of Economic Affairs and Climate Policy (EZK) and multiple retail sector organizations) issued a joint press release. Pursuant to this press release, the parties agreed on guidelines/a “gentlemen’s agreement” which support the retail market and clarify how the relevant market players on the retail market should interact with each other during the current COVID-19 crisis. The guidelines are not binding. For details we refer to www.ivba.nl/actueel-artikel-detail/steun-akkoord .

Save for specific contractual arrangements and specific individual circumstances, we believe that terminating the lease is an uphill battle for a lessee.

We see current market initiatives arise in which the lessors and lessees jointly agree on (temporary) settlements or adjustments regarding their lease agreements, such as rental payments in arrears, partial rent reductions, extensions of the payment term and rental payment arrangements. However, mutual consent by both lessor and lessee is required.

7. Does the outbreak of COVID-19 justifies invoking force majeure by lessee? 

Most leases do not contain  a force majeure clause. Usually parties rely on the statutory provision regarding force majeure are set out in the Dutch civil code.

It depends very much on the specific lease circumstances of the case and the conditions in the lease agreement, whether there is a situation of force majeure.

A governmental order to close down in connection with COVID-19, such as the temporary closure of restaurants or retail locations, may under circumstances, may qualify as force majeure.

Picture of Arnout Scholten
Arnout Scholten
Partner
Amsterdam
Picture of Hein van Meer
Hein van der Meer
Partner
Amsterdam