Lease agreements

01-06-2024
The majority of commercial lease agreements are based on the so-called ROZ-template. This is a template drawn up by the Netherlands Real Estate Council (raad voor onroerende zaken) (ROZ). It is not uncommon for the standard lease agreement and the applicable general terms and conditions to be modified and amended in negotiations between the parties.

The Dutch lease legislation distinguishes between (i) residential leases; (ii) retail lease (the lease of commercial space to be used for retail, hotels, restaurants etc.; and (iii) office/industrial lease of other types of commercial space (e.g. office space, factories, banks, etc.).

Dutch residential lease law is, for the most part, mandatory. For instance, mandatory law with respect to termination (the lessor can only terminate based on a limited number of statutory grounds and on the basis of a court order only) and the rights of the lessee's partner, the rent and rent review are also in part governed by mandatory law. Dutch residential lease law is lessee friendly and lessees are well protected by law. The mandatory character of Dutch lease law holds that parties may only deviate from mandatory law in favour of the lessee. Furthermore, the residential market can be divided into two sectors; the regulated housing sector and the non-regulated, liberalized sector. The residential properties that fall within the regulated sector are, as a result, subject to stricter governmental supervision.

With respect to lease agreements relating to commercial retail space (such as restaurants, hotels, retail space), under Dutch lease law, the initial term of the lease agreement is usually 5 years (or more). Upon expiry of the initial term the lease will usually be continued with a term of another 5 years. Parties are to a certain extent free to agree on different initial and subsequent terms. The lessor and lessee are free to agree on the rent payable. Under Dutch law the lessee and lessor are entitled to request the Court to adjust and assess the rent in accordance with the rent of comparable local retail space during a reference period of 5 years proceeding the rent review date. The Court is entitled to do so as per the end of the initial term and subsequently after every 5 consecutive years after the last adjustment of the rent by the parties.The above assumes that the lease will run for an indefinite term following the initial fixed term. Furthermore, Dutch lease law includes mandatory provisions with respect of the termination grounds to be used by the lessor when terminating the lease agreement. From the mandatory provisions as included in the Dutch Civil Code, can only be deviated from to the disadvantage of the lessee if the deviating clauses have been approved by the court.

With regard to office space, Dutch lease law does neither contain provisions concerning the terms of the lease, nor termination grounds, nor for rent revision. The lessor and the lessee are free to make arrangements on durations, rent level, notice periods, rent revision and other commercial topics. The leases concerning offices are subject to the mandatory provision of article 7:230a of the Dutch Civil Code as a result of which the lessor, in order to effect the vacation of the leased premises by the lessee, must also give a notice of vacation to the lessee. From the date of vacation set forth in the notice of vacation, in principle – unless the lessee has agreed to a termination or terminated the lease agreement itself - the obligation for the lessee to vacate the leased premises is suspended for a period of two months by force of law. The lessee may within the twomonth period request the Court to extend the term of suspension to a term of one year. By filing this request, the obligation to vacate is further suspended until the court has given a judgment. As the lessee is entitled to repeat this request two more times, in the most optimal case the lessee can –in theorysuspend the obligation to vacate the leased premises with a maximum of three years.

A range of circumstances in the lease agreement may make the asset more or less desirable:

Duration of the lease period

Office/industrial lease: Parties are free to decide. However, a 5-10 year lease period is common. Leases often include one or two renewal terms and or one or more so called – lessee’s options.

Retail

Parties are free to decide. Usually, retail leases are entered into for an initial duration of 5 years followed by a subsequent term of 5 years, so up to a total of 10 years. Retail lease agreements can only be terminated by the lessor using the statutory termination grounds on the basis of a court order, so not out of court (unless parties have agreed a contractual arrangement to the contrary, which is approved by the court).

Rent

For retail and offices leases, Parties are free to agree the rent. Usually the rent will be paid monthly or quarterly, mostly prior to commencement of the specific term of payment.

Rent indexation

The most common type of rent adjustment for commercial properties is indexation, which means that the rent is adjusted annually according to the changes in the consumer price index published by Statistics Netherlands. Indexation clauses usually include a base year, a base index, and a formula for calculating the rent adjustment. Sometimes a cap on rent review can be negotiated by the parties. In relation to regulated and non-regulated residential leases some restrictions apply based on the law.

Cost distribution

With regard to cost distribution in commercial leases (i.e. not residential leases) the following applies. Parties are free to agree upon the way operating costs (such as maintenance/renewal, insurances, taxes, etc) are passed on to the lessee. In short, the ROZ template lease agreement provides for an allocation of the maintenance costs between the parties, and the taxes in relation to the use of the leased space are for the expense of the lessee. Parties can also agree upon a double or triple net lease, whereby the lessee also pays the insurance and/or the taxes in relation to the ownership of the leased property.

Green leases

Green leases are optional in the Netherlands. However, Green leases and their provisions are encouraged by the authorities. Landlords are obliged to provide the lessee/purchaser an ‘energy label’ (similar to an EPC) when selling or leasing the building. Office buildings require a minimum C label.