The Netherlands, like many other countries, is in the grasp of the Corona virus. To (further) prevent spread of the virus, the government has announced an (emergency) package of measures, part of which is that all food and beverage establishments must close their doors. Tuesday evening March 31, it was announced that this mandatory closure will be extended until at least April 28, 2020. In many ways, this measure hits entrepreneurs hard but what about the tenancy consequences of the compulsory closure?
Rental price reduction
Many tenants want to know whether they are obliged to pay the (full) rent during these special times. Due to decreasing income, they would like to pay less or even no rent at all. Usually there must be a defect in order to be able to apply for rent reduction. There is a defect if – in short – the landlord cannot provide the so called enjoyment that the tenant may expect. This is to be assessed on the basis of “the prevailing views in society”. Closure on government order by COVID-19 is a situation not previously assessed by the judge. Because the landlord cannot influence this external factor, it remains to be seen whether a tenant is entitled to a reduction of rent.
The remark I would like to make here is that the outcome may be different if there are specific provisions in the lease contract regarding rent reduction. In that case, parties must comply with the agreement. In principle, if parties use the General Provisions associated with the ROZ model for retail space, there is no room for discussion. This model excludes the appeal to rent reduction, barring exceptions.
Branch organizations of retailers Retail Netherlands and the NRW and landlords IVBN, the NRW, “Vastgoed Belang” and the VGO reached a “corona agreement” last week. This agreement has a temporary nature and provides tenants a grace period until April 20. The parties have come to the following arrangements:
- Quarterly rents for Q2 that start on April 1, are converted into monthly rents;
- If necessary, retailers receive deferment of payment for the rent from April 1 to April 20;
- If rental invoices have already been issued, they will not be collected until April 20;
- No fines or interests are charged on deferred rental payments during crisis months;
- Stores without a substantial drop in turnover (25%) remain outside the discussion;
- Retailers are given the option of not meeting an operating obligation until the end of April. This by mutual agreement.
Consultations are now continuing with the aim of reaching a final solution before April 20, 2020.
Delivery and collection?
As an alternative to a total closure, more and more companies offer a delivery and / or collection service, but is this allowed? The answer depends on the scope of the destination as stated in the lease contract. If the lease does not offer such an option, it is wise come to an agreement with the landlord about such use. In my opinion, if the landlord does not comply, it would not be inconceivable for the court to allow a temporary change of use.
Do you have corona crisis-related questions? Feel free to contact the Corona crisis advisory team of Valegis Advocaten or your regular contact person at Valegis Advocaten.
We strive for completeness in our reporting but cannot guarantee this because developments follow each other at a rapid pace. The Dutch government regularly comes up with additions to or improvements of (new) regulations. As a result, our reports may be outdated at the time you read them. That is why we mention the date and time of posting with each message.