Lease of retail business premises in the Netherlands is governed by mandatory rules of law, that serve to protect the interests of the tenant and used to serve the stable development of the Dutch economy after the second world war. Although the justification for the strict rules and regulations no longer plays any role whatsoever, the rules still are in force today. This is a particularity of Dutch law landlords and tenants are confronted with on a day-to-day basis.

Under these mandatory rules a lease term should either be a maximum of two years, or a minimum total of ten years. If the parties fail to observe mandatory law, this can result in surprises. Where the lessor and the lesse agree to a fixed seven year term, the lessee can successfully force an extension of the lease term with three years (so in this example the total lease term will be ten years). After ten years, the contract will continue for an indefinite period of time; either party may then give notice of termination with a notice period of one year.

What is retail lease?

The court will have to establish whether a lease falls within the scope of the mandatory law on retail lease. From case law, it is known that retail lease includes the lease of shops, restaurants (including take-outs / take-aways), bars / cafés, and hotels, insofar as these businesses are established inside immovable property (real estate) and insofar as (part of) the premises of these businesses are accessible to the public. As this description is rather vague, there is a lot of case law about whether or not a certain agreement is a retail lease agreement. It has been decided, for instance, that the lease of petrol stations is retail lease in the sense of the law. The lease of cinema’s on the other hand, was not regarded as retail lease.

Lease term

The law provides for it, that the term for retail lease is either a maximum of two years, or a total of ten years (normally divided into two five year periods, but other combinations such as seven plus three years are also possible). With permission of the Cantonal Court, it is possible to deviate from these standard terms. If permission of the Cantonal Court is not obtained and the contract contains a non-standard term (for instance a total term of six years without prolongation), either party may invoke prolongation of the lease term up to a total of ten years.

Termination of a lease contract

In general, lease of business premises may only be terminated before the agreed end date in specific circumstances. This is considerably easier for the tenant than for the landlord. If the lessee does not agree with a termination initiated by the lessor, the lessor will always have to bring proceedings before the Cantonal Court in order to have the agreement terminated.

The lessee may terminate the agreement at the end of the first five year term or at the end of the ten year term by giving notice of termination at least one year before the end of the term.

The possibilities for the lessor are more restricted. First of all, a notice of termination without mentioning a specific ground for termination is to be held null and void. According to the law, possible grounds for termination by the lessor during the first five years of the agreed term are:

• business operations of the lessee are not "as benefits a good lessee"
• the lessor urgently needs the premises for his own use.

Most important example of the first ground for termination is non-payment of rent due; however, other examples do of course exist. From case law comes the example of a petrol station operator who frequently worked while under the influence of alcohol; this proved to be sufficient grounds for termination.

After the second five year term, the lessor may also ask for termination of the agreement on the grounds that his interest to end the agreement is more compelling than the interest of the lessee to continue the agreement. The interests of both parties will be weighed by the Cantonal Court.

Flexibility

The demands of the market are often more flexible than this relatively rigid system. For example, parties might want to agree to lease for no longer than seven years, without an automatic extension to ten years in total. And, especially in case of so-called "shop-in-shop" lease, the location of the premises might have to be (relatively) flexible as well.

Especially for these matters, the dutch legislature has introduced the facility of the so-called "derogational clauses" ("afwijkende bedingen"). When parties wish to agree to enter into a non-standard lease contract, they will have to ask the Cantonal Court for prior permission to enter into this agreement.

Certain clauses will never be allowed by the Cantonal Court. To give an example. Clauses that extend the possibilities of the lessor to terminate the agreement are not permitted under Dutch law.

The legal system in Holland seems rigid at first sight. However, if one makes good use of the legal possibilities, it is no problem to get the desired result. Modern concepts, like the "shop-in-shop"-concept flourish in The Netherlands.

Further information

For additional information please feel free to contact our Real Estate contact person. Your comments and questions are always welcome.

Dutch Commercial property leases are regulated by statute law. Different regimes apply to each category of property lease. As a general rule, the primary use of the premises determines the applicable legal regime.

Retail Business Premises

This category of premises mainly consists of shops, hotels, bars and restaurants. The rule of thumb being that the premises is open to the public. Rental agreements for this category must either be concluded for less than two years, or for at least five years. For lease agreements of less than two years duration no further mandatory rules apply. For agreements of longer duration, the lessee has the option to prolong the agreement to at least ten years. These Retail Business rental agreements do not terminate automatically upon lapse of their duration, but must be terminated by giving notice. Notice is subject to strict formalities:

• at least one year's notice by registered letter or bailiff's writ
• if given by lessor, the grounds for the notice must be specified in the notice.

If notice is given by the lessor, and the lessee does not agree with the termination, the lessor must apply to the court for a termination order. Notice by lessor after the first five year term is only legally possible in case of misconduct of the lessee or an urgent need, on the part of lessor, to use the premises himself for retail business purposes. In case of notice by the lessor after the ten year term (or at a later moment), the court must balance the parties' interests, but must allow action for termination if one or more of a limited number of grounds is present. When the matter is brought before the court, the agreement only ends after the court has given its final judgment.

The law provides that the lessee who transfers his business to another party, may ask the court to substitute the new owner in his place as a lessee. The lessor is not able to prevent this from happening, as long as the new lessee is financially capable of fulfilling their obligations under the lease.

Termination of Retail Business leases

Retail Business leases can be terminated either by agreement, judicial dissolution (in cases of default), the lessee's decision to give notice, or a court decision after the lessor's notice based on one of the (limited) grounds listed in the Dutch Civil Code.

Offices and other Business Premises

In case of offices, factories and other buildings not covered by specific rules, the parties are free to agree on the terms of the contract. For termination of the lease by the lessor, it is necessary that the lessor summons the lessee to vacate the premises, by registered letter with receipt, or by bailiff's writ. Thereafter, the lessee enjoys a two-month protection period during which it may decide to submit a request for prolongation of the lease to the cantonal court. The court will base its decision on an assessment of the interests of both parties. In accordance with the legislation the court can grant the request for prolongation for a maximum of three one-year periods.

Termination of Office leases

Office leases end automatically. If the lessee does not use the described protective prolongation period to extend the lease, the lessor may commence eviction proceedings.

General

The Dutch Civil Code contains a number of provisions generally applicable to rental agreements, of which the most important are:

• The Lessor is responsible for damage resulting from visible or hidden defects in property.
• The lessee may sublet in whole or in part, if reasonable objections of the lessor are not anticipated.
• Major maintenance and repairs are for the account of the lessor.
• Minor repairs and day-to-day maintenance are for the account of the lessee.

The general provisions mentioned above do not form part of compulsory law, and are frequently set aside in individual contracts. Lessors often make use of general conditions, which deviate from the Dutch Civil Code. It is therefore advisable to seek advice on the contract and the applicable general conditions from one of our lawyers before taking action.

Further information
For additional information please feel free to contact our Real Estate contact person. Your comments and questions are always welcome.

Arbitration has become a widespread and preferred method of resolving disputes in many industries, such as the maritime, securities and construction industries. Less formal than court proceedings, arbitration is supposed to be quicker and more cost effective. Another useful advantage of arbitration is the better enforceability of arbitration awards internationally. Whatever the reason, parties nowadays tend to agree on arbitration on a wide scale.

New York Convention on Arbitration

The Netherlands is a party to the New York Convention on arbitration and arbitration awards. As a consequence the Dutch Courts are bound to recognize an agreement in writing in which the parties undertake to submit to arbitration should any disputes arise between them. At the request of one of the parties the Court will refer the parties to arbitration in a matter in respect of which the parties have made an arbitration agreement, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

The Convention provides that each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. Arbitral awards rendered in other Contracting States are recognised and enforceable in The Netherlands and vice versa. The convention has been implemented in Dutch legislation, more specifically in the 1986 Arbitration Act (Section 1020-1076 of the Dutch Code of Civil Procedure).

Ad hoc and Institutional Arbitration

As in other jurisdictions the parties may opt for ad hoc arbitration or institutional arbitration. There are various arbitration institutes in The Netherlands to opt for, but ad hoc arbitration remains a good and legally sound alternative.

Properly structured, ad hoc arbitration should be less expensive than institutional arbitration and, thus, better suit smaller claims and less affluent parties. Ad hoc arbitration places more of a burden on the arbitrators to organize and administer the arbitration in an effective manner. A distinct disadvantage of the ad hoc approach is that its effectiveness may be dependent upon the willingness of the parties to cooperate and the talents of the appointed arbitrators to keep the arbitration process going.

An institutional arbitration is one in which a specialized institution with a permanent character intervenes and assumes the functions of aiding and administering the arbitral process, as provided by the rules of that institution. Often, the contract between the parties will contain an arbitration clause which will designate an institution as the arbitration administrator. If the institutional administrative charges, which may be substantial, are not a factor, the institutional approach is generally preferred.

The Netherlands Arbitration Institute

The Netherlands Arbitration Institute was established as a non-profit foundation in 1949. Its Governing Board consists of representatives from the business community and the legal profession, as well as members of the judiciary, all of whom have extensive experience in the fields of arbitration, binding advice and mediation. The Governing Board also includes representatives from the Dutch Central Chamber of Commerce in The Hague, the Dutch Organisation of the International Chamber of Commerce and the Dutch Association for Industry and Trade, and Accountancy. The secretariat is located in Rotterdam.

The NAI administers arbitration pursuant to the 2001 NAI Arbitration Rules. Binding advice proceedings are also administered pursuant to the same Rules, while mediation is administered pursuant to the 2009 NAI Mediation Rules.

Transport And Maritime Arbitration Rotterdam-Amsterdam TAMARA

The Dutch Legal Community realised that there was a need for quality arbitration in Maritime and International Trade Issues. The foundation "Stichting Transport and Maritime Arbitration Rotterdam-Amsterdam (TAMARA)" for arbitration in transport cases was established in 1988 by Dutch maritime lawyers and interest groups in the fields of shipping, transport and international commerce. Over the past years, the TAMARA foundation has become a well-established arbitration board, in particular in Dutch maritime circles, and is a well known alternative for settling disputes by means of arbitration.

Disputes that are commonly handled by the TAMARA foundation are disputes relating to shipbuilding (yachts, freighters, drilling platforms), financing and insurance, chartering, cargo claims, stevedore and agency services, physical distribution and ship broker’s services, as well as relating to other modes of transport.

Arbitration via the TAMARA foundation has increasingly become an alternative for traditional court procedures and for the London arbitration. Arbitration via the TAMARA foundation offers settlement of disputes at least the same standard as a traditional court procedure or the London arbitration, but within a significantly shorter period of time and at considerably lower cost. In order to enhance these goals, the TAMARA rules were revised in 2008. They provide a tight, modern procedure, enhancing speed and efficiency.

Other Arbitration Institutions

The two Arbitration Institutions discussed above, are just two of the many Arbitration Institutions in The Netherlands. Our lawyers assist our clients before a huge number of other Arbitration Institutions, amongst which the Arbitration Board for the Building Industry in the Netherlands, that traditionally arbitrates a majority of the building conflicts in The Netherlands. Another industry where a lot of disputes are resolved through arbitration is the Health Care Industry. The Dutch Forwarders Association FENEX also avails over its own Arbitration Institution, not unlike a lot of other sector specific associations.

Further information

Arbitration in The Netherlands is a reliable option to resolve conflicts. Kernkamp Advocaten assists clients from all over the world. The firm offers services that are reliable, efficient and professional, and tailored to meet the needs of our clients.

Should you be looking for representation in arbitration proceedings in the Netherlands, or you query the validity of an arbitration clause, our firm of experienced professionals can provide you with an excellent and cost effective service. For further information, please feel free to contact our Arbitration contact person. Your questions are always welcome.

Civil law country

The Kingdom of The Netherlands has a civil law, as opposed to a common-law, system and the procedure before the Dutch Courts is essentially carried out by the parties filing, through their lawyers, written submissions. Verbal hearings do take place, but play a relatively minor role in civil litigation. All cases are decided by professional judges. It is not possible to ask for a jury trial.

Court of first instance

The lower Court of first instance is the Cantonal Court, that basically deals with small claims, disputes regarding leases of residential and business premises and employment cases. The higher Court of first instance is the District Court, where parties need to be represented by a Dutch registered lawye. There are 19 District Courts in the Netherlands.

Appeal

Appeals against decisions of the Courts of first instance are heard by one of five Courts of Appeal and further appeals (solely on points of law) are dealt with by the Netherlands Supreme Court in The Hague.

Initiation of proceedings

Dependent on the nature of the case, proceedings are initiated by issuing a writ of summons (which is done by a balilff) or by filing an application. In the summons procedure the case is pending from the date of the summons. The writ must be served at the office of the clerk of the court by the claimant by the last day on which the office is open prior to the cause list date indicated in the summons procedure. The clerk of the court enters the case to the cause list of a single chamber.

In an application procedure the case is pending from the moment when the application is lodged with the office of the clerk of the Court.

Recovery of legal fees

Each party initially bears its own costs. In ordinary civil cases, the losing party must bear the legal costs as fixed by the court, which is in most cases substantially lower than the actual legal costs.

Contingency Fees

Contingency Fee arrangements are forbidden. However, balanced success fees are possible.

Further information

If you have any questions regarding litigation in The Netherlands, you are welcome to contact our litigation contact person.

The lawyers of the Real Estate Practice Group primarily deal with cases in the field of commercial property. Our main clients are owners of commercial property, project developers and contractors, both foreign and domestic. Our team has ample experience in dealing with issues as:

• Construction
• Leasing
• Real Estate and Construction Litigation
• Town and Country Planning
• Environmental Law

Our lawyers handle real estate litigation matters of every type and scope, including building disputes, the breach of lease actions, breach of guarantee actions, purchase and sale agreement disputes and land use disputes. The Group’s expertise includes the negotiation of commercial, retail and industrial leases, purchase and sale agreements, parking agreements, construction documents, development agreements and advice to retail, commercial and industrial landlords.

Further information

For additional information please feel free to contact our Real Estate Practice Group contact person. Your comments and questions are always welcome.

Related:

• Retail lease in The Netherlands
• Commercial Leases in the Netherlands
• Arbitration in The Netherlands
• Litigation in The Netherlands
• Real Estate