How many tenants encounter the problem of continual complaints about outstanding maintenance? Tenants are increasingly confronted with it in these difficult times for the real estate market. In principle rental law in The Netherlands offers sufficient remedies with which the commercial tenant can pursue a failing landlord. However in practice the civil code turns out to offer insufficient support to tenants.
Who hasn’t had to deal with it? Your employees complain constantly about the climate within their office. It is too cold or too warm or too humid or too dry. Sick leave increases and you even have to send employees home because it is no longer bearable. The solution? Call your landlord immediately. They send a man, he twists a few knobs and gives you the blame for your ignorant employees that have played around with the system. He leaves as soon has you have signed his docket and a couple of hundred euros will be added to your service charge reconciliation. And the complaint remains unsolved.
In such situations is the service of a notice of default (ingebrekestelling) the remedy that suffering tenants choose. Trust in their fellow humans remains unusually high and despite everything you still want to retain a good relationship with the landlord. However a number of landlords is no longer able to comply with their obligations and must grasp everything at their disposal not to have to eat into their maintenance reserves with major capital expenditure. From our own practical experience we have seen situations where the (technical) manager doesn’t even visit a property, let alone that he/she has a practical knowledge of what goes on within the walls of their ownership. The tenant’s patience can in practice turn out to work distinctly against their own interests – of which more later.
Once informal attempts have not delivered a solution the law provides the possibility of serving a default notice on the failing landlord. This means that the landlord will receive a formal communication that he is in default (gebrek) and must remedy the default within a “reasonable” period of time. The tenant may also suspend payment of rent whilst it waits for the solution.
Hopefully this suspension of the rent will spur the landlord into action. If that doesn’t work, what are the next steps that are available for the tenant? The law prescribes that the tenant may remedy the default itself (once the aforementioned reasonable time period has elapsed) and subsequently deduct the costs involved from the rent. In theory the ideal solution but in practice not always desirable. For instance, you rent space in a building with an ancient climate installation that is well beyond its best before date. As tenant you don’t want to get involved in a project of tens of thousands of euros that is comparable with peeling an onion; as soon as the boilers are replaced, it turns out that there is asbestos in the seals. As soon as that is removed it turns out that the control technique is also obsolete. And so on. As well as the technical know-how that is required, you also have to spend management time on the issue. In effect you have to pre-finance the costs and you run the risk that you cause damage to the property that has nothing to do with the original problem. If it also involves a multi-tenant building, life doesn’t get any easier.
What you really want is that the landlord gets his house in order. If he doesn’t do that, what then? The reminders for the suspended rent are piling up, the landlord threatens you with the bailiffs (with all the associated costs) and your employees’ productivity is rapidly declining. Maybe even the credibility of the management team will be brought into question by your own employees because the situation is still not solved.
In principle, the next step is the step into court. The law gives the possibility to structurally reduce the rent by order of a judge. As tenant this doesn’t help much; you are paying less but your (lack of) enjoyment of the premises still unchanged. Dissolution? In serious cases you can also request it. However – and this is where your patience comes back to you like a boomerang – the chance that a judge will order dissolution is very slim. Certainly if the tenant has been able to continue its activities in the premises for some months despite the problem. It wasn’t that serious after all then?
In practice the route to the courtroom is seldom followed. Certainly not by small and medium sized enterprises for which the legal costs are unmanageable, at least not in combination with the uncertainty that a legal procedure brings.
So, the risks of self-help are too large, just like the costs and risks of the legal route. And then? In practice it turns out that suspending the rent is the most effective means of encouraging the landlord to take action. In general landlords also do not want to end up in court. Letting the landlord feel the pain in his wallet can be extremely effective. Note well, you should always set aside the funds. It is always a suspension, not the disappearance of the obligation to pay!
Preferably as tenant you want to ensure that you don’t get into this sort of situations. It is in any case clear that rental law offers insufficient support to tenants if a landlord turns out to be in default with respect to his maintenance obligation. But what can a tenant do to ensure that it doesn’t get into such a difficult position?
At Redept we see that tenants often neglect to carry out any form of technical inspections prior to entering into a rental agreement. Pennywise pound foolish because a few hundred euro spent at this stage pays itself back time and time again. We advise our clients to carry out a building inspection before reaching agreement on the rental terms. Not only does this guard against entering into a long term commitment whereby the building turns out to be a headache. It also gives Redept essential information that we can bring into the rental negotiations. Additionally by fixing the performance specifications in the rental agreement we can to some extent limit the chance of a default occuring at a later date.
Also in this context the existing ROZ model rental agreement deserves some attention. Since the introduction of the new rental law in 2003 – where the definition of default was tightened up to the advantage of the tenant – this agreement contains wording that completely negates the intention of the lawmaker. Redept negotiates as standard various deviations from the standard ROZ rental agreement in order to improve the position of the tenant.
Thankfully it is no more the case in today’s market that landlords can say: “take it or leave it”. One of the side-effects of the existing malaise is that well advised tenants can win a great deal in rental negotiations. They can force a much more reasonable position in relation to the landlord that was the case in times of scarcity. However, we still see that tenants – and advisors – pay a great deal of attention to the financial aspects of a transaction and that the future enjoyment of the property receives insufficient attention. Redept calls for a more holistic approach to rental negotiations in which not only the rent and the incentives are the subjects of discussion, but also the physical and functional suitability of the premises in order that the tenant is assured of ‘quiet enjoyment’ for the long term.
