How to do business in the Netherlands: Real Estate and Tenancy law

Continuous logistic development combined with economic stability have resulted in an increase of investments in Dutch real estate. Many foreign investors have found their way to the Dutch real estate market.

A large group of these investors wants to generate income from real estate by letting out their property to a tenant. In such cases it is advisable to ensure that as an investor you are aware of the legal risks of letting out property. Therefore in this article we you with present a brief overview of Dutch tenancy law.

The system
Under Dutch Law the lease agreement is qualified as a so-called “special” agreement. This implies that it is an agreement that is separately regulated and governed by the Dutch Civil Code.

Lease agreements can regulate the lease of different types of goods: movable goods (the operational lease of a car), immovable goods (the lease of an apartment) or property rights. In order to create a regulation that suits all of these different types of lease agreements, the Dutch legislator has set up a system of four different legal regimes. They are:

  1. the lease of undeveloped or movable goods;
  2. the lease of residential premises;
  3. the lease of business premises and;
  4. the lease of ‘other’ premises (these are all types of (immovable) properties that cannot be classified as residential premises or business premises. For example: office space, storage space or industrial buildings).

Each regime has its own stipulations that regulate the options of terms, termination and tenant protection. In case a regime does not provide stipulations for a certain subject, the general Dutch (rent) law, also included in the Dutch Civil Code, will apply.

Residential premises
In general, Dutch tenancy law is characterised as tenant-friendly law. The position of a tenant within the residential and the business premises regimes, in particular, is well protected. These regimes provide extensive tenant protection due to limited termination and duration options. The most extensive form of protection can be found in case of termination of a lease agreement regarding the lease of residential premises. Without judicial intervention, with the exception of termination with the consent of the tenant, any termination has no effect whatsoever. In addition to this mandatory judicial intervention, a landlord is bound by specific reasons for termination.

Business premises
The regime of business premises also includes protection for tenants. In addition to a limitation of the reasons for termination, the lease of business premises is bound by strict lease terms. Landlord and tenant can agree on specific terms such as 2, 5, 10 or 20 years. However, if a lease agreement is agreed upon for a term longer than two years, it will convert automatically into a lease agreement for 5 years. Such a term will be extended automatically, by operation of law for another five years if the agreement is not terminated.

With permission from the Cantonal Court Judge, it is possible to deviate from the lease duration as stipulated by semi mandatory law.

Termination by the landlord after the initial lease period is only possible if based on specific (limited) grounds.

The consequences of the above is that the business premises regime can easily lead to the situation of long-term commitments for a landlord.

Office premises
The third regime is the regime of the lease of office premises. Although this regime contains so called eviction protection for the tenant, it does offer parties more contractual freedom than the abovementioned regimes. There are no standard lease terms and parties can terminate agreements without any obligation to terminate on specific grounds.

If notice of the eviction is given by the landlord then the tenant can plead for abovementioned eviction protection. This will result in an extra term (of lease of the property) of two months, starting on the planned date of eviction, in which the tenant can file a request with the court for an extension of the (extra) term. However, this request is only granted if the interests of the tenant affected by the eviction are deemed more important than those the landlord has with respect to the eviction.

Undeveloped or movable goods
Last but no least there is the regime of lease of undeveloped or movable goods. Only the general Dutch tenancy law applies to this regime. Parties therefore have contractual freedom regarding the lease of this particular goods.

In addition to the abovementioned regimes the Dutch tenancy law contains a variety of additional arrangements regarding subjects such as sustainability, rent and maintenance. These arrangements fall outside of the scope of this article, but can bring serious obligations for the landlord.

If you have any concerns or questions regarding real estate or tenancy matters in the Netherlands, please don’t hesitate to consult us. The Real Estate attorneys of our International Desk will be happy to advise you on such matters.

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3721 
How may I be of service to you
Nick Kooistra
Attorney
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