COVID-19 impact on tenants

March 24, 2020 | News

Assuming the lease is based on the market practice ROZ terms and conditions, the legal playing field between tenant and landlord is roughly as follows.

Probably no reliance on defect regulation

It does not seem possible to file for a lowering of the rent on the basis of a defect in the rented property. invoke the tenancy law's defects regulation. Firstly, it is questionable whether the coronavirus crisis (and its consequences) is a defect. In addition, rent reduction is contractually generally only possible if the landlord is attributable to the landlord. That is not the case here.

Possible appeal on unforeseen circumstances

Furthermore, article 6:258 Dutch Civil Law offers the possibility to invoke the doctrine of unforeseen circumstances. Firstly, there must be a circumstance that has not addressed, be it implicitly or tacitly, in the contract. The law does not require that the circumstance in question was unforeseeable. Furthermore, the impact of the unforeseen circumstance must be such that one party (in this case: the lessor), according to standards of reasonableness and fairness, could not demand the unaltered maintenance of the contract. Jurisprudence is very cautious in this respect. After all, loyalty to the given word remains the starting point. The judge will have to examine on a case by case basis whether the legal requirement is met. On the one hand, the tenant is hard hit by the impact of the measures announced by the government; on the other hand, the landlord's interests in rent payment are of course (also) evident. Finally, the unforeseen circumstance should not be for the account of the party invoking it. For example, case law indicates that sharply deteriorated market conditions as a result of the financial crisis in 2008/2009 are deemed to be a regular commercial risk. Here, too, the circumstances of the specific case play a role. For a sector that has already experienced the impact of previous epidemics (SARS, Ebola, Zika) in the past, the assessment is likely to be different than for a sector that has never experienced such an impact before.

In practice, recourse to unforeseen circumstances is only accepted in highly exceptional situations, but the coronavirus crisis is just such a situation. In this sense, an appeal to unforeseen circumstances might not be without merit. However, the tenant must realise that the burden of proof rests on him and that an appeal to unforeseen circumstances must be thoroughly substantiated. Moreover, the court will always take the circumstances of a specific case into account.

Should the court rule that an appeal to unforeseen circumstances is possible, then the judge can amend or dissolve the agreement. This can also be done with retroactive effect. What the court will be prepared to do also depends on the circumstances of the case. Keep in mind, however, that if the court adjusts the rental agreement as a result of the coronavirus crisis, he or she will want to divide the pain among the parties.

As long as the contract has not been modified by the court, the tenant must "simply" pay the rent. If the tenant's cash flow really does not allow it, it is conceivable that a landlord will appeal to the bank guarantee to get the rent paid. If the tenant fears this, it is advisable to inform the landlord that under the current circumstances a reliance on the bank guarantee will be unlawful and that the landlord will be liable for any resulting damage. It remains to be seen whether this liability will indeed be assumed afterwards, but the notice of liability may prevent the lessor from resorting to the bank guarantee too frivolously .

Obligation to operate

The tenant is usually contractually obliged to occupy and actually use the rented property. If the tenant has ceased operation by order of the government, this is a case of force majeure and the landlord cannot require the tenant to resume operating. If the lessee has voluntarily proceeded to close down, it may - according to jurisprudence - be unacceptable under standards of reasonableness and fairness to oblige the lessee to resume the operation. The extent to which the operation is loss-making plays an important role in this aspect. In that light, it does not seem likely that, under the current circumstances, a landlord can oblige its tenants to continue to use or reopen the rented property.

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