Reliance on sustainable own use by landlord business premises due to renovation: does it hold up? 

The lease of a 290-company space may be provided by the landlord terminated due to permanent own use. Pursuant to Section 7:296 (1) (b) of the Civil Code, this also includes renovation of the business premises. The termination for permanent own use does require that the renovation is impossible if the lease contract is maintained. However, the question is often when this condition is met. Is the renovation really only possible if termination of the lease of the business premises? Or is that requirement not met if the tenant can simply return to the leased property after the renovation. Is a claim of urgent own use then sustainable? The tenancy law lawyer of Lexys Lawyers discusses what that's like in this blog.

Urgent own use or sustainable own use?

The law does not speak of urgent own use, but of permanent own use. In colloquial language, the term urgent own use is often used. This is because ‘urgency’ is a criterion when terminating a lease of living space. The term urgent own use is so well established that it is also often used when terminating the lease of business premises. This is therefore unjustified. With business premises it is about ‘sustainable’ own use. And there we have an important difference with the lease for living space. Because if the tenant of commercial premises can return after the renovation, is there ‘sustainable’ own use by the landlord?

Case law: criteria for continuation of lease on business premises after renovation

Case law has crystallized when there is the possibility of continuation of the lease after renovation. These conditions are that the location and function of the leased property remain the same. If this is the case, then the lease can be maintained. This is shown, among other things, by the following ruling of the Amsterdam District Court of May 22, 2017 (ECLI:NL:RBAMS:2017:4432). Although some of the premises were rezoned, this did not mean that the location and function of the leased premises had changed substantially. The lease could therefore continue after the renovation.

“16. In the opinion of the Subdistrict Court, based on the statements in the summons and what was discussed during the court session, there is no question of urgent own use. It is ruled that the renovation can very well take place, for example after temporary eviction of the leased property, without termination of the lease. This means that there is no question of permanent use within the meaning of Section 296 (1) (b) of the Dutch Civil Code. Although Vastned has made it plausible that part of the premises will be used differently (retail space on part of the 1st floor and apartments on the currently vacant 2nd and 3rd floors), this is (Hunkemöller rightly pointed out) not such that the location and function of the leased property have not remained the same. Thus, the Subdistrict Court considers it plausible that Hunkemöller can also realize retail space on the 1st floor in the current situation. In this light, Hunkemöller must be followed in its argument that Vastned should have made Hunkemöller a reasonable proposal, pursuant to Section 7:220 (2) of the Dutch Civil Code.”

Length of renovation affects whether lease can be upheld

In another case, on November 27, 2012 (ECLI:NL:RBAMS:2012:BY7818) held that even the planned five-month duration of the renovation did not provide grounds for termination of the contract, as the leased property remained the same after renovation. Therefore, the landlord should have made a reasonable offer to continue the lease:

“It follows from the foregoing that the urgent need for the renovation has not become plausible. Nor has Alri et al. made it sufficiently plausible that the intended renovation cannot take place without termination of the lease. It is not disputed that the function of the leased property will remain the same after renovation. That the location of the leased property will change as a result of the renovation by significantly increasing the surface area of the retail space has, in view of the foregoing, not become sufficiently plausible. The planned duration of the renovation of five months does not provide grounds for termination, as Cainco has indicated its willingness to adapt its operation to the renovation work or, if necessary, to temporarily cease operation.”  

Indications that lease cannot be maintained due to renovation

Thus, the fact that the location and function of the leased property remain the same may be an important indication that the continuation of the lease agreement is simply possible even after renovation. Nevertheless, on September 9, 2009, the Subdistrict Court of the Utrecht District Court (ECLI:NL:RBUTR:2009:BJ7387) ruled that there may also be circumstances that mean that the contract can precisely not be continued. Those circumstances include:

“the size of the complex involved in the redevelopment, the number of parties involved in it, the extent and duration of the renovation work and the period during which the tenant will be deprived of the leased property pending new construction.”

Further, the Supreme Court ruled on February 14, 2014 (ECLI:NL:HR:2014:338) that continuation of the lease cannot be required of the landlord if it would lead to non-cost recovery. Indeed, a tenant of 290 business premises is entitled to different protection than a tenant of housing:

“The protection of the lessee of business premises as referred to in Section 7:290 of the Dutch Civil Code involves the protection of a right of a (fundamentally) different nature, in which in particular business interests of the lessee and the lessor play a role. The lessor of business premises cannot, in a case such as the present - in which the necessity of renovation is not at issue between the parties - be required to continue a lease which, after renovation, leads to a non-cost-effective operation.”

Similarly, an appeal by the tenant to the possibility of return in case of alternative plans does not prevent the granting of an appeal to terminate the lease on the ground of sustainable own use. Thus, the Amsterdam Court of Appeal considered on July 13, 2010 (ECLI:NL:GHAMS:2010:BN8230):

“3.5 Yacoubi submitted the following in explanation of his grievances. De Key has not demonstrated its alleged urgent need. It has not substantiated why Yacoubi's premises cannot be retained; the foundation repair required to renovate the premises is possible with retention of the leased property. Nor has De Key made it plausible why Yacoubi cannot return to the new building after possible demolition while retaining the lease.

(...)

 3.6 Contrary to what Yacoubi seems to assume, the fact that alternative plans, which would mean that Yacoubi's lease can be maintained, are also economically and financially feasible, does not have to stand in the way of granting De Key's reliance on urgent necessity of own use. The existence of these alternatives will have to be taken into account when assessing urgency, but in principle it is up to the lessor himself to determine how he wishes to conduct his business. Other considerations than just business or financial may also play a role in this.”

Rent law lawyer in case of appeal for sustainable own use or urgent own use

In short, a reliance on termination of a lease of business premises on the grounds of sustainable own use due to renovation by the landlord is not always tenable. For example, if the lessee can return to the leased property after the renovation. This is the case if the function and location of the leased property remain the same. Yet tenants of 290 business premises enjoy less rent protection than tenants of residential premises. Therefore, a lease can sometimes not be continued even after renovation. For example, if this implies a non-cost-effective operation for the landlord. Other circumstances may also mean that the contract cannot be continued. Are you a tenant of 290 business premises and would you like to know what your rights are? Then contact contact up with our tenancy law lawyer who can advise on a claim of permanent or urgent own use.