Terminating residential lease: watch out for snags!

Terminating residential lease: watch out for snags!

Residential tenants enjoy rent protection. This (and more) has also been in the news a lot recently. Moreover, this rental protection is getting stronger. Termination of a lease is therefore even more difficult. One solution is to terminate the lease by mutual consent. However, this does not always work, according to a judgment of the European Court of Justice. Central Netherlands court which was published last week. Rental law attorney Robert van Ewijk discusses the verdict.

Residential lease termination by mutual consent

The law states the possibility of terminating the lease by mutual consent after it has started. In this case, the parties had entered into a lease that ran from May 16, 2021 to May 31, 2022. About two months before the expiration of that lease, they entered into a termination agreement. This stated that the lease would be terminated by mutual consent as of Dec. 31, 2023. However, the tenant did not want to leave and was therefore terminated by the landlord in summary proceedings subpoenaed. The question addressed was whether the lease termination agreement met the legal requirements. For example, the law provides that the termination must take place “after the lease is up”.

Cantonal court: tenant protection important

The landlord found that this requirement had been met. After all, the rent had already started. However, the subdistrict court did not go along with this. The idea behind the text “after the lease is up”, is that the termination agreement is concluded after there is rent protection, which the tenant can waive. Thus, there must be a lease that has already started for an indefinite period of time. In this case, it means that the lease termination agreement is in violation of the law because it was concluded two months before the lease was to start for an indefinite period.

In addition, termination agreement qualifies as extension

Furthermore, what was important in this case was that the lease termination agreement provided for more than just when the lease would end. After all, the agreement also covered the continuation of the lease after the fixed term for which the lease was entered into would end. Admittedly, the lease may then bear the heading ‘lease termination agreement,’ but in fact the document in itself then qualifies as a lease. And thus as an extension. And on that, the law provides that that extension is without question indefinite.

Implications for practice

The judgment of the subdistrict court involves two previous rulings. Namely, from the district court North Netherlands court and the Amsterdam court in which a similar conclusion was reached in virtually the same terms. In those cases, too, the judgment was that since the termination agreement was concluded during the term of a temporary lease, it was not valid. Although I do not (yet) know of any judgments of the Court of Appeal or Supreme Court on this issue, I find the explanations given by the subdistrict courts easy to follow.

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Thus, the lease termination agreement must not only be entered into at the right time, but must also serve the sole purpose of terminating the lease. terminate. If that is also intended to extend the lease, you as a landlord might go wet. The rulings discussed above show that. With the rise of the law on permanent leases this issue will become less and less relevant. With the entry into force of the Fixed Leases Act on July 1, 2024, temporary leases can only be concluded in exceptional cases. For temporary leases concluded until then, vigilance is required if they are terminated by mutual consent. Therefore, take timely contact on the tenancy law lawyer of Lexys Lawyers, to get proper advice.