Real Estate alert

Over the past months, the Amsterdam District Court handed down multiple judgments in which the Subdistrict Court ruled that the much-applied (ROZ ¹ ) rent indexation clause for liberalised rental housing (being: CPI ² + a maximum 5% surcharge) is unfair within the meaning of European Directive 93/13/EEC on unfair terms in consumer contracts (the “Directive”) and should therefore be annulled.

These judgments had far-reaching consequences in these tenancy relationships, it meant that: (i) the rent reverts to the initial rent and (ii) there is no possibility of annual indexation of the rent in the future. The financial implications of this case law for landlords – should it be upheld on appeal or in cassation – are potentially huge. Due to the far-reaching consequences, the Subdistrict Court has now posed preliminary questions to the Supreme Court on the scope and consequences of annulment of such ‘unfair’ rental price indexation clause. The following is a summary of the preliminary questions:

• If a rental price indexation clause provides partly for an increase based on the statutory scheme and partly for an additional rental price indexation which is deemed to be unfair, has the clause to be void in its entirety or is only the unfair part to be void?

• Does an unfair rental price indexation clause has the consequence that the rent reverts to the initial rent and that there is no possibility of annual indexation of the rent in the future?

• In such instance - even if the tenant has not appeared in the proceedings - must the court consider on its own initiative what has been ‘overpaid’ from the commencement of the lease and deduct that amount from the claimed rent arrears?

• Can the landlord rely on prescription when the tenant reclaims the ‘overpaid’ rent increases?

• Or are there any other grounds for limiting the period during which the tenant can recover the ‘overpaid’ rent increases?

The Supreme Court will decide on these questions after the parties have submitted their submissions. It is not known when exactly this will happen. On average, the Supreme Court formulates answers to preliminary questions between six and twelve months. In the meantime, the ROZ advises landlords to seek legal advice when using the rent indexation clause for liberalised rental housing. Should you have any questions or need advice in connection with rental price indexation clauses, please do not hesitate to contact us.

¹ In the Netherlands, the standard model lease agreement including general conditions drawn up by the Dutch Real Estate Council (Raad van Onroerende Zaken, “ROZ”) is most often used.
² Index-linked to reflect the changes in the consumer price index (CPI) published by the Statistic Netherlands (Centraal Bureau voor de Statistiek).