sign for sale and for rent

Does Rent goes before Purchase even when part of the leased plot is transferred?

If splitting the lease leads to a sensible result, transferring part of a leased plot will result in splitting the original lease into two leases. This was recently the case in a Supreme Court case. It concerned the following case.

Of a leased plot with a surface area of 792 m2, a part with a surface area of 241 m2 will be transferred to a new owner. On this particular part there is a building built by the tenant.

The new owner terminates the lease and claims payment of the remaining rental instalments. The tenant takes the position that no lease has been concluded with the new owner and that he owes nothing to the new owner. This raises the question whether the rights and obligations from the lease have (partly) been transferred to the new owner.

It seems to follow from parliamentary history that Section 7:226 of the Civil Code (sale does not break rent) only applies in the event of transfer of the entire property and not in the event of transfer of part of the leased property.  However, the purport of Section 7:226 of the Civil Code is the protection of the tenant, which is that the tenant does not lose his enjoyment of the lease upon transfer of the leased property.

In view of this purport, the Supreme Court has ruled that the transfer of part of a leased property may result in the rent ratio being split into two (or more) leases. It will have to be assessed on a case-by-case basis whether such a division will lead to a meaningful result.

In the present case, the Supreme Court considers that the division leads to a meaningful result, in particular because the building constructed by the lessee is located on the part of the parcel of land that has been transferred. As a result, the transfer of ownership splits the lease into two leases.

Furthermore, the Supreme Court considered that if the lease is split into two leases, it will not be clear to the tenant which part of the rent he has to pay to his original landlord and which part to his new landlord.

The Supreme Court ruled as follows. As long as the tenant has not taken cognisance of the transfer, he will be able to pay the entire rent in full to his original lessor. After taking note of the transfer, this no longer applies. However, the tenant will then be entitled to suspend payment of the rent until the landlords have informed him how the rent is to be split.

Want to know more? Feel free to contact us.

Marius Rijntjes (rijntjes@m2advocaten.nl)