Service costs for liberalised rent: more freedom of contract for landlord of living space

Earlier we published a blog about a landlord of a free sector property, who had to repay €16,500 to her tenant because she had charged far too much for furnishing and because she had not specified Owner’s Association costs. In the meantime, it seems that a turnaround in case law has taken place and that lessors of houses in the free sector are being given more freedom to make agreements at their own discretion. 

Determination of service costs

In short, service costs are the costs of the property that the landlord charges on top of the basic rent for supplies and services. Landlords are required by law to provide their tenants with an annual overview in which all service costs charged are being specified, including the method of calculation (Section 7:259(2) of the Dutch Civil Code). In practice, landlords of privately owned dwellings do not always use an exact approach when determining the service costs. They have simply included an amount in the tenancy agreement for the service costs which they believe adequately cover their efforts.

Old situation

Determining the service costs by estimation could sometimes be expensive for the landlord in the past. When the tenant challenged the level of the service costs, it was not uncommon for the landlord subsequently to have to pick up the tab because it could not be demonstrated that the service costs charged were related to actual costs. The Amsterdam Court of Appeal ruled on this in 2017:

“The Court of Appeal deems (…) if the parties have agreed an amount for service costs, that amount must be reasonable, in the sense that it must be in reasonable proportion to the value of what is offered for it”.

In other words, the service costs charged by the lessor should be based on actual costs. Therefore, if the tenant could make it clear that the service costs were not based on actual costs, the lessor had to reimburse the service costs that were overcharged.

Current state of affairs

Remarkably enough, the Court of Appeal of Amsterdam has come to an entirely different conclusion on the basis of the legislator’s explanation of Section 7:259 of the Dutch Civil Code and is of the opinion that only when no or incomplete agreements have been made about the service costs, it should be determind that the service costs should be considered to be at least. For the rest, however, the Court of Appeal reasoned as follows:

“In the case of liberalized dwellings (…) contractual freedom with regard to (the level of) service costs (…) is the starting point, just as this freedom in principle also applies to the determination of the rent. (…) There is no need for a relation to the actual costs’.

In short, according to the last judgment of the Amsterdam Court of Appeal, in case of a liberalized dwelling the parties are free to agree on a compensation for service costs at their discretion without necessarily having to make a connection with the actual costs. In short, a landlord may charge €350 per month for the rent of a couch of €300, – provided the tenant has agreed to this.

Note

One may wonder whether the verdict of the court of appeal actually makes much of a difference. After all, even before this ruling it was possible for the landlord of a liberalized dwelling, if he was of the opinion that he was insufficiently compensated for the service offered, to increase the (bare) rent at will, provided the tenant only agreed to the higher rent. This ruling, on the other hand, forms a safety net for those landlords who, in the subdivision between bare rent and service charges, had wrongly included too much of the rent in the service charges.

However, with this ruling one may wonder what the function of the mandatory overview (Section 7:259 (2) of the Dutch Civil Code) still is, with the exception of the service charges part where the final amount is determined afterwards, as is the case for the use of utilities. There was already no statutory sanction for failure to provide an overview, and with this ruling landlords of liberalized dwellings seem to have even less reason to actually provide it, which does not improve transparency towards tenants.

Questions about service costs? Feel free to contact M2 Advocaten.

Lawyer Marius Rijntjes rijntjes@m2advocaten.nl

 

service costs

Living space service costs: Can the OA (VvE) contribution be charged on to the tenant?

It regularly happens that a landlord passes on the Owners Association (OA, in Dutch “VvE”) contribution to his tenant as part of the service costs, but is this actually allowed? For example, in a recent judgment of the Amsterdam Subdistrict Court it was ruled that a landlord had wrongly charged the VVE contribution of 200 euros per month to its tenant as service costs. As a result, the landlord had to repay no less than €5500 in undue VVE contributions to the tenant. However, this does not mean that a VVE contribution can never be passed on to a tenant. When can the VVE contribution be passed on to the tenant and when can it not be?

Not charging VVE costs one-to-one

In the case as described above, the landlord had included in the lease that the tenant was due a monthly fee in respect of the ‘service costs VVE. However, the court ruled that VVE costs cannot be passed on to a tenant on a one-to-one basis. VVE costs may only be passed on to a tenant to the extent that they are directly related to the use of the property.

A landlord is therefore better advised to specify these VVE costs in more detail in order to make it clear that they are indeed user costs. It does not suffice to simply include a cost item ‘service costs VVE, since service costs for the VVE will normally not consist entirely of user costs. Incidentally, it should be noted that in this court case, the lessor could not subsequently prove that these were operating costs.

In some cases, it will not be immediately clear to the landlord what specific amounts the monthly remittance to the VVE consists of. In that case, a more detailed cost specification will have to be requested from the VVE in order to find out which parts of it can be passed on to the tenant. The tenant is therefore also entitled to such a cost specification.

 

Which costs within the VVE contribution can a lessor pass on?

Examples of costs that can be passed on to the tenant are:

– Heating costs

– Glass cleaning of windows that the occupant cannot reach without risk.

– Electricity consumption of communal areas

– Cleaning costs of common areas

– Sweeping of chimneys and drains

What costs within the VVE contribution can a landlord not charge to his tenants?

Examples of costs that cannot be passed on to the tenant are:

– Required maintenance costs for the complex (e.g. maintenance of the lift and/or existing lighting installations).

– Repairs to the building

 

How do you charge these costs to the tenant?

If a landlord wishes to pass on certain VVE costs to the tenant, these costs must first be specified and agreed in the tenancy agreement. Subsequently, the landlord is legally obliged to provide the tenant annually with a specified(!) overview of these service costs (article 7:259 paragraph 2). The tenant may require the lessor to substantiate the costs with statements of account. The lessor is not permitted to make a profit on recharged costs. Therefore, a lessor may not charge more for user costs than it has actually incurred.

The annual service costs overview must be provided within six months after the end of the calendar year at the latest. In short, before July 1st, the lessor must have provided the lessee with an overview of the costs for the previous calendar year. In addition, the provision of a service charge overview is necessary if a lessor wishes to increase the advance payment amount (Article 7:261).

In short, if user costs are included in your VVE payment, these costs may be passed on to your tenant provided this has been agreed in the lease agreement. Subsequently, provide a clear and specified service costs overview on time and annually. If the tenant does not agree with the service costs, the rent commission and otherwise the subdistrict court may be requested to rule on the service costs.

 

Ginio Beij

 

Do you have further questions about charging service costs or other questions?

Please feel free to contact M2 Advocaten.