Indexing rent afterwards, is that okay?

Many (standard) leases include an indexation clause. This means that the rent can be increased once a year according to a method of indexation stipulated in the agreement.

Sometimes the landlord does not apply the indexation clause in practice. Suppose the landlord has forgotten to apply the indexation for 4 consecutive years. The question then arises whether the landlord is allowed to catch up with this in one go. This would mean that the tenant would have to pay a substantially increased rent in the future, which would be increased by 4 years of indexation. In addition, the tenant would also have to pay ‘overdue’ rent over the past 4 years.

That sounds unreasonable at first sight. Nevertheless, the rule in case law is that the landlord may, in principle, indexate with retroactive effect, see, for example, the judgment of the Amsterdam Court of Appeal of 10 April 2012 (read here). The reasoning behind this is that the landlord’s right to indexation has not been lost as a result of legal processing. Just sitting still is not sufficient for the administration of rights, additional circumstances are required. However, the period during which the landlord can claim back overdue rent is limited to 5 years, because such claims become time-barred after 5 years. (Please note that this limitation only applies to the collection of the overdue rent, not to the possibility of determining an increased rent for the future on the basis of indexation).

The landlord may therefore index the rent afterwards. But a good legal rule does not come without exception. Under certain circumstances, it may be unacceptable to index retrospectively according to standards of reasonableness and fairness. A recent example played in the District Court of Overijssel of 13 December 2016 (read here). In this case, landlord Nettorama had leased part of its supermarket space in 1983 to a tenant who sold bread, cheese and nuts there. The lease contained an indexation clause.

The indexation clause had never been applied by Nettorama, but in 2015, i.e. 32 years after the start of the agreement, Nettorama wanted to implement it. This would mean that the tenant would have to pay € 3,100.45 per month instead of € 1,000. Also, over the past 5 years no less than € 114,362.50 in overdue rent would have to be paid.

The Subdistrict Court considered this unreasonable. In addition, the Subdistrict Court pointed out that Nettorama provided an annual settlement of the rent, without the indexation, and that the tenant was therefore entitled to trust that Nettorama would no longer be entitled to the indexation.

As far as I am concerned, this reasoning of the Subdistrict Court is rather thin, because the mere provision of an annual statement does not mean that a landlord waives his right to claim indexation. Nevertheless, the outcome of these proceedings is satisfactory, because the payment of € 114,362.50 after 32 years is too much of a good thing.

The main rule, therefore, is that the landlord may index afterwards, unless the District Court Judge thinks it really is too much.

Ginio Beij (beij@m2advocaten.nl)

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