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Landlord suffers damages as a result of police action against tenant. Who bears the damage?

If damage lies outside the normal social risk or the normal business risk of the lessor, the State is in principle liable for the damage suffered by the lessor. This recently occurred in a case before the Court of Appeal in The Hague. It concerned the following case.

A landlord has leased business premises to tenant. In 2012, the police raided the leased premises, finding drugs. The tenant has been convicted in connection with this. The raid caused damage to the facade of the rented property.

In first instance, the State was ordered to compensate the landlord for the damage suffered. The State appealed against this judgment.

The Court of Appeal held that a different distribution of the damage may take place, or that the obligation to pay compensation may be cancelled or maintained altogether, if “fairness demands this because of the varying seriousness of the mistakes made or the other circumstances of the case” (the fairness correction).

In addition, Section 6:101(2) of the Dutch Civil Code provides that in the case of damage caused to an item held by a third party for the injured party (as in the case of rent), the circumstances attributable to the third party shall be attributed to the injured party.

If the tenant had been the injured party, the State could have invoked 100% of its own fault to defend its obligation to pay compensation. The State attaches to this the conclusion that there is no longer any room for the application of the fairness correction resulting in the State having to compensate any damage after all. The State argues that it follows from Section 6:101(2) of Book 6 of the Dutch Civil Code that no circumstances on the part of the injured party may (no longer) be taken into account in the context of the equity adjustment. The Court of Appeal did not agree with this.

The Court of Appeal pointed out that “other circumstances of the case” may also play a role in the fairness adjustment, such as in this case the circumstance that the lessor cannot be blamed for the conduct of his lessee, or the choice of a particular lessee. Based on this, the Court concludes that an equity correction of 100% must be applied, i.e. the State must cover all the damages.

This judgment does justice to the principle that damage that lies outside the normal social risk or the normal business risk of the lessor is, in principle, eligible for compensation.

Overall, it is good for landlords to know that in such cases they will be compensated for their damages and will not suffer as a result of their tenant’s conduct.

Want to know more? Feel free to contact us.

Marius Rijntjes (rijntjes@m2advocaten.nl)