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alimony indexing

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)

Suspension of rent due to defects? Tenant watch out!

In practice it happens regularly. A tenant who is fed up with it. Whether it is residential or business accommodation, there are defects that cannot be solved. There are leaks, there is draught, the rented property is far too hot or too cold. Despite several reminders, the landlord does nothing about it. And then what?

The solution that many tenants choose if they think it takes too long? Just not paying the rent for a while. If the landlord repairs the defect, the rent will be paid in retrospect. The means a temporary suspension of the rent payment.

In itself that sounds logical. What better way to persuade the landlord to take action than by hitting them in the wallet?

Nevertheless, a tenant should handle this carefully. According to established case law, rent can only be suspended if the defect is serious enough. In addition, it is important that the suspension must be proportional to the loss of rental enjoyment. If, despite a defect, it is still possible to use the rented property, it is not permitted to suspend the rent altogether. In practice, however, it often happens that the tenant completely suspends the rent.

A judgment of the District Court of North Holland, published at the beginning of this year, shows an example of how things can go wrong for the tenant. The ruling concerned business premises that were rented to a car rental company. At a certain point, a fire started in the rented premises, after which the business premises were damaged. A few months after the fire, the smoke and soot damage was repaired. However, the renter had suspended the entire rental payment, even after the repair, due to the cause of the defect. It had been established that the damage had occurred because the lessor had installed fire-resistant doors that did not close sufficiently.

The court, however, found this entire suspension to go too far. In general, the fact that the fire-resistant doors did not close properly was no reason to suspend the rent in full. It came down to the fact that the tenant had to pay the full rent with interest and fines. Read the entire judgment here.

Are you in doubt whether you can suspend the rent or do you want to know what other possibilities there are for remedying defects? Feel free to contact us.

Lawyer Ginio Beij (beij@m2advocaten.nl)