Posts

Supreme Court imposes restrictions on service charges

6Last year you could read a blog on our website about a judgment in which the Court of Appeal of Amsterdam ruled that a landlord of a dwelling in the free sector was almost completely free to determine the level of service costs, as long as there was an agreement with the tenant. In cassation, however, the Supreme Court decided differently.

What was the case?

Tenant and landlord have agreed a rent of €740,- per month. In addition to the bare rent it has been agreed that €450,- per month will be charged for the rent of the furniture and €200,- per month in VvE contributions. The tenant will pay €1.500,- per month Including an advance payment for the energy costs. During the rental period the tenant will not receive a specification of the costs.

After termination of the tenancy agreement, the tenant will reclaim the fully paid furniture costs (€11,055.28) and VvE contributions (€5,500.-) because the landlord did not comply with the obligation to disclose the actual costs incurred. The tenant argues that the VvE contributions should not be charged anyway.

Progress of the procedure

The court rules in favor of the tenant. The court ruled that no more than €48,- per month should have been charged for the furniture. With regard to the VvE contributions, the court ruled that no costs may be charged that are not directly related to the use of the property.

On the other hand, in the appeal, the court of appeal made a U-turn with respect to the prevailing doctrine and ruled that, in view of the history of the law, the freedom of contract in the case of liberalized rent should also apply with respect to the agreed service costs. In other words: if the parties have agreed on a certain fee for the service costs, this agreement does apply. In fact, it does not matter whether the charged costs have actually incurred. An agreement is an agreement. According to the Court of Appeal, only if no agreements have been made in this respect, it is necessary to fall back on what has been laid down by law or what is considered reasonable.

Supreme Court

In the meantime, the highest court in the Netherlands, the Supreme Court, has ruled on the matter. The Supreme Court refers to the first sentence of Section 7:259 (1) of the Dutch Civil Code:

“The tenant’s payment obligation in respect of costs for the utilities with an individual meter and the service costs shall be the amount agreed between the tenant and the landlord”.

In the opinion of the Supreme Court, this phrase should be understood to mean the agreement between the tenant and the landlord on the charged costs as a result of the (annual) specification to be provided to the tenant. In that case, the tenant has the opportunity to check whether the costs that were charged are correct, after which ‘agreement’ can be reached.

According to the Supreme Court, this phrase does not mean that a landlord and a tenant can agree on a service charge without any relation to the actual costs. After all, this would render the annual specification which is imposed useless. Section 7:259 of the Dutch Civil Code also applies to deregulated dwellings.

Conclusion

The service costs should be calculated as a reasonable fee in relation to the actual costs. The amount of the service costs can be assessed on the basis of this criterion, even if it concerns a liberalised dwelling.

For tenants of a liberalised dwelling, it is (again) important after this ruling to obtain a good insight into the costs that are stated. It is therefore quite possible to challenge these costs at a later stage, if they are disproportionate to the actual costs. However, it is also important for landlords to actually provide a clear overview of the extra costs that are incurred annually. This prevents them from being suddenly confronted at a later stage with a large claim from a tenant comparable to this case.

Do you have any questions about this blog or would you like to know more about service costs? Please feel free to contact M2 lawyers.

 

Lawyer Ginio Beij (beij@m2advocaten.nl)

 

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