Clarity pays off

By Published On: 16-08-2023Categories: Franchise Agreements, Franchise law

Clarity pays off

Many agreements sometimes use vague definitions or unclear descriptions that are open to different interpretations. Sometimes this is because it is not (yet) possible to give a clear explanation, but often it is because it is thought that the terms used do cover the load. It is precisely in those cases that the consequences of such unclear terms can be major. This may also be the case in franchise agreements or rental agreements used in franchise relationships.

The landlord of a business premises in Bussum experienced that the use of unclear or general terms in an agreement could be interpreted in a negative way. With regard to this business premises, a lease agreement had been concluded between the previous owner, from whom the current lessor had purchased the business premises, and Marqt’s real estate branch. This rental agreement explicitly stipulates that the rented property must be used for ‘retail trade’. When purchasing the property, the new landlord apparently assumed that a Marqt supermarket would be operated in the business premises. It wanted to oblige Marqt and, after the split-off, its legal successor to operate a Marqt supermarket in the leased property. However, this is not laid down in the rental agreement. Nor were explicit documents submitted from which it could be concluded that Marqt had committed itself to starting the operation of a supermarket.

Shortly after delivery of the business space, Marqt (Holding BV) got a new director and sole shareholder, namely Udea Beheer BV. The supermarket chain EkoPlaza has also been incorporated into this organisation. An EkoPlaza branch is located directly on the opposite side of the rented property. The tenant has informed the landlord that, partly for this reason, no supermarket can be operated in the rented property. The tenant has offered to the landlord to prematurely terminate the rental agreement concluded between the parties, offering to pay compensation to the landlord. However, he did not want to accept this and started proceedings before the subdistrict court to oblige the tenant to operate a supermarket in the rented property. The subdistrict court was unable to award this because the lessor has not made it sufficiently plausible that the lessee can be obliged to operate the leased property himself.

The landlord has appealed against this judgment. The court has determined that both parties to the rental agreement must be regarded as professional parties. That is why the Court of Appeal argues that the textual interpretation of the zoning provision is of great importance. ‘Retail trade’ is a broader concept than ‘supermarket’, so the court believes that this was deliberately chosen. However, the court does indicate that there may be circumstances that make it plausible that the provision should be interpreted differently. The landlord has sought these circumstances in extensive renovation agreements from which it concludes that these were carried out solely with the intention of establishing the supermarket in the rented property. However, the Court of Appeal ruled that the explicit obligation to operate a supermarket cannot be read from the circumstances presented. For example, the court points out that it refers to ‘the assignment to operate a hull retail space’. It may then be the case that the intention was to start a supermarket at the time, but this was not laid down in the agreements concluded between the parties. The Court of Appeal therefore also rules that no obligation has been agreed between the parties for Marqt to operate a supermarket in the leased property. Retail has been chosen and the current use of the rented property by the subtenant is in line with this. The landlord’s claims are therefore also rejected on appeal. The Court of Appeal explicitly ruled that now that the landlord has been a professional party and has also been assisted by experts such as a real estate agent, there is no reason to come to a different interpretation of the provisions. For the same reason, there is no reason to explain any ambiguity in favor of the landlord.

Using the general term ‘retail’ in the lease now works against the landlord. If the landlord had already wanted to enforce the ‘supermarket’ destination, it would have been up to her to explicitly include this destination in the lease. Now that this has not happened, the landlord must accept the current use. It is difficult to determine afterwards whether this was a preconceived plan of the tenant, but she was able to use the general term used in the lease in this matter. The outcome of this case would in all probability have been completely different if the signed lease had explicitly stated the intentions so that the landlord could have relied on this. For that reason alone, it is always recommended to include clear and straightforward wording in agreements.

Ludwig & Van Dam lawyers, franchise legal advice.
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