Is the landlord allowed to increase the rent by 14.5% or not?

The ruling of the District Court of The Hague of June 29, 2023, ECLI:NL:RBDHA:2023:10394, concerned the question of whether the landlord could increase the rent by 14.5%. In an earlier case on which the preliminary relief judge of the District Court of The Hague ruled on May 4, 2023, ECLI:NL:RBDHA:2023:8786, the rent was not allowed to increase by 14.5%. However, in the present case the decision was different.

A Plus franchisee has entered into a franchise agreement with Plus Retail BV (hereinafter: Plus Retail) for a period of ten years, starting on March 1, 2017.

The franchisee has entered into a lease agreement with Plus Vastgoed BV (hereinafter: Plus Vastgoed) with effect from January 26, 2017 for a term of at least ten years for the operation of a PLUS supermarket. The ‘general provisions of the rental agreement for retail space and other business premises within the meaning of Article 7:290 of the Dutch Civil Code’ (ROZ model 2012) (hereinafter: the general provisions) have been declared applicable to the rental agreement. In short, Article 18.1 states that rental price increases take place on the basis of the change in the monthly price index figure according to the consumer price index (CPI) series for all households (2006=100), published by Statistics Netherlands (CBS).

Pursuant to Article 5.4 of the franchise agreement, the provisions regarding the rental of the business premises form an integral part of the franchise agreement and form one inseparable whole.

In 2022, Statistics Netherlands started a study into a new measuring method that better reflects the price development that households experience on average than the measuring method used until then.

Plus Vastgoed has been implementing an annual rental price change since January 26, 2018. As of January 26, 2023, Plus Vastgoed has indexed the rental price by 14.5% based on the established CPI.

In another judicial decision by the preliminary relief judge of the District Court of The Hague (May 4, 2023, ECLI:NL:RBDHA:2023:8786), the judge concluded that the rent increase of 14.5% was unrealistically high. The judge then considered that CBS had announced that it had established a new calculation method for rental price indexation, as a result of which a lower percentage would apply with effect from June 2023. On this basis, the judge ruled that a rent increase from January 1, 2023 based on the then applicable CBS CPI was not realistic. According to the judge, it was sufficiently plausible in advance that the application of the old calculation method as of January 1, 2023 led to an excessively high, unrealistic price index figure.

In the present matter, the franchisee also does not agree with the rent increase and is also going to court.

The judge considers that energy prices have risen very sharply as a result of the war in Ukraine, even if the parties did not take this into account when concluding the lease agreement, this is not an unforeseen circumstance that should lead to a change in the indexation provision. The parties have taken this circumstance into account by including the indexation provision. They have explicitly agreed in Article 18.1 of the general provisions how the rental price change will be calculated. This applies if the CPI has been relatively low for many years, but also if it shoots up, as was the case in the past year. The parties have included this option in the rental agreement with what they agreed. There is therefore no circumstance of such a nature that Plus Vastgoed cannot expect an unchanged maintenance of the agreement.

Furthermore, the judge ruled that it is a fact of general knowledge that supermarkets partly pass on the cost increases charged to them to consumers. The fact that the franchisee, given the agreements made with Plus Retail, may not be able to pass on all price increases to the consumer does not mean that Plus Vastgoed’s reliance on the indexation provision is unacceptable according to standards of reasonableness and fairness.

The judge is also of the opinion that the mere fact that CBS has introduced a new measuring method for calculating the CPI cannot lead to the conclusion that Plus Vastgoed’s reliance on the indexation provision is unacceptable according to standards of reasonableness and fairness. The fact that there is an (indirect) influence of the franchise relationship on the lease agreement, as argued by the franchisee, does not mean that the agreements made between the franchisee and Plus Vastgoed in the lease agreement should be deviated from.

It remains highly dependent on the specific circumstances how abnormal rent increases are assessed.

mr. A.W. Dolphijn
Ludwig & Van Dam lawyers, franchise legal advice.
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