Obligations of the lessor to remedy defects in the rented property

A franchise agreement is often closely linked to a rental agreement. This (sub)lease agreement may have been entered into between the franchisor as lessor and the franchisee as lessee, but this need not be the case. The franchisee may just as well have concluded the rental agreement with another (legal) person. In the following, it will be assumed that a rental agreement has been concluded with the franchisor as lessor/sub-lessor and the franchisee as lessee/sub-tenant. In this context, the maintenance obligations of the franchisor or the franchisee with regard to the leased property and the compensation by the franchisor of any damage caused to an item as a result of a defect will be briefly discussed below.

Article 7: 204 of the Dutch Civil Code stipulates (in short) that a defect is a condition or a characteristic of the thing, as a result of which the thing cannot provide the tenant (hereinafter: franchisee) with the enjoyment that a tenant may expect when entering into the agreement . Article 7:206 of the Dutch Civil Code stipulates in the new tenancy law that the landlord (hereinafter: franchisor) is obliged to remedy defects at the tenant’s request. However, this is different if it is impossible to remedy the defects or if this requires expenditure that cannot reasonably be expected from the franchisor in the circumstances. In practice, however, it will not be readily assumed that in the given circumstances it cannot reasonably be expected of the franchisor to remedy the defects. Even if the costs of remedying defects do not outweigh the added value of the item in question, this does not necessarily mean that the franchisor has no obligation to repair. Whether the franchisor does have this obligation to repair depends in part on the other circumstances of the case. The franchisor is therefore often obliged to remedy the defects. If the franchisor fails to fulfill its obligation to repair (in a timely manner) and damage occurs, this damage to the leased property is, in principle, attributable to the franchisor. After all, the franchisor fails to fulfill its obligation to repair. If the franchisor does (timely) repair the defect and damage nevertheless arises as a result of the defect, the franchisor is not by definition obliged to pay compensation for the damage caused by the defect. In this case it is also necessary that the defect can be attributed to the franchisor.

An important question is whether the franchisor can deviate from his obligation to repair a defect in the leased property. Section 7:209 of the Dutch Civil Code stipulates that this cannot be deviated from to the detriment of the lessee (franchisee) insofar as it concerns a defect that the lessor (franchisor) knew or should have known when entering into the agreement. This means that it can be agreed that the franchisee is responsible for remedying the defects that have arisen after entering into the lease. If the franchisor wishes to agree with the franchisee that the franchisee is responsible for remedying these defects, the franchisor must expressly agree with the franchisee which shortcomings the leased property has when entering into the rental agreement. It is also necessary that the rental agreement states that these shortcomings are not defects within the meaning of Article 7:204 of the Dutch Civil Code. If the franchisor has not made clear agreements in this regard and has not informed the franchisee that he must therefore take care of the repair of these shortcomings himself, the franchisor can still be held responsible for repairing the relevant defects in the rented property.
In summary, the above means that the franchisor is obliged to remedy defects in the leased property, unless it is impossible for the franchisor to remedy the defects or this requires expenditure that cannot reasonably be required of the franchisor in the circumstances. In addition, the franchisor and the franchisee may agree in the manner set forth above that the franchisee must remedy the defects itself. The franchisee must then be expressly informed about the shortcomings in the rented property, so that the franchisee can no longer expect a well-maintained item.

Ludwig & Van Dam franchise attorneys, franchise legal advice