Operating problems shopping centres: position of tenant different from that of franchisee

Our highest court, the Supreme Court, recently ruled on the question whether and to what extent disappointing visitor numbers in a shopping center are a circumstance that, in short, should be borne by the lessor/owner of the shopping center or whether these of the affected tenants should stay. The direct object in this case was, not for the first time, the Amicitia shopping center in Amersfoort, which has often been the subject of litigation.

In short: Amicitia shopping center was opened in 2001, located between the old city center of Amersfoort and the city ring. The shopping center is recessed in relation to the surrounding area and accessible via stairs. Most of the shops are located on either side of its sunken promenade. The developer presented the project in a brochure at the time. The intention was to “fill Amicitia in a high-quality way” with shops and catering companies, so that it would become an attraction. This was also communicated to potential tenants prior to entering into the various lease agreements. The rents are at a corresponding “A1 level”.

Unfortunately, the shopping center was not the success it was expected to be. This led to various conflicts with tenants, several of whom have since left. A large non-food discounter eventually settled on the vacant space, at a considerably lower rent per meter than the other tenants paid.

Four tenants protested against this state of affairs and eventually also litigated, all the way to the Supreme Court. Substantiated with various factual circumstances, their legal position was, in short, that the disappointing visitor numbers and therefore the disappointing turnover in the respective shops of the tenants, are the result of causes that should be borne by the lessor. The rented property did not meet what the tenant could expect from it. In the alternative, the tenants pleaded error and, more in the alternative, unforeseen circumstances. Both the subdistrict court and the Court of Appeal rejected the tenants’ claims. The Supreme Court ultimately followed the judgment of the Court of Appeal. In short, this opinion means that disappointing visitor numbers, or certain causes thereof, cannot be regarded as a defect within the meaning of Section 7:204(2) of the Dutch Civil Code. If that is the case, then in principle the landlord is liable, if that is not the case, then the negative consequences of this will in principle remain for the account of the tenant. In addition, matters in a broader context can also play a role in relation to the shopping centre. Against this background, the Supreme Court, together with the Court of Appeal, ruled that disappointing visitor numbers in themselves cannot, in principle, be regarded as such a defect. In principle, therefore, the landlord cannot be held liable for this, unless this is the result of a specific defect in the rented object itself, or the shopping center as a whole, which the tenant need not have thought of. According to the Supreme Court, the disappointing visitor numbers as such, in the case specifically of a new shopping centre, are in principle part of a tenant’s entrepreneurial risk.

However, the story becomes fundamentally different when the tenant is also a franchisee. Suddenly the heavy responsibility of the franchisor towards the franchisee becomes apparent: the duty of care entails that an adequate forecast falls under the responsibility of the franchisor. If this is not correct, for example in connection with disappointing visitor numbers in a shopping centre, then this falls under the responsibility of the franchisor. After all, the franchisee may assume that the information provided by the franchisor was correct. This will not change if the franchisee is an independent tenant in the new shopping center with disappointing visitor numbers. Decisive for its position in relation to the franchisor is the responsibility and the duty of care of the franchisor in this regard: the franchisor must ensure that the number of visitors has been realistically estimated and correctly included in the financial estimate. Whether the franchisee is an independent tenant or subtenant of the franchisor is also irrelevant.

When starting in a (new) shopping center or in a shopping center that is being renovated, a franchisee would be wise to explicitly ask the franchisor whether the development of the shopping center in his individual situation has been properly mapped out and translated into a clear financial estimate. / adequate prognosis. The franchisee is also advised to request substantiation of the prognosis. This substantiation can, for example, consist of an adequate and professionally conducted location survey. Some franchise organizations, especially franchise organizations that have existed for a long time, can sometimes make a responsible and thorough assessment on the basis of their knowledge, skills and experience, even without a site investigation. In all cases, however, it is important to materialize the specific point of relevance of the development in a shopping center in the financial estimate in question.

Ludwig & Van Dam franchise attorneys, franchise legal advice