Rent reduction and corona crisis – dated 25 March 2020 – mr. Th.R. Ludwig

In this turbulent time for franchisors and franchisees, many are faced with ongoing obligations that have become problematic. An emergency measure has been announced by the government for personnel costs. Such a scheme does not (yet) exist for other obligations, such as rent payments. What to do now?

In short, it can be considered to invoke unforeseen circumstances. After all, there are circumstances that were not yet known to the parties at the time the lease was concluded. Furthermore, the circumstances are unforeseen and have not already been taken into account in the rental agreement. This is different when epidemics et cetera are explicitly mentioned in the rental agreement as not being a reason to question the rent. In addition, maintaining the rental agreement unchanged should be contrary to reasonableness and fairness and these circumstances should not be the responsibility of the tenant. The essence lies in these last two criteria. The landlord also has an interest. An appeal to unforeseen circumstances is generally only permitted in legal practice in very exceptional cases.

However, the coronavirus is a highly exceptional situation. It is arguable that unchanged maintenance of the tenancy agreement should not be borne by the tenant if, for example, the rented property is obliged to be closed due to the corona pandemic. Social and personal interests also play a role here  an important role in every situation. However, it is not possible to say with certainty in advance how the pain will be distributed. Reasonableness and fairness play an important role in this. This argues, for example, in favor of requesting a significant rent reduction from the landlord at this stage. A possible payment in court on the basis of unforeseen circumstances will not only result in a rent reduction. The tenant could then also claim deferment of payment. In concrete terms, the tenant, whether franchisor or franchisee, is advised to submit a request for a relevant rent reduction as soon as possible in the hope that in these turbulent times landlords, franchisors and franchisees will find each other as quickly as possible.

The doctrine of unforeseen circumstances may also apply to other obligations such as maintenance contracts, fee obligations between the franchisor and franchisees, et cetera. In all cases, the following applies at the moment: act delicately and expeditiously, in careful consultation.

It goes without saying that we remain available for any desired assistance in this matter.

mr. Th.R. Ludwig  – franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Please contact us at info@ludwigvandam.nl