Subdistrict court approval of the link between franchise and rental agreement remains necessary

A frequently recurring subject of litigation in cases between franchisors and franchisees remains the link between the franchise agreement and the underlying (sub)lease agreement. The aim of this link is that termination of the franchise agreement automatically leads to termination of the (sub)lease agreement and vice versa. In that case, the agreements include a provision that the two agreements are linked.

The intent of this link is understandable from a practical point of view. In many cases, the franchisor has  interest in the location and therefore leases the business premises. To enable the operation of this location by means of the franchise agreement with the franchisee, a sublease agreement is concluded with the franchisee. Upon termination of the franchise agreement, the franchisor has an interest in retaining the location. Both agreements therefore include that in that case the lease will also come to an end and the location will once again be available to the franchisor.

However, this link deviates from the legal rent protection system. In order to establish this link and to be able to appeal to it in court, this link must be approved by the subdistrict court judge. Many franchise agreements and underlying (sub)lease agreements also contain provisions whereby the parties agree to jointly request this approval from the subdistrict court judge. However, practice shows that this approval is not always actually requested. This creates a real risk that a court will reject an appeal to the contractual link, which may result in the franchise agreement coming to an end, but the (sub)lease agreement continuing.
That this is a real risk was already apparent from a ruling by the Court of Appeal of ‘s-Hertogenbosch this year (Court of Appeal of ‘s-Hertogenbosch, 7 July 2015, ECLI:NL:GHSHE:2015:2509). In this case, a franchise agreement and a sublease agreement were concluded between the parties. The link included in these agreements was submitted for approval to the subdistrict court judge who had granted the approval. So far no problem. Subsequently, however, an identical franchise agreement and rental agreement were concluded for another location, in the opinion of at least the franchisor, with the same link and  agreement between the parties to have this link approved by the subdistrict court judge. This time, however, this approval was not requested. As a result, the Court of Appeal ruled that the necessary approval for the link was missing. On the other hand, it has already become clear from previous case law that, if this approval is present, a judge, either in preliminary relief proceedings or in proceedings on the merits, will follow the link.

The need to actually implement a provision included in a contract regarding requesting approval of a link between the franchise agreement and the (sub)rental agreement therefore still remains valid and current.

mr. Th. Meijer – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice.
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