Often suddenly, franchisee and franchisor are confronted with a lease termination due to renovation and/or because the landlord wants to use the property himself.
Fortunately, the franchisee and/or franchisor who rents a retail space is well protected in tenancy law. The starting point is that the franchisee and franchisor must be able to recoup their investments. However, rent is also a time-limited right. The lease can therefore, in principle, be terminated by the lessor at the end of the agreed term. Termination is possible, among other things, if the landlord states that he needs the rented property urgently.
Can the tenant be evicted just like that? No, the landlord’s cancellation (unlike the tenant’s cancellation) does not end the rental agreement even after the notice period of at least one year. After termination, the lessor must also claim eviction from the subdistrict court judge by means of a summons. During this procedure, the rental agreement will continue. In this procedure, the lessor must make a plausible case that he urgently needs the rented property himself. Urgent need also includes renovation that cannot take place during the lease and the situation in which the lessor wishes to operate its own establishment in the leased property for a branch and/or franchisee.
For example, the Supreme Court ruled that a competing retail format that had purchased the property from another formula with the aim of establishing its own shop there was allowed to terminate the lease and the eviction was also granted. According to the Supreme Court, there was no abuse of rights in such a situation by giving notice.
Is it that simple then? No. First of all, the new owner must wait three years after purchase before he can cancel. In this provision, according to the Supreme Court, the abuse is thus subject to a time limit. In addition, the tenant can claim an allowance for moving and refurbishment costs. If after the termination it appears that the owner benefits from the fact that he operates a similar business as the tenant did, the former tenant can also claim a goodwill compensation. However, this claim can only be brought after the rental agreement has ended.
Furthermore, as a rule, the actual eviction may only take place after the appeal and, where applicable, the Supreme Court have also ruled on the eviction. These procedures take a long time.
The termination also automatically terminates the sublease agreement. This is not always recognized in time. However, the subtenant can claim compensation from the main tenant if the main tenant has made insufficient efforts to protect the interests of the subtenant. Usually, the main tenant and subtenant also jointly defend the eviction.
In franchise relationships, in view of the above, it is recommended that both the franchisee and the franchisor inform themselves properly about the possibilities and risks at the appropriate times, for example when entering into the franchise agreement and on the eve of major investments, as well as in the event of an intended sale. s of the term of the main lease. For this reason too, franchise and (sub)lease agreements are often linked in terms of duration.
Ludwig & Van Dam franchise attorneys, franchise legal advice