Business Law Articles
By Ynzie Kliphuis, LL.M.
Russell Advocaten B.V.
Lessees of residential and retail property enjoy security of tenure. Security of tenure is also regularly invoked by parties that have not entered into a lease agreement. Is that possible?
Lease Agreement or Not
Lessees enjoy security of tenure either on the basis of tenancy law or on the basis of a lease agreement. Sometimes companies or private individuals enter into agreements that entitle them to also use someone else’s property but provide, or appear to provide, more options for termination than lease agreements. Think, for instance, of loan agreements, contracts for use, or operating agreements. Also, mixed agreements may be entered into that refer to both, a lease and another type of agreement. The issue, then, is whether security of tenure is applicable or the termination arrangements of the other agreement.
Loan Agreement or Lease Agreement
The name of the agreement is not decisive as to whether or not security of tenure will be applicable, as was confirmed by a recent decision of the North Holland District Court. The famous Dutch artist Rob Scholte had entered into a loan agreement with the municipality of Den Helder in 2008. According to the agreement, Scholte was given use of the former post office of Den Helder. In exchange Scholte had to organise at least three exhibitions per year in Den Helder, not necessarily in the building.
The municipality of Den Helder thought to have solved two issues simultaneously: The property remained in use till it would be taken down to make way for a new town hall plus the town had a new tourist attraction. Scholte turned the post office into a museum, the Rob Scholte Museum, including works of other artists and, together with his family, lived in the building.
Eventually, the construction plans for the town hall were not realized. The municipality decided to sell the property and terminated the loan agreement with Scholte. The judge in preliminary relief proceedings decided however that it was probably a lease as Schulte had to organise exhibitions in exchange for using the rented property. Scholte is entitled to security of tenure.
Lease Agreement and Agreement for Services
A catering company invoked security of tenure (continuation of the restaurant) when the State terminated the catering. The catering company had entered into an agreement with the State to provide the catering for private meetings at Groeneveld Castle in Baarn in combination with the right to make use of the premises for running a public restaurant.
The Dutch Supreme Court decided that the agreement was a mixed agreement that fulfilled the conditions of both a lease agreement and an agreement for services. In this case the rules for termination applying to both kinds of agreements clashed so that it had to be decided which provision was to prevail in this specific case. Providing catering services was central and prevailed, and so the rules for termination of the agreement for services had to be applied. As opposed to Scholte, the caterer could not invoke security of tenure.
Both examples show that careful wording of (lease) agreements is crucial for excluding or applying security of tenure.
Would you like to learn more about the right to security of tenure or other kinds of mixed (lease) agreements? Or do you have other questions about lease and real estate? Please contact us.