Eviction of a hospitality entrepreneur with coronavirus-related rent arrears awarded in preliminary relief proceedings
Now that the Netherlands is still facing a partial lockdown, an increasing number of entrepreneurs are experiencing the financial consequences. In particular, entrepreneurs in the hospitality industry are suffering from the forced closing down of their cafes and restaurants. Commercial tenancy lawyer Thomas van Vugt discusses a recent judgment on this subject.
Eviction in preliminary relief proceedings
In a recent dispute, lessor InBev requested the eviction of a Breda pub in preliminary relief proceedings. The lessee had accumulated substantial rent arrears since April 2020 and argued that as long as the pub was closed, he had no income and therefore could not meet his rent obligations.
Substantiation of financial difficulties
Although the District Court in preliminary relief proceedings considered the defence plausible, it pointed out that the lessee had not substantiated its claims at all. It had not been demonstrated that the café business had run into serious financial difficulties due to the corona crisis and the forced closing down. It was also unclear to what extent the lessee could claim government support.
Fair distribution of the pain
The lessee also relied on Section 258 of Book 6 of the Dutch Civil Code (unforeseen circumstances). According to the lessee, the limitations in connection with the corona crisis are such that InBev, according to standards of reasonableness and fairness, cannot expect an unchanged continuation of the lease agreement. The lessee refers to a rent reduction here, which courts have granted in other similar cases. Indeed, it has been ruled repeatedly in case law on this point that the corona crisis is considered an unforeseen circumstance in a claim for a rent reduction. As a result, a rent reduction -in connection with a ‘fair distribution of the pain’ – is usually considered reasonable.
Corona crisis unforeseen circumstance
However, according to the District Court, such a rent reduction cannot benefit the lessee. Even if, in accordance with case law on this point, the rent is temporarily reduced to a maximum of 75% (June to 15 October 2020) and 50% (from 15 October 2020), the rent arrears are still almost €30,000. This is still so high that in all likelihood the lease will be set aside in proceedings on the merits. The claimed eviction will therefore be awarded in these preliminary relief proceedings.
Lawyer rent reduction coronavirus
A hard lesson for Café Parkzicht from Breda, but a useful one for other entrepreneurs in the hospitality industry who are also struggling with rent arrears. The judgment shows that a lessee still has to properly substantiate that the alleged financial difficulties are the result of the coronavirus measures. The judge will therefore also examine whether and how much government support has been applied for. So, make sure you come to a hearing well-prepared and, if necessary, bring an auditor or an audit’s opinion with you.