Termination of a lease agreement for business premises
A lease agreement for business premises under Section 290 Book 7 of the Civil Code cannot be simply terminated by the lessor. Various rules related to this are included in the law, inter alia regarding the time at which termination can take place, the period that must be observed and the grounds on which a lessor can successfully terminate the lease agreement.
Notice period: at least one year
The lessor, who wishes to terminate the lease agreement, must do this with due regard to a period of at least one year. It is possible to agree to a longer period in the lease agreement. A shorter period is only possible with prior approval from the court. The lessor can terminate the lease agreement with effect from the end of the agreed period. This is usually five years. But a lessor’s notice does not simply cause a lease agreement to terminate at the time for which the lessor has given notice. More is required for this.
Termination must be careful and complete
The lessor will be obliged to make it clear in the termination letter on which ground or grounds he wishes to terminate the lease agreement. That letter must be sent by registered mail or delivered to the lessee by means of bailiff’s notification. It is important for the lessor to draw up the termination letter carefully and completely. If the lessee does not agree to the termination, litigation must follow. During the proceedings, it will not be possible for the lessor to put forward new grounds for termination; the lessor must rely on the ground(s) for termination stated in the termination letter.
Termination after the first five years: two options
If the lessor wishes to terminate with effect from the end of the first period (usually five years), this can only take place on two grounds. The fact is that the court can only grant a claim for termination of the lessor on the basis of: (i) poor business operations and (ii) urgently required for one’s own occupancy. The known examples of poor business operations are a bad payment record, neglect of the leased property and prolonged vacancy. It follows from established case law that the court must take all circumstances of the case into consideration when answering the question of whether there are poor business operations.
If the lessor personally wishes to start occupying the leased business premises, he can try to reach termination of the lease agreement on this ground. Urgently required for one’s own occupancy means that the lessor must make it plausible that he personally, or somebody else from his close family, wishes to occupy the leased property personally and permanently. The renovation of the business premises can also fall under urgently required for one’s own occupancy, but the sale of the business premises cannot.
Termination with effect from the end of the second lease period and afterwards
If the lessor gives notice of termination with effect from the end of the (usual) ten-year period, three other grounds apply in addition to the above two grounds for termination (poor business operations and urgently required for one’s own occupancy): the refusal of a reasonable offer for the amendment of the lease agreement, the implementation of an applicable zoning plan and the balancing of interests.
If the lessor has proposed to the lessee, by means of a reasonable offer, the amendment of the lease agreement (for example, with regard to the size of the leased property or intended renovation), and the lessee refuses to agree thereto, the court must grant the lessor’s claim for termination. However, the court can grant a period of one month to the lessee to still agree to the offer.
The court must also terminate the lease agreement if the lessor wishes to implement the designated use imposed on the leased property. It are almost always municipalities that rely on this ground for termination.
A balancing of interests is only vested in the court if the court is of the opinion that the ground for termination set out in the lessor’s termination letter is not present. In that case the court will balance the interests of the lessor in the termination against the interests of the lessee in the extension of the lease agreement.