Netherlands: Real Estate Finance Law In Netherlands

A. Mortgages

1. Can security be granted to a foreign lender?

Yes, a mortgage can be granted to a foreign lender.

2. Can lenders take a mortgage over land and buildings on the land?

Yes, lenders can take a mortgage over land and/or buildings on the land.

2.1 What is the distinction between mortgages over land and buildings on the land?

Under Dutch law, land and buildings on the land are referred to as immovable property (see below). No distinction between the two is made in law. It is possible for a mortgage to be granted over immovable property. Immovable property includes all fixtures permanently attached to it. Accordingly, all buildings constitute immovable properties and are subject to the same mortgage as the plot of land on which they are built.

Buildings that are not permanently attached to the land on which they are built are considered movable properties.

2.2 Are mortgage certificates for a certain value issued? What is the cost? Are they transferable?

The concept of mortgage certification as known under common law jurisdictions is not known under Dutch law. However, in securitisation transactions, transferable mortgage-backed securities can be issued evidencing debt secured by mortgages. The costs for transferring mortgage-backed securities depend on the complexity of the transaction.

2.3 Can second ranking security be taken? If so, how is it registered? Is a priority deed also registered?

Second ranking security can be taken. It is vested in the same way as the prior ranking security was vested, i.e. by way of filing a notarial deed of mortgage with the Dutch Land Registry (Kadaster). The time of registration with the Dutch Land Registry determines the ranking of the security created under the deed. As a consequence, it is not required to enter into a priority deed to determine the ranking of the security created in the mortgage deed.

It is possible to change the ranking of security interests created by executing a notarial deed to effect the change in priority (rangwisseling), which deed should also be filed with the Dutch Land Registry. All beneficiaries of the security interests involved will need to consent to the change in priority for the change to be effective.

2.4 Can real estate be transferred to a third party (being still subject to mortgage) without the lender's consent?

It is common for loan and/or security documentation to include an undertaking not to transfer the encumbered real estate to a third party without having obtained the lender's prior consent.

2.5 Are there any preferred creditors (other than a prior ranking mortgage holders)?

Under Dutch law a distinction can be made between the various groups of preferred creditors, i.e. those creditors that, on the basis of Dutch law, have a preference with respect to the distribution of liquidation proceeds. The claims of these creditors rank higher than those of unsecured creditors. Preferential creditors are:

• Employee Insurance Agency (UWV)
• Tax & Customs Administration
• employees with a wage claim before bankruptcy.

2.6 Can "all monies" mortgages be taken?

An "all monies" mortgage can be taken under Dutch law.

2.7 Can a landlord's right to receive rent be charged, assigned or transferred to a lender by way of security? If so, how?

Yes, the right to receive rent can be pledged by way of disclosed or undisclosed right of pledge. Usually parties prefer to create undisclosed pledges as the creation of such security does not involve sending a notification of the pledge to the relevant tenants. The disclosed or undisclosed pledges can either be created under the deed of mortgage or be done separately under private deeds of pledge which must be registered with the Dutch tax authorities for perfection purposes.

An undisclosed right of pledge keeps the right to receive rent with the landlord, until the lender notifies the debtor of the pledge, after which the right to receive rent is attributed to the lender. An undisclosed pledge requires a notarial deed or the registration of a private deed of pledge with the Dutch tax authorities.

2.8 It is customary/possible for a lender to take a charge/security over bank accounts of the borrower? Is it usual for lenders to contractually restrict rights to withdraw funds in accounts until the scheduled interest and capital repayments are made?

It is possible for a lender to take security over the Dutch bank accounts of a borrower; although generally speaking, it has become unusual for the Dutch banks to provide their unconditional consent to create a pledge over an account holder's claim against the bank where the account is held, if such consent is provided at all.

In lending transactions, lenders usually contractually restrict rights to withdraw funds in accounts until the scheduled interest and capital repayments are made.

3. What are the mechanisms for registering land and for registering and perfecting security?

Both perfecting a transfer of land and perfecting the creation of security requires the execution of a notarial deed which must be registered with the Dutch Land Registry.

3.1 What are the consequences of failure to register?

If a deed of transfer is not filed with the Dutch Land Registry, the deed of transfer does not result in a valid transfer of title to the immovable property. Similarly, if a deed of mortgage is not registered with the Dutch Land Registry, the deed of mortgage does not create enforceable security.

3.2 What are the formalities and costs for execution of security?

The creation of security over immovable property requires the execution of a notarial deed, which is executed by the notary in the presence of the parties to the notarial deed; although in practice, a notarial deed of mortgage is usually signed by the notary and persons working at the notary's office who have been given a power of attorney by the parties to the notarial deed of mortgage.

Following the execution of the notarial deed of mortgage, the deed of mortgage must be registered with the Dutch Land Registry to create enforceable security.

The costs for registering the deed of mortgage is EUR 137.50.

4. Can the lender use a Security Trustee to hold security on trust for creditors?

Dutch law does not recognise the concept of 'trust'. Under Dutch law, security can however be granted to a trustee acting for the benefit of all lenders, provided that the underlying loan agreement or separate security documents include a parallel debt provision. Parallel debt provisions are required since Dutch law is not conclusive as to whether a person can hold security rights for the benefit of another person without a monetary claim. The parallel debt provisions should at least reflect that:

• the borrower undertakes to pay the security agent in its own right, and not as representative of the other finance parties, sums equal to each amount payable by it under the finance documents (the 'parallel debt')
• the security trustee shall have its own independent right to demand and receive payment of the parallel debt
• the parallel debt is owed to the security trustee in its own name on behalf of itself and not as agent or representative of any other person, and that the security documents shall only secure the parallel debt owing to the security trustee.

The loan agreement should further include provisions pursuant to which the other lenders have a contractual claim against the security trustee to ensure that any enforcement proceeds are paid by the security trustee to the underlying lenders.

It is also possible to create security in favour of multiple security beneficiaries using the principle of a community (gemeenschap) within the meaning of article 3:166 of the Dutch Civil Code. Each beneficiary will in such a case be entitled to the assets of the community and to a part of the security right corresponding to its individual share in the community. If this route is chosen, the beneficiaries should enter into an (intercreditor) agreement setting out the conditions for enforcement.

4.1 What happens if the lenders change later on e.g. on a transfer? Does new security have to be signed?

If the lenders change, no new security is required provided the security is created to secure the parallel debt in favour of the security trustee.

5. Does the landlord/borrower have control over changes in tenants if the tenant wants to transfer the lease to a new tenant and is the original tenant still bound by the lease?

5.1 Office/industrial lease

Parties are not entitled to assign the lease as such (unless agreed otherwise in the lease or with permission of the landlord).

5.2 Retail lease

If the tenant intends to transfer its business to a third party, the tenant is entitled to request a substitution of the third party as tenant under the lease. The court may grant such a request if the tenant has compelling arguments (zwaarwichtig belang) in favour of the transfer. The court will deny the request if the third party cannot provide guarantees that it will fulfil the obligations under the agreement, and that it will act as a "good tenant" (behoorlijke bedrijfsvoering).

6. How can the lender enforce its security?

6.1 Can a foreign jurisdiction (either a court or arbitral tribunal) be chosen to settle disputes and under what circumstances may such a choice not be recognised?

Dutch law allows for contracting parties in commercial transactions to agree that either a foreign court or an arbitral tribunal shall be authorised to settle their disputes in cases with a multi-national angle. Dutch courts will therefore need to recognise such a choice for a foreign court or arbitral tribunal and will need to defer to that foreign court or arbitral tribunal to settle the dispute, if requested to settle the dispute notwithstanding the choice for a foreign court or arbitral tribunal.

Notwithstanding the choice for a foreign court, a Dutch court may be requested to settle a dispute in certain exceptional circumstances as a result of which it becomes impossible for parties to settle their dispute in the chosen court as a result of those exceptional circumstances (forum necessitatis). Alternatively, a Dutch court may, in urgent matters, also be involved in the settlement of certain disputes if there is a reasonable ground for determining the jurisdiction of the Dutch court in a specific subject matter (forum conveniens).

6.2 Does the local law allow for the enforcement of arbitral awards or foreign judgements without review?

Dutch law allows for the enforcement of arbitral awards without review. The enforcement of foreign arbitral awards is dependent on the applicable international treaty (in most cases, the United NationsConvention on theRecognitionandEnforcementofForeign Arbitral Awards of 10 June 1958).

In situations where no treaty applies, foreign judgments are in principle not recognised without review. Consequently, in such cases, a final and conclusive judgment cannot be enforced (ten uitvoer worden gelegd) against a company in the Netherlands, without the dispute having been relitigated before a competent court in the Netherlands. The competent Dutch court will however have the discretion to attach such weight to the judgment rendered by the foreign court as it deems appropriate. Based on case law, the Dutch courts may be expected to adjudicate substantial importance to a final, conclusive and enforceable foreign judgment as to monetary obligations, without full re-examination or full relitigation of the substantive matters adjudicated upon (marginale toetsing), and such court will generally give binding effect to an enforceable foreign court judgment provided that certain preconditions determined in Dutch case law have been met.

6.3 How can that security be enforced? Can it be sold to a third party? Is it possible for a secured party to appoint receivers/liquidators and if so how and what are their powers? Can security be enforced directly without recourse to the courts and are private sales of security possible? Does it have to be sold by auction?

Public Sale

If a debt is secured by a right of mortgage in favour of the mortgagee and the debtor fails to fulfil its (payment) obligations, the mortgagee will be entitled to sell the mortgaged property (the "Mortgaged Property") by public auction (the "Public Sale") without court intervention. Pursuant to the applicable statutory provisions, this form of Public Sale must always be carried out through a Dutch civil-law notary. A general description of the procedure for a Public Sale is set out below.

First, the bailiff serves a notification of the Public Sale on the debtor, other mortgage holders and attaching parties, announcing the date of the Public Sale of the Mortgaged Property. This bailiff's notification will be served before the date the Public Sale is advertised.

The intended Public Sale will be published no later than 30 days before the Public Sale ("Publication"). Publication will be made online. Publication may also take place in a national or local daily newspaper (to reach the largest possible audience).

In addition, marketing activities for the Public Sale can be started at an early stage, e.g. putting up billboards near the property, advertisements on several auction websites etc. These marketing activities may be planned before Publication has taken place in the newspaper.

As from the moment the advertisement appears on the internet and/or in the newspaper, the owner must make the Mortgaged Property available for inspection. If the owner fails to cooperate with the inspections, the owner will be obliged by law to cooperate.

If the Mortgaged Property has been allowed to be used by third parties, for example under a tenancy agreement, without the mortgagee's permission, the letting clause must be invoked. The bailiff serves the notifications on the owner and serves the notification of the letting clause on the tenants (including also unknown tenants if there is reason to believe that the Mortgaged Property is let unlawfully, but the relevant persons are not registered with the municipality at the address which is put up for auction). If the mortgagee has failed to invoke the letting clause, and after the Public Sale it turns out that the Mortgaged Property was nevertheless let while it was offered unlet at the Public Sale, the mortgagee will be liable for the loss or damage suffered by the purchaser.

No later than 30 days before the date of the Public Sale (the "Auction Date"), the mortgagee will lay down the auction conditions. After the auction conditions have been laid down, the interested parties will be sent a copy of the deed.

Private Foreclosure Sale

Until 14 days before the Auction Date, interested parties may make an unconditional bid with the civil-law notary (the "Principal"). This (written) bid must be unconditional, irrevocable and without any reservations. The civil-law notary will immediately send the mortgagee a copy of any private bids with the request to inform them if the mortgagee accepts the bid.

If the mortgagee finds one of the bids acceptable, the mortgagee will submit a signed sale and purchase agreement regarding the sale of the Mortgaged Property to the court for court approval. This is possible up to and including 8 days before the Auction Date. The owner may also submit a signed sale and purchase agreement with a party of his/her own choice to the court for court approval.

The Public Sale shall in such case(s) be suspended.

An underlying valuation report will have to show that the offer (to be) accepted by the mortgagee is reasonable. The court will take into account the debtor's interest, i.e. it should be the highest bid and from a reliable party. The timing of obtaining court approval depends on the relevant court and availability of the court.

If the court agrees to a sales contract, the sale of the Mortgaged Property will be carried out in accordance with the agreement and the Public Sale will be cancelled. In that case a private foreclosure sale has taken place ("Private Foreclosure Sale").

To execute the approved sales contract, a transfer deed will be drawn up in which the Principal transfers the Mortgaged Property to the buyer, on which occasion the buyer pays the purchase price.

The owner must vacate the Mortgaged Property at the time of transfer to the buyer.

If the owner is not prepared or able to do so, the buyer can have the owner removed from the Mortgaged Property by the bailiff. Following the Private Foreclosure Sale the Principal will no longer be involved in relation hereto, this should be dealt with between the buyer and the owner.

Public Sale (Forced Sale)

If a Private Foreclosure Sale as described above does not take place, the Public Sale will proceed on the Auction Date. The mortgagee may decide whether to accept a bid or not, no minimum requirements apply. The mortgagee may decide to set up another auction if it did not receive an acceptable bid in the first auction, however it is uncertain if it will receive a higher bid in such case. The mortgagee itself can also submit a bid, in the understanding that the purchase price should actually be paid into the notary account for the purpose of the transfer of the Mortgaged Property.

After the Public Sale, the buyer must pay the purchase price 6 weeks after the Auction Date at the latest (depending on the terms set out in the auction conditions), but he/she may also pay earlier.

The owner must vacate the Mortgaged Property at the time the buyer pays the purchase price. If the owner is not prepared or able to do so, the buyer can have the owner removed from the Mortgaged Property by the bailiff. Following the Public Sale the mortgagee will no longer be involved in relation hereto, this should be dealt with between the buyer and the owner.

6.4 Is the lender responsible for maintenance and insurance of the real estate after default until sale?

A Dutch mortgage deed generally contains a step-in right for the mortgagee. This step-in right is set out in Section 3:267 of the Dutch Civil Code. Including such step-in right in a Dutch mortgage deed is in line with common market practice in the Netherlands.

Upon the occurrence of an event of default that also constitutes a serious breach (ernstig tekortschieten) of the mortgagor's obligation towards the mortgagee, the mortgagee shall be entitled, upon being authorised to do so by the provisional judge of the district court (voorzieningenrechter), to take the registered property in its control (beheer). A payment default is generally considered a serious breach, but also other aspects should be taken into account. Depending on the circumstances of the specific case (also taking into account the principle of reasonableness and fairness), other defaults can also be considered to be a serious breach.

Such control, in each case to the extent required to secure the value of the registered property, includes:

• exploiting the registered property on behalf of and at the expense of the mortgagor
• terminating existing lease or other agreements relating to the registered property
• entering into new agreements relating to the registered property
• collecting rent, fees or similar payments
• doing all that the mortgagee deems useful, necessary or desirable with regard to the registered property (including maintenance and repair work).

In carrying out the control, the mortgagee may arrange to be assisted by experts at the expense of the mortgagor. Such experts can be appointed and discharged by the mortgagee.

The mortgagee shall furthermore be entitled, if this is required with a view to foreclosing on the mortgage, to take control over the registered property and to require that the registered property is cleared (ontruimd).

The mortgagee will be under the obligation to maintain and administer the registered property with due care (which includes ensuring that the registered property is duly insured). Furthermore, the mortgagee is accountable against the mortgagor and should keep the mortgagor informed on a regular basis, or in any case annually.

The authority of the mortgagee to take control over the registered property ends on the date that:

• the right of mortgage ceases to exist or is terminated,or
• the provisional judge of the district court withdraws the authority, e.g. if the provisional judge has put a time limit on the authority to take control.

6.5 Is there any method of foreclosure (lender obtaining good title to the real estate in satisfaction of all or part of its debt)? If so, does this require a court order and is it only automatically used when the real estate is not sold at public auction?

See How can that security be enforced? above.

7. Is there anything else that you would specifically point out to a foreign lender as being unusual or particularly difficult?

N/A

B. Security Over Shares

The answers below assume that the real estate is held in a Dutch SPV (limited liability company) to provide an alternative to enforcement of the mortgage over real estate.

1. Can security be granted to a foreign lender?

Yes, security over shares can be granted to a foreign lender.

2. Can second ranking security be taken? If so, how is it registered?

Yes, second ranking security over shares can be taken. It is vested in the same way as the prior ranking security was vested, i.e. by way of executing a notarial deed of pledge of shares. The time of executing the deed of share pledge determines the ranking of the security created under the deed. Therefore, in order to determine the ranking of the security, it is not required for the second ranking deed of share pledge (or a priority deed) to be registered in a public register.

It is possible to change the ranking of security interests created by executing a notarial deed to effect the change in priority (rangwisseling). All beneficiaries of the security interests involved will need to consent to the change in priority for the change to be effective.

3. What are the mechanisms for registering and perfecting security?

The creation of security over shares requires the execution of a notarial deed.

3.1 What are the consequences of failure to register?

Under Dutch law no obligation exists to register the share pledge in any public register.

3.2 What are the formalities and costs for execution of security?

The creation of security over shares requires the execution of a notarial deed, which is executed by the notary in the presence of the parties to the notarial deed; although in practice, a notarial deed of share pledge is usually signed by the notary and persons working at the notary's office who have been given a power of attorney by the parties to the notarial deed of share pledge.

Following the execution of the notarial deed of share pledge, the shareholders' register of the company will need to be updated to reflect the fact that the shares of the company have been pledged.

As there is no obligation to register the notarial deed of share pledge, no additional costs are payable.

4. Do the shares need to be transferred into the name of the lender or its nominee?

No.

5. How can the lender enforce its security?

5.1 Can it be sold to a third party? Is it possible for a secured party to appoint receivers/liquidators and if so how and what are their powers? Can security be enforced directly without recourse to the courts and are private sales of security possible? Does it have to be sold by auction?

Under Dutch law a share pledge can be enforced by means of:

• public sale without involvement of the court, which requires a bailiff/notary to sell the shares publicly; this option is not commonly used in the Dutch market given the absence of a clear legal framework under Dutch (case) law
• private sale to either:
  • a third party with the consent of the pledgor (such consent is valid only if it is given by the pledgor after the pledgee has become entitled to enforce the share pledge); no court involvement
  • a third party upon having obtained prior approval to do so from the court (upon request from either the pledgor or the pledgee)
  • the pledgee in the amount to be determined by the court (upon request of the pledgee only).

5.2 Are loans from shareholders subordinated? If so, how is this done? Is it customary for such loans to be waived or written off contractually as part of an enforcement of a share pledge should a default occur?

Loans by shareholders are not subordinated by law, although it is common practice to contractually subordinate such loans to any other loans by way of a subordination agreement or an intercreditor agreement.

C. Leases

Most commercial lease contracts are based on the standard model of the Dutch Council for Real Estate (Raad voor Onroerende Zaken or ROZ). This model (a standard form contract and standard general conditions) addresses the main rights and obligations of both the landlord and the tenant. The standard conditions tend to be more favourable to the landlord. Although ROZ models are frequently used, a large number of contracts are tailor-made based on ROZ models and include bespoke amendments of the ROZ standard conditions.

The Dutch lease legislation distinguishes the following types of legal regimes differing per asset:

• residential
• retail – the lease of commercial space to be used for retail, hotels, restaurants etc. that are open to the public
• office/industrial – other types of commercial space, e.g. office space, factories, banks etc.

The applicable legal regime differs for each type of lease. The designated use clause determines the applicable legal regime.

1. Lease Structure

1.1 Typical lease length?

Office/industrial

Parties are free to determine the term of the lease. However, a 5-10 year initial lease term is common. Office/industrial leases often include one or two renewal terms.

Retail

Unless the lease has been entered into for a term less than 2 years, the tenant has a legal right to renew the lease for a total term of 10 years. As parties usually enter into a first term of 5 years, the second term will also be 5 years. Unless parties have agreed on a renewal for a fixed term, the lease will subsequently be renewed for an indefinite term.

1.2 Maximum/minimum lease length if any?

See above. No maximum length.

1.3 Statutory controls and obligations re renewal/termination of leases (does tenant have automatic right to renewal or can they apply to the courts for a new lease); also does some form of notice have to be served to terminate a lease to avoid renewal?

Office/industrial

Unless the lease contains an option to renew the lease or provision for an extension of the lease period, the tenant is not entitled to an automatic lease renewal. If both parties continue the lease after its expiration, it may be construed as an extension for an indefinite period of time. The agreement for such an indefinite period of time can be terminated with due observance of at least one rent payment period (unless the lease stipulates otherwise).

Article 7:230a of the Dutch Civil Code contains mandatory provisions with regard to vacation protection for the tenant at the end of the lease. The lease terminates after one of the parties has given notice of termination of the lease. In order to effect the vacation of the leased premises by the tenant, the landlord must also give a written notice of vacation to the tenant. From the date of vacation set forth in the notice of vacation, the obligation for the tenant to vacate the leased premises is suspended for a period of 2 months by force of law. However, the tenant is not entitled to a suspension of the obligation to vacate in case the tenant:

• has given notice of termination of the lease of its own accord
• has explicitly agreed to termination of the lease, or
• was ordered to vacate the leased premises by court order because of default.

When the lessee is entitled to a suspension of the obligation to vacate it may, within the 2-month period, request the court to extend the term of suspension to a term of 1 year. By filing this request, the obligation to vacate is further suspended until the court has given a judgment. As the tenant is entitled to repeat this request two more times, in the most optimal case the tenant can – in theory – suspend the obligation to vacate the leased premises with a maximum of 3 years. We note that although it is in theory possible to suspend the obligation to vacate the leased premises with a maximum of 3 years, it is rare that such a long period would be granted by the court, especially in the case of an office building. Even an extension of 1 year of vacation protection is uncommon for an office building.

The court will decide on the request of the tenant after it has weighed the interests of the tenant to stay in the leased premises and the interests of the landlord to have the premises vacated. The tenant's request will be rejected by the court when, for example, the tenant has made improper use of the leased premises. The case law on this subject is very casuistic.

Retail

Unless the lease has been entered into for a term of less than 2 years, the tenant has a legal right to renewal of the lease for a total term of 10 years. Typically, initial lease agreements are set for a term of 5 years, thus the second term will also be 5 years. Unless parties have agreed on a renewal for a fixed term, the lease will subsequently be renewed for an indefinite term.

If the lease is entered into for a fixed term, it will not be possible for the tenant or the landlord to terminate the lease prematurely (with exception of termination by mutual consent). The lease can only be terminated against the end of the current term by giving written notice of termination. If the lease runs for an indefinite period of time, both the tenant and the landlord can, with due observance of the applicable provisions, at any moment terminate the lease by giving notice of termination. Both the tenant and the landlord must however observe a notice period of at least 1 year. The tenant is not obliged to state any grounds for termination. The landlord is obliged to state one or more statutory grounds for termination. The tenant is authorised to terminate the lease out of court. The landlord, however, can only terminate the lease on the basis of a court order (in case the tenant disagrees with the termination).

1.4 Any overriding statutes concerning the ability of the tenant to break a fixed term lease (whether or not included as a term of the lease)?

If a lease is entered into for a fixed period of time it will not be possible for the tenant or the landlord to terminate the lease prematurely, with the exception of termination by mutual consent. It will only be possible for both the tenant and the landlord to terminate a lease prematurely if one of the parties is in breach of its obligations under the lease, for example non-payment of the rent for a considerable period of time (at least 3 months). The tenant is authorised to dissolve the lease agreement out of court. The landlord must request the court to dissolve the lease agreement.

If the tenant goes bankrupt, both the bankruptcy trustee and the landlord may terminate the lease, whereby a notice period of 3 months will in any case be sufficient. If the tenant is granted a moratorium of payment, only the tenant may terminate the lease, whereby a notice period of 3 months will in any case be sufficient.

1.5 Any other security of tenure provisions available to a tenant that would frustrate possession or prevent receipt of market rents?

According to Dutch law, the landlord is responsible for the remediation of defects that obstruct quiet enjoyment under the lease, and the tenant can claim an interim rent reduction and damages. The ROZ deviates from this principle.

2. Rent/Rent Reviews

2.1 Rental income receivable quarterly/monthly in-advance/in-arrears?

Parties are free to agree the rent. Usually the rent will be paid monthly or quarterly, mostly prior to commencement of the specific term of payment.

2.2 Periodicity of reviews?

Parties usually agree to a rent subject to annual indexation (consumer price index CPI), while a negative index will not be applied. Parties may agree on a cap on the indexation.

Retail

The landlord and tenant are free to agree on the rent payable. The tenant and the landlord are entitled to request the court to adjust and assess the rent in accordance with the average of the rent of comparable local retail spaces (during a reference term of 5 years prior to the rent review date), per the end of the initial lease term and subsequently every 5 consecutive years after the last adjustment of the rent by the parties or by the court.

The tenant and the landlord must first try to reach mutual agreement on a new adjusted rent. If the parties do not succeed, they must seek expert advice. In case the parties cannot reach agreement on the expert to be appointed, the court can appoint an expert (article 7:304 of the Dutch Civil Code). As the advice of the expert is not binding, either party is entitled to demand that the rent shall be adjusted by the court (article 7:303 of the Dutch Civil Code).

2.3 Basis of review (upwards-only or variable, indexation or market rent)?

The indexation of rent takes place in accordance with the CPI all households series (the latest price index). Market practice is CPI and upwards only. Parties may agree on a cap on the indexation.

2.4 Are rents/reviews subject to statutory control in regard to quantum or increase (i.e. rent control)?

Office/industrial

Dutch law does not contain any provision on this subject. In absence of a contractual provision, neither party can ask for a rent review.

Retail

The tenant and the landlord are entitled to request the court to adjust and assess the rent in accordance with the average of the rent of comparable local retail spaces (during a reference term of 5 years prior to the rent review date), per the end of the initial lease term and subsequently every 5 consecutive years after the last adjustment of the rent by the parties or by the court.

The tenant and the landlord must first try to reach mutual agreement on a new adjusted rent. If the parties do not succeed, they must seek expert advice. In case the parties cannot reach agreement on the expert to be appointed, the court can appoint an expert. As the advice of the expert is not binding, either party is entitled to demand that the rent shall be adjusted by the court.

3. Lease Obligations: Who has responsibility for:

3.1 Internal maintenance, decoration and repair?

Under Dutch law, the tenant is obliged to take care of minor maintenance and day-to-day repairs. The ROZ deviates from this principle.

3.2 External maintenance, decoration and repair?

Under Dutch law, the landlord is obliged to perform extensive and constructive maintenance and major repairs. The ROZ deviates from this principle.

3.3 Structural repairs?

Under Dutch law, the landlord is obliged to perform extensive and constructive maintenance and major repairs. The ROZ deviates from this principle.

The landlord is liable for damages caused by defects of the leased premises if the defects occurred after the commencement of the lease and are attributable to the landlord, and if the defects existed at the commencement of the lease and the landlord was aware, or should have been aware, of those defects. This clause is mandatory law and may therefore not be excluded from a lease. However, damages with respect to defects which were unknown to the landlord at the commencement date of the lease, and defects which occur thereafter and are not attributable to the landlord, can be excluded.

3.4 Insurance?

Either party can insure the premises, although it is usual for the landlord to insure, with the cost of insurance being recovered from a tenant by way of 'service charges' if and to the extent the lease provides for such recovery of charges.

3.5 VAT?

If rent with turnover tax has been agreed with reference to Section 11 subsection 1 opening words under b. part 5 of the Turnover Tax Act 1968 (Wet op de omzetbelasting 1968), then the rent will be subject to turnover tax.

3.6 Rates?

In addition to the rent, additional service charges can be borne by the tenant for the supplies and services provided by the landlord, if and to the extent agreed in the lease.

3.7 Other typical outgoings?

In addition to service charges, the parties can agree that the tenant must pay other ancillary costs, such as premiums for insurance taken out by the landlord.

3.8 The ability to recoup any landlord outgoings (including management costs) by way of service charges?

In order to charge any costs to the tenant, the lease agreement must precisely state each type of costs.

4. Enforceability

4.1 Are terms of leases/contracts recognised and supported by case law in the jurisdiction?

Yes.

5. Valuation and Environmental

5.1 To be recognised in the courts, does an appraisal have to be prepared by some domestically regulated/qualified party or is an RICS (Royal Institution of Chartered Surveyors)-qualified appraisal report accepted and recognised in each jurisdiction?

N/A

5.2 Is it possible/customary to obtain environmental reports from a local government agency or a qualified, insured environmental professional?

Yes, an environmental consultant may be appointed to undertake a range of different investigations and reports.

5.3 Is it possible for liability in respect of past or present breaches of environmental laws to attach to a lender by it holding or enforcing a mortgage over real estate?

There is no explicit provision on this type of liability. However, generally speaking, if a lender has used its step-in rights under a mortgage and has assumed control and responsibilities, it is possible for a lender to be liable. That would only apply insofar as the breach can be attributed to the lender.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.