Developments in rental and real estate law
Real estate law is in a state of flux. For example, on July 1, 2024, the Fixed Lease Law and the Affordable Rent Law went into effect. These laws aim to better protect tenants and ensure the affordability of rental housing by abolishing temporary leases and regulating rents and rent increases in the (new) non-liberalized middle segment, respectively.
To address the overstretched housing market, more solutions are needed. In urban areas where space is limited and the need for housing is increasing, "topping up" existing buildings offers an innovative solution to partially solve the housing shortage. Optopopping involves adding one or more residential floors to an existing building.
The case law also remains active with respect to these new developments. Preliminary questions have been raised regarding the rent modification clause, which appears in almost all leases. What do all these developments entail, and how do these changes affect the new ROZ model Lease Agreement Living Space? That and more is discussed in this blog.
Blog Overview
Real estate law update: changes and developments
- What has changed since July 1, 2024?
- Non-liberalized middle segment
- Abolition of temporary leases
- Opting up: a step up?
- Directly to: blog about process division deed amendment
- State of play on rent modification clause
- Facts
- Opinion plv. PG. Wissink on preliminary questions to the Supreme Court
- Now what?
- Amendments to the ROZ model Lease Agreement Housing Space
- Clarification of rental options
- Adjusted provisions on utilities/security deposits and penalty clauses
- Landlord's duty of disclosure
- Legal updates
i. What has changed since July 1, 2024?
1. Non-liberalized middle segment
Effective July 1, 2024, the non-liberalized housing segment was expanded to 186 points and up. This change is the direct result of the enactment of the Affordable Housing Act. The "middle rental segment" thus comes under the operation of the housing valuation system (hereinafter: WWS). The WWS is a system used to assess the quality of housing through a point system. The system assigns points to the various aspects of a dwelling, such as the number of square meters, the energy performance, the WOZ-value, quality of kitchen and plumbing, and so on. Exactly how the points are determined is laid down in the Housing Rents Decree. The total number of points determines the maximum rent that may be asked for the house. Up to 186 points, the WWS is mandatory; if a property falls within this number of points, the parties are bound to a maximum rent (up to €1157.95) and the tenant is entitled to rent protection.
The prescriptive nature of the WWS is intended to ensure that the rent is commensurate with the quality of the property. It offers tenants rent protection. If the tenant is in doubt about the rent, he or she can turn to the Rent Commission, which will review the rent. If it is found that the rent is too high, it will be reduced to an amount corresponding to the number of points established.
Part of the Affordable Rent Act is the modernization of the WWS. The WWS has been objectified and simplified, making it more enforceable. Landlords who do not comply with the new rules can be fined by the municipality starting Jan. 1, 2025. In addition, as of Jan. 1, 2025, landlords are required to include a point estimate in new leases so that tenants have insight into the maximum rent for the rental property.
1. Abolition of temporary leases
Rent protection means that when a landlord wants to terminate a lease, he or she must meet the legal requirements for termination. This means that the landlord must give notice of termination of the lease, stating the reason for termination. The "grounds for termination" in relation to housing are set out in Article 7:274 of the Civil Code.
Before the introduction of the Fixed Lease Law, tenants of housing accommodations with indefinite contracts enjoyed rent protection. However, rent protection did not apply to leases with a duration of two years or less (self-contained housing) or five years or less (non-self-contained housing). These temporary leases ended upon expiration of the fixed term, without requiring a ground for termination. Since the Fixed Lease Agreements Act came into force, Section 7:271 (1) of the Civil Code provides that fixed-term leases no longer end automatically. Residential tenants therefore always enjoy rent protection; and leases can in practice only be entered into for an indefinite period of time.
There is an exception to this rule, which applies to certain categories of persons, as stated in Article 1 of the Decree on Specific Groups of Temporary Rental Agreements. Within these categories, it is possible to enter into a housing rental agreement for a period of two years or less without rent protection. However, the landlord must inform the tenant in a timely manner about the approaching end date of the lease. If the landlord does not do this at least three months and no later than one month in advance, the lease will automatically continue for an indefinite period of time.
ii. Opting up; a step up?
Topping up enables further sustainability measures within the VvE. The extra apartments created by adding one or more floors to an existing building increase its value when it is sold. The VvE can use this surplus value to have the sustainability measures realized. Also, by providing additional housing, optopping will solve a (small) part of the housing shortage.
For detailed information on opting in, please refer to Paul Bekkers ' blog .
iii. Admissibility of rent modification clause.
1. Facts
Lease agreements for deregulated housing often stipulate that the rent changes annually on the basis of the consumer price index (CPI) established by Statistics Netherlands (CBS), plus a fixed or maximum surcharge of, for example, 1%, 3% or 5%. A clause of the type CPI + (maximum) x % is also found in the much-used ROZ model Lease Agreement Living Space.
Since mid-2023, such clauses are tested in lower courts (ex officio) against the European Unfair Terms Directive and its transposition into Art. 6:231 et seq. of the Civil Code. For the record: private landlords who do not rent professionally or commercially fall outside the scope of the European Unfair Terms Directive.
In two cases, the Amsterdam court considered that the entire rent modification clause is unfair because of the possibility of a surcharge of - in these cases - up to 3%. This would mean that the entire clause is void and all rent increases must be reversed. In January 2024, the court submitted preliminary questions on this issue to the Supreme Court.
The preliminary questions raised can be summarized as follows:
- Is a rent modification clause applying a surcharge of up to 3% above indexation in accordance with CPI an unfair clause?
- Should the entire clause then be disapplied, or just the unfair part?
- Will this lead to the need to roll back all rent increases?
2. Opinion of plv. PG Wissink on preliminary questions to the Supreme Court
Deputy Attorney General Wissink (hereafter: plv. PG Wissink) is of the opinion that the landlord has a legitimate interest to be able to periodically adjust the initial rent in the case of a permanent housing lease. Therefore, according to plv. PG Wissink, a surcharge clause of up to 3% does not qualify as an unfair clause. Indeed, a surcharge of 3% would be acceptable, given the annual rent increase rates set by the Minister in the social sector.
According to Plv. PG Wissink, the rent modification clause should be split into an indexation clause and a storage clause. The indexation clause is intended to continue to rise in line with inflation and is not at issue in that respect. The storage clause, however, is up for discussion. The moment the rent review clause is not split into a storage clause and an indexation clause separately, and the rent review clause is found to be unfair, then this clause is void in its entirety.
If the rent modification clause is found to be unfair in its entirety, the court must nullify that clause, according to plv. PG Wissink. This annulment has retroactive effect and concerns the entire clause affected by it. This means that past increases in rents in the free sector have taken place without legal grounds and will be annulled. These amounts must then be repaid by the landlord.
3. Now what?
It now remains to be seen whether the Supreme Court will follow Plv. PG Wissink's opinion, or take a different route after all. It is not yet known when the Supreme Court will answer the preliminary questions. Naturally, we will keep you informed of developments.
iv. Amendments to the ROZ Model Lease Housing Agreement.
When renting out living space, in many cases the ROZ's model Lease Agreement for Living Space is used. On July 25, 2024, this standard model was amended. The changes are due to the new legislation introduced and the other developments already cited.
1. Clarification of rental options.
The number of options for lease term has been reduced from four to two, with an additional option for customization. This makes the model clearer and reduces confusion. As mentioned, a fixed-term rental agreement relating to housing - barring the aforementioned exception - can no longer be entered into without rent protection for the tenant. This has also been adopted in the ROZ model Residential Tenancy Agreement.
2. Adjusted provisions on utilities, security deposits and penalty clauses
- Utilities: There is now a clear distinction between utilities with and without individual meters, which clarifies the tenant's obligations to the landlord.
- Security deposits: The regulations regarding the security deposit have been amended in accordance with the Good Landlord Act. It may now be a maximum of two months' rent. In addition, there are new regulations regarding the return of the deposit by the landlord.
- Penalty clauses: In the new model, there are stricter rules for imposing fines on tenants. A key component is the"anti-cumulation clause," which ensures that tenants cannot be fined multiple times for the same violation. In addition, a general penalty clause has been introduced, though it can still be reviewed by the courts for fairness. These changes are designed to improve tenant protections.
In the new ROZ model Residential Tenancy Agreement, the landlord is required to include certain information as an annex to the lease for the tenant. This obligation to provide information is the result of the Good Landlord Act, which came into effect on January 1, 2023. The duty to provide information and its elaboration can be found in article 2 paragraph 2 sub e of the Good Landlord Act. This duty includes, among other things, that the landlord must actively inform the tenant about:
- The tenant's rights and obligations with respect to the leased property, to the extent these rights and obligations are not included in the lease;
- Through which contact information the tenant can ask questions about the property or report complaints;
- How service charges are calculated and that annual full cost breakdown must be provided to the tenant.
4. Legal updates
The ROZ model Lease Agreement Residential Space also includes a paragraph regarding rent modification clauses. As indicated, there is still discussion surrounding these clauses in the deregulated rental segment for housing. As long as the Supreme Court has not yet provided clarity, this clause will remain unchanged from the old ROZ model Lease Agreement Living Space (2017). Until the Supreme Court rules, we advise you to handle the rent modification clause with caution. We will be happy to advise you on the possibilities.
