Over the past year, the Amsterdam subdistrict court ruled in several proceedings that such a standard rent increase clause in housing is considered an "unfair clause. The most recent ruling dates from August 3 of this year. This ruling by the subdistrict court may have far-reaching consequences for many landlords. We explain below how the subdistrict court arrived at this judgment and what the consequences are.
Case study
In the August 3 judgment, the landlord claimed dissolution of the lease and eviction of the property because of rent arrears that had accrued. In addition, the landlord claimed payment of accrued rent arrears. The rent had increased greatly over the years by using the rent increase clause included in the lease. This clause allowed the landlord to increase the rent annually by the consumer price index plus a maximum 5% increase. Meanwhile, the rent had increased from €865.00 per month, to €1,534.75 per month.
During the proceedings, the tenants acknowledged that they were in rent arrears. They wanted a payment arrangement and to continue living in the property. It does not appear that the tenants relied on the fact that there was an unfair clause. The subdistrict court ruled on this on its own initiative. That may sound strange, but it is not.
Indeed, where there is a tenant as a consumer and a landlord as a trader, the European Unfair Terms Directive Directive applies. Pursuant to this Directive, it is then up to the Subdistrict Court to assess "ex officio" whether such a clause is unfair. Note that not in all cases will a landlord be considered a trader. This is only the case when the landlord engages in commercial rental of residential premises and thus acts in the exercise of a profession or business. However, this is a broad concept and, as a result, a landlord often appears to be a trader.
In the ruling under consideration, the subdistrict court ruled that such a clause, where an additional increase in the rent can be applied in addition to the application of the consumer price index , is an unfair clause. Several circumstances play a role here, including the fact that the clause does not contain a clear and transparent explanation of when the extra increase will or will not be applied. But the fact that the tenant does not have the option to terminate the lease if the rent increase clause is used also carries weight. As a result, the clause qualifies as an unfair clause and is therefore eligible for annulment .
Far-reaching implications; refunds/overpayment of rent indexation
It can have far-reaching consequences for a landlord if such a rent increase clause is qualified as an unfair clause. The clause can be annulled. Annulment means that the increased rent clause never formed part of the lease. First of all, this means that there is no longer any possibility for the landlord to periodically increase the rent. This is because the rent increase clause cannot be annulled in part. Thus, it is either valid or voidable in its entirety. Nor does the court have the ability to modify or supplement the clause. As a result, the landlord can no longer claim a rent increase based on the consumer price index. But it also means that previous rent increases will have to be reversed. After all, the rent increase clause never existed. Moreover, in this particular case, a claim for set-off was allowed. It had the effect of dismissing the claim for dissolution and eviction. But also the claim for payment of rent arrears. There was no such claim (anymore). The subdistrict court even ruled that as long as there was still a positive balance, the tenants could invoke setoff. In practice, this means that these tenants will not have to pay rent for the foreseeable future, having paid too much rent for a very long time.
Landlords are therefore in an uproar and are curious as to whether the various rulings will be upheld on appeal. After all, a large proportion of landlords use a similar clause in their standard residential leases.
ROZ model living space 2017
It is notable that such a rent increase clause as discussed above hardly differs from what is contained in the ROZ model living space 2017. This is a model used by many landlords in the rental of living space. In fact, Article 5.2 of the model states the following:
"... In addition to and simultaneously with the annual adjustment in accordance with Article 16 of the General Provisions, the landlord is entitled to increase the rent by up to ...%."
It therefore seems to follow from the above judgment (and also from the earlier judgments of the District Court of Amsterdam) that the standard provision from the ROZ model will not stand either. It is therefore questionable whether this line will continue to be followed, given the enormous impact that the ruling has on a large number of residential leases, which contain a similar clause without being negotiated by tenants and landlords. In any case, it is something to keep in mind as a residential landlord. Especially for landlords looking to negotiate new leases and considering including a rent increase clause in the lease.
Summary
For now, it seems better to limit yourself as a landlord to only a consumer price index increase. Not only that, also delete the option of an additional increase completely from the lease. Because irrelevant is whether a possible additional rent increase was actually implemented.
Moreover, it cannot be ruled out that the standard lease agreements also contain other clauses that a court may automatically consider unfair. If, as a landlord, you do not want to run any risk, it is wise to check the standard lease again carefully, check which clauses are not core clauses and, at least in the future, negotiate with each tenant about clauses that may be considered unfair (but may be desirable from the landlord's point of view).
For existing leases, it seems wise to at least try to make a change to the existing contracts. It may be an option to make an offer of a new lease at some point. But don't be surprised if a tenant demands a refund due to overpayment of rent indexation.
