Shop-in-shops: different rental regimes apply?

Shop-in-shop

The popular shop-in-shop system is set up so that businesses rent part of a store to operate their own business there under their own banner (brand). In a large supermarket, for example, a bakery, pizzeria or florist driven by an independent business owner can be found. Or consider a coffee bar in a movie theater and a parcel post pickup point in a bookstore. With ordering or streaming products over the Internet gaining popularity, applying the shop-in-shop system is a good way to remain attractive to customers, as business owners can appeal to a wider audience in this way because of the variety and exclusivity of the offer.

A shop-in-shop concept can be designed in various ways. For example, parties may choose to enter into a concession agreement or a cooperation agreement. It is also common to enter into a rental agreement, in which part of the store is leased or subleased to the shop-in-shop owner.

Applicable rental regime

Rental law has various regimes whose applicability depends on the nature of the leased space. A movie theater, for example, can be regarded as business premises within the meaning of Section 7:230a of the Civil Code, a coffee bar as middle-class premises within the meaning of Section 7:290 of the Civil Code. It is important to know which regime applies, since, for example, the protection provisions for the tenant of 230a business premises are less far-reaching than for 290 business premises. In addition, legal grounds for termination apply to a lessor of 290 business premises, which do not apply to 230a business premises.

A shop-in-shop can also be considered as medium-sized business premises, since parts of an immovable property can fall under the definition of article 7:290 paragraph 2. This paragraph stipulates that parts of a built-up property can also be considered as 290 business premises. The nature or purpose of the greater whole of which the leased property is a part is not necessarily decisive in this respect.

The question arises as to what happens if a different rental regime applies to a shop-in-shop than to the space in which it is located. If this is the case, it must be examined whether actual separation is possible or whether the spaces are inseparable. For example, division is possible if the two spaces have their own entrance. The two premises are then governed by their own rental regime. If splitting is not possible, it is determined which premises predominate. Here all circumstances of the case are important, such as the floor area, turnover and the intention of the parties regarding the use of the leased property. For example, in the case of a movie theater with a separate coffee bar, given these circumstances, the movie theater will be considered "predominant. Then the rules of the predominant space apply to the entire space. If there is the same operator as tenant, this need not be a problem. If there are two different operators, for example because of a sublet construction, it is important to think about this and seek advice beforehand. This can prevent problems later on.

Finally, it is important to note that if the parties have used a model lease agreement for 230a premises, while the destination falls under the definition of Section 7:290 of the Dutch Civil Code, then the 290 regime still applies. This means that a tenant can still enjoy far-reaching rental protection.

Questions?

Do you have questions regarding your lease agreement, such as the applicable lease regime and the associated legal protection provisions? If so, please contact one of our rental law specialists.