Rent reduction in practice: a joint effort by franchisee and franchisor

In these economically difficult times, also for the franchising world, it is of great importance for both franchisor and franchisee that the rent of the building in which the franchise business is carried out is reduced as much as possible, if there is reason to do so. In view of the decreased value of many real estate properties, there is plenty of opportunity for this in practice. Franchise and franchisor ideally work together in this, especially when the franchisor is the main tenant.

If the rental price of a business space as referred to in Article 7:290 of the Dutch Civil Code no longer corresponds to that of comparable business spaces on site, both the franchisee and the  the franchisor, if it is the main tenant, jointly or separately, on the basis of Article 7:303 paragraph 1 of the Dutch Civil Code, demand that the court determine the rent in more detail and then reduce it in practice.

The claim for a further determination of the rent is only admissible if it is accompanied by advice on the further rent, drawn up by a franchisee and/or franchisor and the main lessor (jointly) appointed expert. If the parties fail to reach agreement on the appointment of an expert, the court will appoint one  request of the parties.

On October 4, 2013, the Supreme Court ruled on the admissibility of a request for the appointment of an expert, as laid down in Section 7:304(2) of the Dutch Civil Code.

This concerned the following:

There was a lease for an indefinite period of a retail property. Subsequently, a motivated proposal for rent reduction was made. The landlord did not accept that proposal. Pursuant to Article 7:304 paragraph 2 of the Dutch Civil Code, the tenant has requested the subdistrict court judge to appoint an expert.

The subdistrict court judge granted the tenant’s request. The landlord has appealed against the decision of the subdistrict court judge and the Court of Appeal has overturned the decision of the subdistrict court judge and declared the tenant’s application inadmissible. To this end, the Court has considered that it follows from the wording of Article 7:304 paragraph 2 and from the parliamentary history of that Article that prior to the request for the appointment of an expert, there must in any case be some form of consultation in order to reach agreement. occurred. If no prior consultation has taken place, this omission cannot be remedied after the application has been submitted. The tenant has appealed against the Court’s decision  appeal set up. The high  The Council has once again reiterated that without prior consultation the rent review will not make it.

With Section 7:304 of the Dutch Civil Code, the legislator intended to encourage parties to adjust the rent without the intervention of the court, if necessary on the basis of advice from an expert appointed jointly by the parties. It is also intended to provide the court with an expert opinion immediately if the parties fail to reach an agreement. Based on this intention, Article 7:304 paragraph 2 of the Dutch Civil Code must be understood as meaning that the admissibility of the applicant’s request requires that the parties have not reached agreement on an expert to be appointed jointly. The applicant will have to state in the application that this is the case.

Incidentally, no high requirements are set for the content of the consultations that must take place between the parties. It is sufficient and necessary that an invitation to consultation or proposals from the other party is accepted seriously and without undue delay, both with regard to the rent change and with regard to the possible appointment of an expert. If the parties do not agree on this within a reasonable time, or if a serious response is not forthcoming (unnecessarily long), it can be concluded that the parties have not reached an agreement as referred to in Article 7:304(2) of the Dutch Civil Code.

Franchisee and franchisor are therefore wise to first consult carefully with the landlord before starting the rent review. Reference objects, such as comparable retail properties, should be taken as a starting point. In practice, it can even happen that entire franchise chains can realize rent revision en masse in this way. In addition, a good franchisor has a duty of care towards his franchisees to ensure that this rent review is actually implemented if there are opportunities to do so. In the current economic era, this duty of care is all the more pressing, now that a lower rent is often a dire necessity.

mr. AC van Engel, franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to info@ludwigvandam.nl