Track Record: Termination of Commercial Lease Prevented — Unless-Clause Protects Tenant of Petit Restaurant

Mr. Vincent Besters represented a commercial tenant and prevented full termination of the lease in appeal proceedings

In August 2019, the Amsterdam Court of Appeal issued a judgment in appeal proceedings concerning the lease of commercial premises. Mr. V.M. Besters acted as counsel for the tenant — the operator of a petit restaurant in Amsterdam. The landlord sought termination of the lease and eviction due to years of repeated payment arrears. The court only granted termination on a conditional basis, thereby preventing immediate termination.

What was the case about?

The tenant had been leasing commercial premises from the landlord since 1 April 1994 at a monthly rent of € 1,626.13, in which he operated a petit restaurant.

The payment history was turbulent: the tenant had repeatedly fallen into arrears. There had already been a prior judgment (February 2017) ordering payment of outstanding rent. Further arrears had subsequently arisen. The landlord issued proceedings claiming:

• Payment of the outstanding rent;
• Termination of the lease;
• Eviction from the premises;
• Compensation equivalent to three months' rent.

At first instance, the subdistrict court had rejected the termination claim because the arrears at that point were (just) below the two-month threshold. The landlord appealed.

The tenant's defence (Mr. Besters)

Mr. Besters argued on behalf of the tenant that:

• The tenant had since become fully up to date with rental payments;
• Termination of a longstanding tenancy would be a disproportionate sanction;
• The unless-clause of Article 6:265 of the Dutch Civil Code applied: the shortcoming, given its particular nature or minor significance, does not justify termination;
• The contractual penalty should be reduced given the circumstances.

What did the court decide?

The court acknowledged that the tenant had displayed a pattern of poor payment over many years and that the landlord was entitled to object to this. At the same time, the court applied the unless-clause:

• Conditional termination. The court granted termination but only on a conditional basis: only if the tenant failed to meet his obligations strictly over the following two years. At the time of the judgment, the tenant was fully up to date with payments.
• No immediate eviction. The claim for immediate eviction was thereby averted.
• No reduction of the penalty. Given the tenant's poor payment history, the court saw no reason to reduce the contractual penalty (2% per month, minimum € 300 per month).

Through the conditional construction, the tenant retained his business premises and was able to continue operating his restaurant — provided he complied with his payment obligations going forward.

What does this mean for commercial tenants?

• Arrears do not automatically lead to termination. Courts also consider the situation at the time of judgment. A tenant who clears arrears in time may avoid termination.
• The unless-clause offers protection, but not a free pass. Article 6:265 DCC makes it possible for a court to refuse termination if the shortcoming is too minor. But where there is a pattern of non-payment, that protection comes under pressure.
• Contractual penalties are not easily reduced. A penalty of 2% per month with a minimum of € 300 can accumulate quickly. Reduction is possible but rarely granted in cases of systematic non-payment.
• Acting promptly is crucial. By clearing arrears before the hearing, a tenant can persuade the court to refrain from termination or only grant it conditionally.

Case Reference

This post is based on ECLI:NL:GHAMS:2019:3075.

Mr. V.M. Besters acted as counsel for the tenant (respondent/incidental appellant) in this case.