A few weeks ago reported We have discussed a number of summary proceedings in which this issue was raised. This week, the District Court of The Hague ruling conducted as part of proceedings on the merits. In such proceedings, the subdistrict court judge examines the case in greater depth than in summary proceedings.
Café/restaurant
The case concerns a café/restaurant in The Hague that is leased by the operator. The premises were closed during the ‘intelligent lockdown’ in the first half of 2020 and during the current lockdown. In the intervening period, the tenant suffered significantly as a result of the restrictive measures imposed by the government.
In the proceedings, the tenant is claiming a full exemption from rent. The landlord is claiming payment of the full rent and payment of a penalty of €900, as stipulated in the tenancy agreement, in connection with the late payment of the rent.
The Judgement of Solomon?
The magistrate considers that there has been a fundamental disruption of the balance in the tenancy agreement. However, neither party can be blamed for the unforeseen circumstances that have caused this.
The subdistrict court then ruled that the consequences of the coronavirus crisis during the periods in which the hospitality business was required to close should be shared equally between the parties. In other words: the tenant is liable for 50% of the rent. This relates to the government-imposed closure of hospitality venues between 15 March and 31 May 2020, as well as the ongoing closure since 15 October 2020.
For the period during which the government imposed far-reaching restrictions on the operation of the café/restaurant, 75% of the rent must be paid. This covers the period from 1 June to 14 October 2020 inclusive. During this period, the tenant estimated the loss of turnover at 20%. During the period of closure, the loss of turnover amounted to 86%.
With regard to the penalty of €900 included in the agreement, the court ruled that, given the circumstances surrounding the accumulation of the rent arrears, it should reasonably be reduced to zero.
Not standard
However, these percentages certainly cannot be applied as a standard. Both the tenant and the landlord must put forward sound arguments in this regard and back up these arguments with supporting evidence.
The tenant has provided sufficient evidence that they have suffered a loss of turnover AND that this is caused by the coronavirus crisis (the landlord argued that the business was already in a very poor financial state before the coronavirus crisis). To this end, the profit and loss accounts for 2018 and 2019 were submitted. And for 2020, the lower turnover was demonstrated by means of a summary of bank statements.
The tenant has also demonstrated that they have made full use of the financial support offered by the government, but that this support is insufficient to cover the full rent. Bank statements show that €4,000 was received in April (presumably from the TOGS scheme) and €3,782 in November (likely the advance payment from the TVL scheme).
TVL increased
The landlord has not contested the tenant’s assertion that the government grants:
- are also intended to cover fixed costs other than just the rent; and;
- do not aim to cover the fixed costs in full.
After all, the TVL grant is equal to 50% of the fixed costs determined on a flat-rate basis (a percentage of turnover set for each sector).
The 50% percentage has now been increased. In the fourth quarter of 2020, depending on the extent of the loss of turnover, it ranges between 50% and 70%. In the first and second quarters of 2021, this percentage is 85%. See also our updated factsheet about the TVL.
The higher compensation payments could well tip the scales in the landlord’s favour to a greater extent during the periods in question.