A verbal rental agreement; is that allowed?

This makes it clear at a glance to both the landlord and the tenant which arrangements they have agreed upon. The rental agreement contains the most important arrangements, such as the rent, the rental period and the rules. But also arrangements regarding the termination of the rental agreement. Often, general rental conditions are also declared applicable to the rental agreement. In practice, it sometimes happens that no written rental agreement is drawn up. The landlord and the tenant may only make verbal arrangements. Is this a valid rental agreement? And what arrangements apply? While it is recommended that a rental agreement is drawn up in writing, it is not legally required. We would like to tell you more about the verbal rental agreement below.

A verbal rental agreement; is that allowed?

A rental agreement can also be agreed upon verbally. A rental agreement is in fact what is called a ‘consensual contract’. This means that a rental agreement comes into being when consensus ad idem is reached between the landlord and the tenant. In other words, if they agree on the most important aspects of the rental agreement. These aspects are called the essentials of a contract. These include the property or part of the property that is being let, what is paid in return for this (read: the rent) and the rental period. If the parties agree on the essentials, a legally binding rental agreement exists immediately.

Lack of clarity on arrangements made

Although a valid rental agreement exists immediately after agreement is reached, there are risks attached to a verbal rental agreement.

Specific rules apply to the rental of residential property, retail premises and office premises. For example, with regard to the minimum rental periods, formalities concerning termination and any rent protection. Because the parties have only spoken verbally, a lack of clarity about the exact arrangements may cause various problems.

A real risk is that it is not sufficiently clear which legal rules apply to the rental agreement. For example, Article 7:271(1) of the Dutch Civil Code (Burgerlijk Wetboek) stipulates that if a rental agreement is concluded for a maximum of 24 months, the landlord may simply terminate the rental agreement by letter after expiry of the rental period. The landlord is only required to inform the tenant about the upcoming end of the rental agreement. There is no need to rely upon a ground for termination.

If a rental agreement is concluded for longer than 24 months or if the rental agreement is tacitly extended, then it becomes a rental agreement for an indefinite period by operation of law. In that case, the landlord can only terminate the rental agreement if at least one of the legal grounds for termination of Article 7:274 of the Dutch Civil Code are present. The tenant is then well protected.

Risks

With a verbal rental agreement, there is also the risk of too much uncertainty about the agreed rental period. For example, the tenant may think it is a rental agreement for an indefinite period with a minimum rental period of one year. And the landlord may think it has entered into a short-term rental agreement for up to one year. Case law shows that such an ambiguity can cause a nasty surprise for the landlord, as it is usually interpreted in favour of the tenant. The landlord is then confronted with a rental agreement for an indefinite period and the tenant enjoys rent protection as a result.

Who is responsible for what?

Another risk lies in the more specific components of the rental agreement. Suppose the parties agree on the essentials, but do not agree on the further components of the rental agreement. For example, the level of service charges or who is responsible for carrying out minor maintenance or repairs. A difficult situation is created if no clear arrangements have been made on this or if the parties disagree on what has been agreed. The main rule is that a person who relies on a fact or right, such as a certain arrangement, must be able to make his/her reasoning sufficiently plausible. He/she bears the ‘burden of proof’. It is extremely difficult to make a verbal arrangement plausible, especially if the other party refutes the arrangements. There is a risk that the tenant or the landlord is confronted with arrangements that he/she did not want.

Conclusion and advice

In order to avoid unnecessary discussions and the aforementioned risks, it is strongly recommended that arrangements made verbally about renting or letting a property are properly recorded in a written rental agreement. This makes it clear at a glance to both parties which arrangements they have agreed upon. A verbal rental agreement is thus just as legally valid, but proving the exact arrangements and deadlines is almost impossible. Please do not hesitate to contact us for more information.