21 May 2025
In November 2024, the Dutch Supreme Court (Hoge Raad) provided further clarity on the sale of scarce land by public authorities. What does this mean for municipalities and market parties?
In the second Didam ruling of November 2024, the Supreme Court answered several key legal questions that had remained unresolved following the first Didam ruling in 2021.
First, a brief recap of the case three years ago. In the original Didam ruling, a party claimed to have been disadvantaged because the sale of a scarce plot of land by a municipality had not been conducted fairly. The disadvantaged party argued that potential buyers were not given an equal and transparent opportunity to participate in the sale.
The Supreme Court confirmed that public authorities, when selling scarce real estate (such as land plots), are bound by the general principles of good governance.
The Court ruled that, based on Article 3:14 of the Dutch Civil Code, a public authority must observe the principle of equality in such civil law transactions. This means that competitive opportunities must be provided to (potential) interested parties.
The public authority must apply objective, verifiable, and reasonable selection criteria. This requires open, timely, and transparent communication regarding the sales process. The aim of these so-called Didam rules is to ensure the equal treatment of all interested parties.
Following the first Didam ruling, legal uncertainties remained concerning the application of these rules, particularly regarding the consequences for public authorities who failed to comply.
In the second Didam ruling, the Supreme Court provided further clarity.
The Supreme Court confirmed in Didam II that public authorities do not automatically violate mandatory law if they fail to comply with the Didam rules during the sales process. This means that a sale agreement between the authority and a buyer is not automatically void or voidable. In principle, the agreement remains valid, even if it was concluded in breach of general principles of good governance, such as the principle of fairness.
The Court also clarified whether the Didam rules apply only to future transactions or also to transactions that were completed before the original ruling. The Supreme Court ruled that the rules established in Didam I are based on principles of good governance that were already in force before the ruling.
Thus, the rules have retroactive effect and apply to (all) earlier transactions where Didam standards were not observed. This could potentially lead to claims for damages relating to transactions completed prior to the 2021 Didam ruling.
Disadvantaged parties who believe they were treated unfairly during a sales process have legal remedies. If they feel their chances were wrongly restricted, they can hold the public authority liable for damages on the grounds of wrongful act (onrechtmatige daad).
If the sales process has not yet been contractually finalised, the disadvantaged party may even be able to block the intended sale. However, if the contract has already been concluded and the authority is obliged to proceed with delivery, then compensation is the only available remedy. The claimant can seek compensation based on the missed opportunity to purchase the land.
The Supreme Court also reiterated in Didam II that if there is only one serious candidate for the purchase of a plot, the authority does not violate the principles of competition and fairness. However, it remains essential that the authority communicates openly and transparently about the sales process, allowing all parties to be aware of the proposed sale. Moreover, the authority must carefully justify why there is only one serious candidate, to avoid any perception of arbitrariness and to uphold the principle of fairness.
To proceed with a particular candidate, there must always be an objective justification. This approach helps prevent favouritism and arbitrary decision-making and ensures fair competition.
The Supreme Court’s ruling does not restrict the freedom of public authorities to set development plans. However, the Didam rules come into play once a development plan leads to the sale of real estate.
The Supreme Court underlined in Didam II that public authorities must comply with the general principles of good governance when selling real estate to private parties. The Didam rules have retroactive effect and may impact previous transactions where authorities did not comply with the standards. Furthermore, disadvantaged parties have the right to claim damages from the public authority on the basis of a wrongful act.
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