17 January 2010
Nowadays, corporate frugality might result in a-not-entirely-unexpected-but-really-not-welcome change in contracts.
Many employees of multinational companies, who previously were awarded expat contracts, are presented with the choice of leaving the company or accepting a local contract. What this means differs from one company to the other, but most often the first privilege to go is housing for the family paid for by the company.
Those ’deprived’ of one of the most attractive perks in an expat’s life will suddenly struggle not only with rather exorbitant housing costs but will also soon realize that one is not alone in seeking the affordable dream house and that there is a jungle of rules and regulations out there that can be both confusing and frustrating to navigate.
Rumor has it that in the Randstad, the number of small enterprises set up by the trailing spouses of expat employees is on the rise at present; and it comes as no surprise that such businesses are most often set up in the comfort of one’s own living room. When the restructuring of family funds is high on the agenda, the possibility of deducting the costs of an office from the overall rent can become an interesting issue. Likewise, for a company that perhaps had to move to less glamorous premises for pecuniary reasons, the issue of what is and what is not regarded as office space by law is worth investigating.
And, last but not least, let’s think of the lucky few who are made redundant, receiving a nice golden handshake…Apparently, starting a consultancy firm or an e-business seems more of a first option to many of them, rather than uprooting the whole family and return to the home country.
In all of the above cases, housing will be the factor that will contribute to making it or breaking it in the new situation. Although limited by its scope and the space available, this article aims to provide general information, intending to instil a greater understanding of the legal aspects concerning housing and tenancy law.
In The Netherlands, the rental market claims about 50 % of the housing stock; ownership of office- and commercial premises is a smaller slice of the cake than perhaps expected by expats as most entrepreneurs tend to rent rather than buy their office or commercial space. 75% of the overall rental stock is dedicated to subsidized housing – the highest percentage within the EU. Rental policy and the rights of tenants have therefore always been high up on the national political agenda. Rent levels in the regulated housing segment in The Netherlands are adapted on a yearly basis by the Government. Since 95% of the overall subsidized housing sector fall under this rule it is a rather small segment of usually up market rental properties that is left to the market forces operating between landlords and tenants.
Seen through the eyes of expat employees and entrepreneurs, the terms of duration, renewal and termination of a lease or a tenancy agreement under Dutch Law can come as a surprise, even in cases that are purely a matter of tenancy law, and not part of a broader scope (e.g. administrative law, construction law, notary law).
To start with, let’s establish the context of it all: except for some specific statutory and not-statutory provisions of administrative law, lease agreements in The Netherlands are governed by general rules of civil law.
Dutch civil law has its roots in Roman Law, later enriched by the French Code Civil. Roman Law reached The Netherlands in the 15th century, immediately gripping the attention of lawmakers and scholars alike. In the 17th and 18th century, members of the so-called ’school of elegant jurisprudence’, including my namesake, De Groot (Hugo Grotius) , merged Roman law with some legal concepts taken from the then customary law of The Netherlands, only to have it later replaced by the aforementioned Code Civil, the ’Burgerlijk Wetboek’ (BW).
Though not typically Dutch, the BW’s rental and ownership (apartment) legislation has a strong social, pro-tenant approach. The BW distinguishes between three different lease/tenancy agreements:
From the lawmaker’s point of view, a well-founded set of general regulations apply to all categories.
As the applicable mandatory legal regimes are different for both office lease and commercial lease agreements, it is very important to spell out all rental terms and conditions in clearly formulated contracts.
Commercial premises have specific regulations concerning contract length and termination, rent determination, and substitution. These are mandatory law regulations, and therefore deviations to the tenant’s disadvantage are not allowed. For office lease and other business premises the legal regulations are left to the discretion of the contracting parties. Parties should therefore stipulate all the provisions in properly drafted contracts.
Depending upon the kind of premises involved (buildings split into apartments, houses and parts thereof) and their main destination (office, commercial, private or a mix thereof; double usage), further more specific rules are to be set out.
In my practice I see a lot of foreign entrepreneurs in a mixed private-professional tenancy. If permitted in Municipal zoning plans, such tenancy constructions may give rise to the question which legal regime is applicable, that of housing or that of businesses.
Which brings us back to the issue of getting it right – right from the start. After finding the right place (location, location, location…), drafting and reviewing of the lease agreement comes next. The assistance of an experienced real estate lawyer could be the key that will turn your dream into reality, as legal scrutiny of the opportunities and possible risks weaved into the lease agreements is essential to the success of the new business venture, also buying peace of mind to the family.
For more information, contact me at email@example.com