Substitution in retail premises

Tenants of retail premises may substitute another party in their place as tenant if they wish to transfer their business.

Naturally, several conditions must be met. How do you enforce a substitution of tenant as a tenant? And how do you, as a landlord, defend yourself against this “changing of the guard”? The lawyers at our firm can quickly guide you through this subject and assist you both in the preparatory stage and during court proceedings.

What does the law say?

The statutory regime for substitution of tenant can be found in Article 7:307 of the Dutch Civil Code. This is important because the regime therefore applies exclusively to lease agreements for commercial premises. In the case of other lease agreements, such as lease agreements relating to residential premises or office space, a tenant cannot rely on the statutory substitution of tenant regime.

In short, the law requires that there be:

1. a transfer of the business operated in the leased premises, and
2. a substantial interest on the part of the tenant, and
3. sufficient guarantees for performance of the lease agreement and proper business operations by the new tenant.

If these three requirements are met, the court balances the interests of the tenant and the landlord. The tenant may then be authorised (or not) to place the third party in their stead as the new tenant.

In conclusion

Under the substitution of tenant regime, the tenant has a strong position if they wish to sell their business. However, a landlord does not have to accept a proposed substitution without more. Such requests from tenants often raise a number of issues, and it is always the question whether all statutory requirements have been met. Additional security may also possibly be required. Landlords are therefore certainly not powerless.

Are you confronted with a request for substitution of tenant? Would you like to transfer the lease to a third party in connection with the sale of your business? Or do you have another legal question? Please feel free to contact us. We would be happy to help you.

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