In mid-2023, a trend regarding rent adjustment clauses for deregulated residential properties emerged, causing significant controversy. The general conditions of tenancy agreements for deregulated residential properties, including the frequently used ROZ models, often stipulate that the rent is annually adjusted based on the consumer price index determined by the CBS, plus a fixed or maximum surcharge of a certain percentage. A trend has emerged in lower courts where such clauses are deemed ‘unfair’ ex officio and annulled by the judge. As a result, rent increases are considered unjustified and can be reclaimed or offset against future rent payments.
Such a rent adjustment clause was the point of focus in the judgment of the Amsterdam District Court on 12 May 2023. In that specific ruling, the Court found that another step must precede the consideration of substantive issues, as the tenancy agreement was concluded between a trader (landlord) and consumers (tenants). First, the Court must assess ex officio for compliance with European and Dutch consumer law, particularly Directive 93/13/EEC (Unfair Terms Directive). Subsequent to this assessment, the Court ruled that the rent adjustment clause significantly disrupts the balance of the rights and obligations of the parties arising from the agreement to the detriment of the tenants, deeming the clause unfair and subject to annulment. As a result, the tenants were not obligated to pay the rent increases.
This ruling was followed by several similar judgments, as discussed in our article ‘Devastating Judgment for Landlords Regarding Widely Applied Rent Increase Clauses.’
This caused an uncertain period for landlords, during which it was highly questionable whether implemented rent increases would be upheld or could be reclaimed or offset against future rent payments. An extremely undesirable situation, especially considering that tenancy agreements for residential properties are, in principle, concluded for an indefinite period and cannot easily be terminated given the tenant protection laws.
Preliminary Questions
In two court proceedings before the Amsterdam District Court, the judge has – provisionally – considered that the entire rent adjustment clause is unfair because it includes the possibility for the landlord to increase the rent by up to 3% on top of the indexation. This would also lead to the conclusion that the clauses are subject to annulment and that the rent increases have been wrongly paid. Last January, the court in these two proceedings submitted (the same) preliminary questions to the Supreme Court. Today, the Deputy Attorney General issued an opinion to the Supreme Court regarding the answering of these questions.
Opinion of the Attorney General
The Attorney General concludes that the rent adjustment clause, in the context of assessing its unfairness, should be split into an indexation clause (the consumer price index determined by CBS plus one) and a surcharge clause (the fixed/maximum surcharge above the indexation). This deviates from the approach followed in lower court rulings so far, where it was held that the clause should be treated as a single clause that, if deemed unfair, should be annulled in its entirety.
Regarding the assessment of the unfairness of the surcharge clause, the Attorney General concludes that a clause providing for an annual surcharge on the rent of up to 3% above the indexation based on the consumer price index is generally not an unfair clause. The Attorney General believes that the landlord has a legitimate interest in periodically adjusting the initial rent in an indefinite-term tenancy agreement, considering a balance of various circumstances:
(1) the nature of the agreement (long-term, limited grounds for termination);
(2) reasonable grounds for the surcharge clause in addition to the indexation clause (to cover above-inflation cost increases and property value development);
(3) transparency regarding whether, when and how often the rent can increase and the maximum surcharge percentage;
(4) the lack of transparency concerning the absence of grounds for applying the surcharge and how those grounds lead to a specific application of the surcharge;
(5) the legislature’s limitation of contractual freedom regarding rent adjustment clauses with the Nijboer Act (Act on Capping Rent Increases for Liberalized Rental Contracts) and the Affordable Rent Act;
(6) the level of the maximum surcharge percentage (the higher, the more vulnerable).
The full opinion of the Attorney General is included in the following cases:
– ECLI:NL:PHR:2024:770
– ECLI:NL:PHR:2024:771
If the Supreme Court follows the Attorney General’s advice, rent can at least be indexed and possibly also increased by the agreed surcharge.
Finally, the question remains whether the Supreme Court will follow the Attorney General’s advice when answering the preliminary questions. We will have to wait and see. However, it is very possible that the situation may not be as severe as initially anticipated.