Rent arrears on commercial property
With commercial space arrears mount faster than with housing, and the Dutch court weighs the case differently. That is good news for landlords, provided you keep to the order. Skip a step and you are still empty handed months later.
Commercial space is not the same as housing
With residential property the court applies a rule of thumb of roughly three months of arrears before dissolution comes into view, and the tenant’s housing interest always weighs in. With commercial space that interest is absent and the court dissolves more readily.
Dutch law does distinguish between retail and hospitality space on the one hand and other business space such as offices and warehouses on the other. The first category enjoys more protection, among other things through term protection. That mainly affects termination, not dissolution for non payment.
The order that works
1. Formal demand, in writing and with a deadline
A notice of default with a concrete deadline. Without default there is no dissolution and no damages. This is the step most often skipped and the step that most often costs a case.
2. Look at the security you already have
Is there a bank guarantee or a deposit? A group guarantee or a personal surety from the director? Many landlords negotiated these but never call on them, while that often produces money faster than proceedings against the company itself.
3. Consider prejudgment attachment
With a tenant still trading, attachment of the bank account or of receivables is often more effective than going to court. It brings the business to a halt, and an entrepreneur notices that immediately.
4. Claim dissolution and eviction
Usually combined with payment of the arrears and of the future rent instalments up to the end of the term. Landlords often forget that last element, while that is where the largest amount sits.
5. Think ahead about the successor
An empty unit produces nothing. Make sure you know what you will do with the space before the judgment arrives, because the duty to mitigate loss affects what you can claim.
Two things that make or break your position
The condition report. Was a description drawn up at the start and countersigned by the tenant? If not, you are in a difficult evidential position on damage to the property. With commercial space the sums for restoring installations and flooring run high quickly.
The director behind the company. If the tenant turns out to be an empty company and the director entered into obligations knowing payment was impossible, director liability comes into view. That is not automatic, but it is a route that too often goes unused.
Frequently asked questions
After how many months of arrears can I dissolve?
For residential property Dutch case law generally uses three months as a guideline. For commercial space there is no fixed threshold and dissolution is granted more readily, because the housing interest is absent. The court weighs the seriousness of the breach against the consequences of dissolution.
May I evict the tenant without a court?
No. Self help eviction is prohibited and makes you liable in damages yourself, even where the tenant is clearly in default. You always need an eviction judgment and a bailiff.
Can I call the bank guarantee alongside proceedings?
Yes, and usually that is sensible. A bank guarantee is an independent obligation of the bank and can generally be called on first demand. Do watch the expiry date in the guarantee itself, which often falls earlier than landlords expect.
Can I claim the remaining rent instalments?
On dissolution for breach you can claim damages, including the rent lost up to the moment the agreement would have ended in the normal course. Against that stands your duty to mitigate: you must make efforts to re let.
Are arrears running?
The earlier you call, the more options remain. The first conversation of up to one hour costs you nothing.