Exemption clause in lease agreement: salvation for a poor indoor climate?

An exemption clause in a commercial lease agreement by no means always protects the landlord against the consequences of a defective indoor climate. When leasing office and commercial space, as a landlord you may in principle agree that you are not liable for the consequences of defects. However, that exemption fails as soon as you knew or ought to have known about the defect at the time the lease agreement was concluded. A poorly functioning climate control system can, after all, be considered a defect in the leased property, potentially resulting in a rent reduction, repairs, or even a claim for damages. In this article, we explain when you can and cannot invoke an exemption clause, and how you can protect yourself smartly as a landlord.

When is a poor indoor climate a defect?

Nowhere does the law explicitly refer to a poor indoor climate as a defect. Nevertheless, it can certainly fall under this category. Pursuant to Article 7:204, paragraph 2, of the Dutch Civil Code, a defect exists if the leased property fails to provide the tenant with the enjoyment that he was entitled to expect, upon entering into the agreement, from a well-maintained property of the same type. It therefore revolves around the pattern of expectation, and this concept is interpreted broadly in case law. This is a matter of tenancy law in which the specific circumstances are decisive.

A properly functioning climate control system has a major impact on the enjoyment of the leased property. A building that is too warm, too cold, or poorly ventilated can affect working conditions and even business performance. Whether the tenant could reasonably expect a proper indoor climate depends on the specific circumstances, such as:

• the age of the business premises and of the climate control system;
• what the parties agreed upon when concluding the lease agreement;
• the intended use of the leased property and the use that the tenant may make of it;
• which the tenant could have determined during the viewing and from their own investigation.

In the case of a new rental property with a new climate control system, the tenant may logically impose higher requirements than in the case of an older property with an outdated installation.

Example: the overheated office wing

Suppose an IT company leases an office floor and discovers as early as the first summer that the south-facing facade is structurally overheating, preventing employees from working during hot weather. The lease agreement contains a general exclusion clause that excludes liability for defects. Whether that clause holds up depends on what the landlord knew: if the cooling capacity was already apparent from a previous maintenance report or from complaints by a previous tenant, then the landlord knew of the defect “or ought to have known of it,” and the exclusion clause offers no protection on that point. If, on the other hand, the problem arose later and was unforeseeable, the situation is different. This demonstrates why proper documentation and honest information provided in advance are so crucial.

What rights does the tenant have in the event of a defect?

If there is a defect, several options are available to the tenant. He can:

• rectification of the defect ;
• a rent reduction proportionate to the reduced enjoyment of the property;
• compensation , insofar as the defect is attributable to the landlord;
• demand dissolution of the lease agreement in serious cases

For the landlord, these are therefore real risks, precisely because a climate-related complaint often only manifests itself after some time.

Establishing the pattern of expectations in the lease agreement

Good news for landlords of office and commercial space: the defects regulation applies to this category as so-called regulatory law. This means that you are allowed to deviate from it in the lease agreement. You can therefore contractually stipulate what the parties do and do not consider a defect. This is also exactly what happens in the model lease agreements of the ROZ (Council for Real Estate).

in a lease agreement for commercial premises, you can stipulate concrete requirements that the space must meet. Are you aware of certain limitations regarding the indoor climate? Then mention them explicitly. This way, you manage the expectations the tenant can rely on later and prevent disputes afterwards. If the prospective tenant wishes to make modifications to the property themselves, you can also emphasize their duty of due diligence.

Being open about known defects is often more effective than a general exclusion clause. What you honestly state beforehand is difficult for the tenant to cite as a surprising defect afterwards.

What is an exemption clause and when does it apply?

An exclusion clause is a contractual provision by which a party excludes or limits its liability for (certain) damages. Such clauses are common in lease agreements for commercial premises, often in general terms intended to cover all consequences of defects.

In the leasing of office and commercial space, an exemption clause is in principle permitted, because the defects regulation is not mandatory law in this regard. Nevertheless, such a clause is not a blank check. The most important limit is set out in Article 7:209 of the Dutch Civil Code.

The limit of Article 7:209 of the Dutch Civil Code

Pursuant to Article 7:209 of the Dutch Civil Code, as a landlord you cannot deviate to the detriment of the tenant from the core provisions regarding defects (repair and compensation) insofar as these concern defects that you knew or ought to have known about. This part of the defect regulations is mandatory (semi-mandatory) law: an exemption clause seeking to override this lacks effect against the tenant to that extent.

It is striking that in case law, the phrase “should have known” is generally not taken lightly. If you could reasonably have discovered the defect upon delivery or when entering into the lease, you run the risk of being deemed to have known about it. In that case, you can no longer successfully invoke the exemption clause for the consequences of that defect.

Why timing and knowledge are so decisive in a climate shortage

A defective indoor climate is often a latent problem that only becomes apparent after months or years. This is difficult for the landlord: while certain claims against the contractor or installer may become time-barred, the tenant can continue to invoke the defect as long as the enjoyment of the property is impaired. The precise time limits vary by situation and legal relationship; always have these assessed before relying on anything.

The core remains: if you were aware of the climate problem, or could have been aware of it, a general exclusion clause often does not hold up against the tenant. Landlords who truly wish to cover risk would be wise to identify known defects and carefully document the expectations, rather than relying on a standard exclusion clause.

Practical steps for landlords

1. Inventory the installation. Map the condition and age of the climate system before renting out and retain maintenance and inspection reports.
2. State known limitations. Stipulate in the lease agreement what the space does and does not offer in terms of indoor climate.
3. Manage the expectations. Contractually define what the parties consider a defect and point out the tenant's duty to investigate.
4. Use exemption clauses wisely. Rely on an exemption clause only for defects that you genuinely did not know about and did not need to know about.
5. Document communication. Keep what you told the tenant beforehand; this is often decisive evidence later on.
6. Have it reviewed. Have the clause and the entire lease agreement checked before you sign.

Frequently asked questions about exemption and indoor climate

Is a poor indoor climate always a defect?

No. It is a defect when the leased property does not provide the tenant with the enjoyment that he was entitled to expect when entering into the agreement. That pattern of expectation depends on, among other things, the age of the building and installations, the agreements made, and what the tenant could have investigated himself.

May a landlord of commercial premises exclude their liability?

For office and commercial premises, the defects regulations constitute dispositive law, so an exemption clause is permitted in principle. However, pursuant to Article 7:209 of the Dutch Civil Code, you cannot absolve yourself of liability for defects that you knew or ought to have known about at the time of entering into the lease agreement.

What does “ought to have known” mean?

That you could have discovered the defect during normal inspection or upon delivery. Case law generally does not interpret this flexibly: if you could reasonably have seen it, you run the risk of being deemed to have known about it, and it falls outside the protection of your exoneration clause.

Does an exemption clause also apply to a subtenant or new owner?

Not automatically. An exemption clause applies primarily between the parties who agreed to it. The position may be different in the case of subletting, contract assignment, or sale of the property. In such situations, always have it determined in advance who can invoke which clause.

What can I do better than a general exemption clause?

Identify known defects in advance and establish the pattern of expectations in the lease agreement. It is difficult for the tenant to subsequently cite as a surprising defect what he knows or could have known at the time of entering into the agreement.

Have your lease agreement or exemption clause checked?

As a landlord, do you want to know if your exemption clause holds up, or do you want to properly address an indoor climate issue before renting out? Our legal experts review your commercial lease agreement and advise on the best course of action, as not every solution suits every situation. Also, view our expertise in tenancy law or schedule an intake directly to discuss your situation personally.