What is a retail space lease agreement? Explanation and use

What is a retail space lease agreement? It is the written agreement in which a landlord and a tenant stipulate that a space containing a point of sale accessible to the public is leased for payment, such as a shop, restaurant, or café. Such space falls under Article 7:290 of the Dutch Civil Code and is known as 290 business premises. Unlike with an office, the tenant enjoys strong, mandatory protection here: fixed terms, limited termination options for the landlord, and the right to rent revision.

The short answer

• What: Contract for the lease of retail, hospitality, or craft space with a public function.
• Statutory regime: 290 business premises pursuant to Article 7:290 of the Dutch Civil Code and subsequent articles.
• Terms: in principle five years, extended to ten years (the 5+5 system, Article 7:292 of the Dutch Civil Code).
• Protection: mandatory law, deviation only with the approval of the sub-district court judge.
• Rent: subject to revision after a period of time pursuant to Article 7:303 of the Dutch Civil Code.

What exactly is a retail space lease agreement?

Tenancy law treats shops and hospitality establishments differently from offices, because a shopkeeper depends on their location for their turnover. Building a good location takes years, and the law protects that investment. Therefore, a system of mandatory law applies to 290 business premises. The core is found in Article 7:290 of the Dutch Civil Code: it concerns space leased for the operation of a small business and containing a premises accessible to the public for the direct delivery of goods or services.

Think of a clothing store, a bakery, a hairdresser, a cafeteria, or a restaurant. A takeaway or delivery service can also fall under this. Crucially, customers must visit in person. A purely online business or an office without a point of sale falls under Section 230a Business Premises, with much less protection. The classification determines your entire legal position.

The 5+5 system and termination

The duration of a retail lease agreement is largely determined by law. Pursuant to Article 7:292 of the Dutch Civil Code, an initial term of five years applies in principle, which subsequently extends by operation of law to ten years. Only after ten years does the agreement continue indefinitely. A shorter, deviating term is only valid with the approval of the sub-district court judge.

Termination is also protected. The landlord can only terminate the lease on statutory grounds. In the first five years, these are primarily poor business management by the tenant and urgent personal use. After ten years, additional grounds are added, such as a reasonable balancing of interests and a change in the zoning plan. Therefore, a tenant who pays their rent on time and runs their business well cannot simply be put out on the street.

Rent revision

A special right regarding 290 business premises is rent revision. Pursuant to Article 7:303 of the Dutch Civil Code, both the tenant and the landlord may request the subdistrict court, after the expiration of a fixed term or every five years in the case of an indefinite-term contract, to adjust the rent to that of comparable business premises in the area. The court considers the average of comparable properties over the preceding five years.

Before a party can go to court, they must first jointly appoint an expert to advise on the market rent, usually a commercial rent advisory committee. This is stipulated in Article 7:304 of the Dutch Civil Code. That advice is a mandatory intermediate step. For a retailer in a prime location, a revision in the event of falling market rents can save thousands of euros per year.

When do you use this contract?

You use a retail space lease agreement as soon as you rent or lease a property where customers physically come to buy something or receive a delivery. If you are unsure whether your space falls under Section 290 or Section 230a, have this assessed in advance, as the difference in protection is significant. In the case of mixed use, for example a shop with an office above, the judge looks at the center of gravity of the use.

A new hospitality entrepreneur rented premises and signed a three-year contract, assuming that this was shorter and therefore more flexible. Because the deviation from the statutory five years was not approved by the subdistrict court judge, the entrepreneur was later able to simply rely on the statutory five-year term. The intended flexibility turned out differently than the landlord thought.

Honest recommendation

If you rent a standard retail unit based on a standard ROZ model with statutory terms and a market-rate rent, you do not necessarily need a lawyer. Read the contract carefully, check the zoning, indexation, and service charges, and sign. The law provides a great deal of protection for 290-spaces itself, so you are in a stronger position than an office tenant.

Be sure to have someone review the agreement regarding a deviating term, a key money arrangement, substantial investments in fit-out, a substitution issue upon acquisition, or uncertainty regarding rent revision. Precisely because the protection is mandatory, deviating clauses may prove invalid or work against you. A brief review prevents surprises when renewing or selling your business.

Want to know more? View the retail space lease agreement, read how to go drafting such a contract , or discover what it costs to have a retail space lease agreement drawn up.

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