Operation

Operation

When leasing commercial premises, the landlord may include an operating obligation in the lease agreement. This means that the tenant must use the leased property and remain open for the duration of the lease agreement. An operating obligation is included in the lease agreement to ensure that tenants do not simply cease their business operations. After all, vacancy of the leased property can result in a decrease in the value of the commercial space. In addition to neglect of the leased property, there is also the risk of vandalism or squatters.

An obligation to operate the business must be included in the lease agreement. If this is included, a tenant cannot simply cease its business activities during the term of the lease agreement. Compliance can then, in principle, be demanded on the basis of the obligation to operate.

We have the knowledge and expertise to assume diverse roles: from advice to dispute resolution. We have an experienced team of lawyers and legal experts in the fields of tenancy law and operational management. Contact us to discuss the possibilities.

Legal basis: no obligation to operate without an agreement

Contrary to popular belief, the law does not impose an independent obligation to operate the business on tenants of commercial premises. While the principle of good tenancy (Article 7:213 of the Dutch Civil Code) implies that a tenant must act as a good tenant, this does not automatically create an obligation to actually continue operating the business. The obligation to operate the business typically arises only through a contractual agreement. In practice, this agreement is almost always found in the general provisions of the ROZ model for retail space (Article 7:290 of the Dutch Civil Code) or office space (Article 7:230a of the Dutch Civil Code). In these provisions, the tenant commits to using the leased property “actually, fully, properly, and personally” throughout the entire term, in accordance with the intended use stipulated in the lease agreement. Whether you are an international group leasing dozens of branches or the baker on the corner renting a single property, whether an obligation to operate applies depends on exactly what is stated in your contract and the applicable general provisions. Our lawyers and in-house counsel will review these provisions for you and translate them to your specific situation.

Fine and penalty payment for non-compliance

If a tenant fails to comply with the obligation to operate the business, the ROZ model offers the landlord strong instruments. The general provisions of the retail space model include an immediately enforceable penalty of EUR 250 per day (found in older and newer ROZ versions in, among others, Article 31 and the penalty clause of the relevant model, respectively) for each day the tenant remains in default after a formal notice of default has been issued. In addition, the landlord may claim compliance with the obligation to operate the business in summary proceedings, often reinforced by a penalty payment pursuant to Article 611a of the Dutch Code of Civil Procedure. Should a structural dispute arise, the landlord may also claim dissolution of the lease agreement and compensation for damages due to vacancy and depreciation. It is important for the tenant to realize that the obligation to operate the business is indeed enforceable; the idea that a landlord “cannot do anything with this” is a persistent misconception. We assist both landlords seeking to enforce compliance and tenants facing a fine or penalty payment.

When can a tenant be released from the obligation to operate the business?

The obligation to operate is not absolute. A court may release a tenant, in whole or in part, if full compliance would be unacceptable according to standards of reasonableness and fairness (Article 6:248 paragraph 2 of the Dutch Civil Code) or on the grounds of unforeseen circumstances (Article 6:258 of the Dutch Civil Code). This was the case, for example, during the coronavirus closures. The burden of pleading and proof lies with the tenant: they must substantiate that continued operation entails such heavy burdens that it cannot reasonably be required. In doing so, judges take concrete circumstances into account, such as a structurally and seriously loss-making operation, necessary investments that cannot be recouped, and the question of whether a suitable successor tenant or subtenant can be found. A single bad year is insufficient. For both large chains and independent entrepreneurs, our assessment of these facts makes the difference between a promising and a hopeless appeal.

Sector classification and the landlord's interest

Particularly in shopping centers, the obligation to operate is closely linked to the zoning and the overall attractiveness of the complex. Vacancy not only reduces the market value of the specific property but also affects foot traffic and turnover in surrounding shops; in a shopping center, vacancy often attracts new vacancies. Therefore, landlords and investors have a strong interest in ensuring that tenants remain open and adhere to the agreed zoning regulations. This obligation to operate is often linked to additional clauses, such as opening hours clauses, a prohibition on (partial) subletting, and zoning protection clauses. Some of these agreements deviate from the semi-mandatory tenancy protection rules and require judicial approval; please see our page on the approval of deviating clauses for more information. We advise landlords on drafting watertight operational and zoning agreements and tenants on their assessment.

Our approach to exploitation disputes

An operational dispute rarely begins in court. Our first step is always a thorough contractual analysis: what has been agreed upon, which general terms and conditions apply, and how strong is your position? Next, we choose the route that suits your interests, ranging from a well-substantiated notice of default or negotiation to summary proceedings for performance or, conversely, a defense against a claim for a penalty or coercive fine. Because our team consists of both lawyers and in-house counsel, we switch smoothly between strategic advice and litigation, and keep costs proportionate to the stakes, whether it concerns a corporate real estate portfolio or the sole property of a family business. If the operational dispute overlaps with other issues, such as defects in the leased property or an impending termination of the lease agreement, we address this connection within a single strategy.

Frequently asked questions about operations

Does an obligation to operate always apply? No. Without a contractual agreement, there is in principle no independent obligation to operate; Article 7:213 of the Dutch Civil Code alone is insufficient for this. Therefore, always check your lease agreement and the applicable general provisions.

Am I allowed to temporarily close my shop if I continue to pay the rent? If an obligation to operate has been agreed upon, continuing to pay the rent is not sufficient in itself; vacancy is then in principle not permitted and can result in a fine or penalty payment.

Can I be released from the obligation to operate the business in the event of significant losses? Sometimes. In the case of a structurally and seriously loss-making operation, a court may grant an exemption on the grounds of reasonableness and fairness (Article 6:248 paragraph 2 of the Dutch Civil Code) or unforeseen circumstances (Article 6:258 of the Dutch Civil Code), but the tenant bears the burden of proof for this.

Part of our tenancy law

Operation is a specialty within our broader Tenancy Law. In this area, we advise and litigate across the full spectrum of commercial tenancy law, with mixed teams of lawyers and in-house counsel, for clients ranging from international corporations to the baker on the corner. Please feel free to contact us to discuss your operation issue without obligation.