Thursday, August 11, 2022

Coronavirus crisis: extension of temporary lease is possible

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By Reinier W.L. Russell, LL.M.

The corona crisis can make it extra difficult to find a new home or a new tenant after the expiry of a temporary lease. In this context one must think, for example, of quarantine, extra shifts for health care workers and redundancy as a result of which people have no time or money for removal. However, when a temporary lease is extended, this will result in a lease for an indefinite period. Many landlords do not want this. As a temporary emergency measure, the temporary law for the extension of temporary leases allows an extension for a limited period of time. What does this law entail?
 

Which leases fall under the Emergency Act?

The scheme applies to leases ending after 31 March 2020 and before 1 July 2020. Both the tenant and the landlord can make a proposal to extend the lease by one, two or three months. The extension may last until 1 September 2020 at the latest. The tenant has to make a proposal for extension within one week after the landlord has notified the tenant of the end date of the lease.
Please note: If the landlord does not report the end date on time, the lease will be extended for an indefinite period of time by operation of law. This notification obligation does also apply to the extended lease.

Did the landlord give notice of the end of the lease before the law entered into force? In that case, the tenant may still submit a request of extension within one week of the entry into force of the law. The parties may also decide by mutual agreement to extend the lease for a few months, without causing a lease for an indefinite period.

If the corona crisis continues, the law provides for the possibility of extending this measure. In that case, also leases that end before 1 October 2020 may fall under the law. Temporary leases that had already been extended under the law may then be extended again.
 

When may the landlord refuse an extension?

If the tenant makes a proposal, the landlord may refuse for one of the following grounds:

  1. The property has been sold to a third party and needs to be delivered empty.
  2. The property has already been re-let and the new lease will take effect before the requested term for extension.
  3. The landlord wants to live in the property and does not have any other residential property.
  4. The landlord wants to renovate the property and has made arrangements with third parties to deliver the property empty before the expiry of the requested term for extension.
  5. The landlord has arranged with third parties that the property will be delivered empty in connection with demolition at a date before the expiry of the requested term for extension.
  6. The landlord may also refuse extension if the tenant has not behaved like a good tenant.

For the first five grounds, the landlord must have made arrangements before 1 April 2020. The sixth reason explicitly includes the abuse of the corona crisis by the tenant, when the tenant pays less or no rent and there is not inability to pay. The landlord must notify the tenant of the refusal in writing within one week.
 

What to do if the landlord refuses extension?

If the landlord invokes one of the six grounds for refusal, the tenant may request the court to extend the lease. If the landlord refuses to extend the lease by the period of time requested by the tenant on a different ground than the six grounds mentioned, the landlord must take the matter to court. The landlord must demonstrate that he/she has a substantial interest in an earlier termination of the lease. As long as the court has not decided on the extension, the lease continues to exist. It is not possible to lodge an appeal against the decision of the court.
 

More information?

Do you have any questions about the emergency law on temporary leasing? Would you like to learn more about how to limit the impact of the corona crisis on your real estate? Please contact Reinier W.L. Russell, LL.M. (reinier.russell@russell.nl)

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