Supreme Court provides final answer on disputed rent increase clauses

The Supreme Court took a long time, but has now finally come up with answers (https://uitspraken.rechtspraak.nl/details?id=ECLI:NL:HR:2024:1780) to the preliminary questions posed by subdistrict courts regarding unfair rent increase clauses in rental contracts for residential property. The Supreme Court’s ruling is especially favorable for landlords and is therefore very welcome for them, after earlier fears of having to repay billions.

Brief recap

Before turning to the Supreme Court’s ruling, let’s take a brief look back. For what was it again that prompted these preliminary questions? In mid-2023, we already informed you that a professor of European consumer law had conducted research on various lease contracts that year. He came to the conclusion that certain rent increase clauses in contracts might not stand up in court because of conflict with a European directive (https://www.flib.nl/hoogleraar-huurverhogingen-vrije-sector-mogelijk-onwettig). This would possibly render various rent increases that have taken place in the free sector since 1993 already illegal.

Amsterdam subdistrict courts quickly delved into this matter and ruled that some rent increases had indeed been unlawfully implemented because the rent increase clauses serving as a basis for them were unfair.

Because the potential consequences were huge, the subdistrict judges decided to take the matter to the Supreme Court. The Supreme Court’s counsel already came to the Supreme Court in mid-July 2024 with an opinion positive for landlords. That opinion now appears to have been adopted.

The ruling

In short, the conclusion is that many landlords will be able to breathe a sigh of relief. The Supreme Court ruled that a rent modification clause providing for an annual surcharge on the rent of up to 3% on top of the consumer price index is generally not an unfair clause.

The Supreme Court stated that the indexation and surcharge components should be separated because the components have different functions. The challenged storage clause can only be declared unfair in additional circumstances. Rent increases applied on the basis of an unfair storage clause can be retroactively reclaimed by tenants as undue and as such set off against rent arrears. In principle, however, this requires an appeal by the tenant.

Advice

Do you have questions about the above developments or do you have other legal questions about tenancy law? Our specialized attorneys will be happy to assist you. Contact one of our lawyers by mail, telephone or fill in the contact form for a free initial consultation. We will be happy to think along with you.