BarentsKrans Newsletter
With this newsletter we would like to inform our clients and business contacts about legal developments that might be of interest to them. Issues addressed relate to labour law, competition law, intellectual property law & technology, corporate law and M&A, Supreme Court litigation, administrative law, real estate and financial litigation. The newsletter is published three times a year.
Index June 2010:
Termination of an unprofitable lease due to renovation
New block exemption for vertical agreements
Consumer credit agreements: greater protection for the consumer
New environmental permit
Enterprise Chamber grants a clients’ participation council a right of investigation
Homecare suppliers turn down special competition regime
Termination of an unprofitable lease due to renovation
In most cases residential leasing proves profitable for the lessor. In some instances the leasing agreement may, over time, turn unprofitable. Under these circumstances, a lessor may want to terminate the lease. Not all situations however allow for such a cause of action. A recent Supreme Court judgment dated 26 March 2010 helps clarify the question of when an unprofitable lease of residential property may provide grounds for termination.
Termination due to unprofitable exploitation
Within the leasing profession the question regularly arises as to what measures the lessor may resort if rental proceeds become highly unprofitable. In particular, it has been unclear what course of action a lessor may take if, as a consequence of intended and needed major maintenance or renovation works, the costs of exploitation come to outweigh the rental proceeds.
The applicable legislation holds that a lessor cannot simply terminate a residential leasing agreement on any ground. The mere circumstance that the lease is no longer profitable does not constitute sufficient grounds for termination. Only a limited number of statutory grounds constitute sufficient grounds for termination. If, for instance, the lessor urgently needs the property for his own use, this can provide grounds for termination. This ‘urgent need for personal use’ criterion can consist of an intended renovation of the property. However, this renovation needs to be so extensive that its completion requires termination of the leasing agreement.
In many cases the Courts would judge claims strictly against the urgent need for personal use criterion. The Courts would regularly deem a renovation, intended for the sole purpose of ending an unprofitable residential lease, as insufficient grounds for termination.
Supreme Court judgment
In its judgment dated 26 March 2010 the Dutch Supreme Court clarified the circumstances under which renovation provides sufficient grounds for termination of an unprofitable leasing agreement. The Supreme Court states that the mere intent of a lessor to renovate the property cannot furnish sufficient grounds for termination of the lease due to urgent need for personal use. The same applies to situations in which the exploitation of the residential property is merely unprofitable. The Supreme Court has ruled that a structural disproportion between the costs of exploitation and the rental proceeds qualifies as sufficient grounds for termination on grounds of an urgent need for personal use. Moreover, when reaching such a decision, the lessor’s interests must be weighed against those of the lessee. If the lessor’s interests outweigh those of the lessee, the lessor may lawfully terminate the lease.
Consequently, a lessor is not bound endlessly to continue highly unprofitable exploitation of residential property. As a general rule, a lessee enjoys protection, even when the lessor intends to renovate the property. An extensive renovation can, however, provide the lessor with grounds for termination, if as a result the lessor faces a structural disproportion between the proceeds and the costs of the lease.
If you would like to find out more about the subject matter of this article, please contact:
Joost Huijgen (huijgen@barentskrans.nl)
Max Essed (essed@barentskrans.nl)
T +31-(0)70-376 06 94
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New legislation
New block exemption for vertical agreements
On 1 June 2010 the new European block exemption for vertical agreements came into force. A vertical agreement is one between two or more companies each of which operates at a different level in the production or distribution chain. The European ban on cartels does not apply if an agreement between these parties fulfils the requirements of the block exemption. A major difference relative to the old block exemption (1999) is that both supplier and customer may have a market share of up to 30% to benefit from the block exemption.
Additionally, the European Commission’s guidelines on vertical agreements include a detailed review of sales on the internet. According to the Commission, every distributor has the right to sell on the internet. Suppliers may not restrict passive sales on the internet, that is, where a consumer approaches a distributor via a website. Nor may a supplier restrict the proportion of internet sales relative to total sales. No supplier may oblige a distributor to charge higher prices when products are sold online instead of offline. Active sales on the internet, such as online advertising specifically targeted at specified customers, may indeed be restricted. In the case of selective distribution no supplier may restrict both active and passive internet sales to end users. The block exemption permits a supplier to impose qualitative standards on the use of an internet site used to resell his goods.
Mariëtte Plomp (plomp@barentskrans.nl)
T + 31-(0)70-376 06 75
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Consumer credit agreements: greater protection for the consumer
An EU Directive has mandated tougher Dutch legislation on consumer credit. A bill to augment consumer protection has now been tabled before Parliament’s House of Representatives. Lenders will be obliged to keep to stricter rules on advertising, perform a credit check and provide transparent information in advance of the credit agreement about matters such as annual costs. Lenders need to stay ahead of this legislation and they should check out their contract documentation, brochures and other publicity. BarentsKrans is well able to advise on the subject.
Consumer rights will be reinforced. Consumers are given 14 days in which they may pull out of any credit agreement without giving any reason. There are some restrictions: for example, if the credit agreement is based on buying stocks or bonds withdrawal is not an option. If the credit agreement is concluded for an indefinite period the consumer has the right to terminate the agreement at any time free of charge. The consumer only needs to pay the outstanding capital sum and the interest owing prior to the redemption date. If the credit agreement is concluded for a fixed period the consumer may repay the credit at any time prior to the closing date. In that case the lender may only request reasonable and objective compensation for the direct costs arising from the early repayment. The level of compensation will depend on the circumstances surrounding the credit agreement (duration, capital sum, variable or fixed interest etc.).
William Schonewille (schonewille@barentskrans.nl)
T + 31-(0)70-376 06 50
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New environmental permit
The General Provisions of Environmental Law Act (that covers surroundings in a broad sense, as opposed to the environment in the strictly ecological sense) (‘Wet algemene bepaling omgevingsrecht’ or ‘Wabo’) are set to come into force on 1 October 2010. Wabo simplifies considerably the process of applying for a permit: the new Act integrates around 25 different permits and licenses into a single new environmental permit. A considerable number of fairly common permits such as building, ecological and historic building permits will fall under the scope of the environmental permit. Whereas a single project would, in many cases, require the applicant to file simultaneously for multiple permits such as, for example, a felling, building, monumental building and ecological permit, the new Act enables the applicant to file a single application. A single standardised procedure leads to a single decision, instead of each request for a permit generating a separate decision. The new Act does not affect the possibility of phasing certain projects such as those in construction by applying for consecutive environmental permits. Overall the new law can be expected to simplify procedures and leave the substantive statutory grounds on which permits are granted virtually unchanged.
Max Essed (essed@barentskrans.nl)
T +31-(0)70-376 06 37
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Unique in healthcare
Passing a new legal milestone: Enterprise Chamber grants a clients’ participation council a right of investigation
Legal history was made recently when a clients' participation council (‘cliëntenraad’) of a care institution exercised its right of investigation (‘enquêterecht’). The board of directors of the care institution in question had unilaterally suspended all consultations with the clients' participation council and the institution’s supervisory board failed to intervene. The clients' participation council applied to the Enterprise Chamber for an order for an independent investigation and for temporary injunctions immediately suspending the chairman of the institution’s supervisory board and appointing a replacement. The Enterprise Chamber granted all these requests.
The right of investigation is the right of certain ‘stakeholders’ to file an application with the Enterprise Chamber for an order granting an independent investigation into the policy of a legal person. If specifically requested, the Enterprise Chamber may also grant a variety of far-reaching temporary injunctions, such as the suspension of managing directors. This made the right of investigation a popular remedy especially appreciated by shareholders. Since 2005 clients' participation councils of care institutions have had the right of investigation, but until now none had ever exercised it. BarentsKrans assisted the first clients' participation council that secured this right.
The tenor of the Enterprise Chamber’s judgment is that not only conventional corporate bodies but care institutions as well need to remember that any stakeholder may lodge an application with the Enterprise Chamber. They will have to take their clients more seriously than before. The Court went on to rule that, providing they are serious, governance disputes within the healthcare institution may of themselves suffice for the Enterprise Chamber to grant an order for investigation. That a clients' participation council has other legal remedies at its disposal does not change this. The Enterprise Chamber made short work of the frequently heard argument that clients' participation councils are not representative. Once a substantive discussion with a clients' participation council has begun, there is little room left for a debate on representativeness. Even troublesome questions deserve an answer.
Roeland de Mol (dmol@barentskrans.nl)
T + 31-(0)70-376 06 84
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Homecare suppliers turn down special competition regime
Members of ActiZ, the trade association representing health care suppliers, turned down an agreement in principle negotiated in early May 2010 between the Netherlands Competition Authority (NMa) and ActiZ’ Board. Under the agreement the NMa was to exercise a specially tailored form of supervision for the nursing and home care industry.
The agreement called for the following arrangements. Care institutions were to report all their agreements (including those in pending cases, even where that might involve penalties) on a voluntary basis by 31 December 2010. An independent committee would review the agreements. If this committee found these agreements to be in restraint of competition, they would be terminated forthwith and those involved would make a contribution to an innovation fund. The NMa would refrain from enforcement in such cases. The agreement was designed to allow the nursing and home care industry to make a fresh start. ActiZ members turned down the agreement because it threatened to sweep under the carpet an issue of major importance: the discussion between competition law versus quality of care and the interest of the patient.
However, ActiZ members approved another part of the agreement in principle. This part is designed to introduce a compliance programme with regard to the Dutch Competition Act. A compliance programme helps care organisations optimise their understanding of every aspect of the Dutch Competition Act and what it means both in day-to-day management and in cooperative ventures with other health care suppliers. Pierre Bos and Mariëtte Plomp acted on behalf of ActiZ in the negotiations with the NMa.
Pierre Bos (bos@barentskrans.nl)
T +31-(0)70-376 06 75
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