Most tenancy agreements contain a clause that allows the landlord to index the rent annually. Tenancy agreements are often based on the model of the Council for Real Estate Matters (Raad voor Onroerende Zaken, “ROZ”)), and the rent is indexed on the basis of a formula that departs from the consumer price index (“CPI”) published by Statistics Netherlands (Centraal Bureau voor de Statistiek). Such a rent increase clause in a tenancy agreement between a professional landlord and a non-professional natural person is not unreasonable as such, provided that the clause is sufficiently clear and transparent about the way in which and the time when the landlord can apply the rent increase. This appears from a recent judgment of the Court of Amsterdam of 12 May 2023.
The Dispute
The tenants of a house took the view that they do not have to pay the annual rent increase to the landlord because of defects to the house and the growing problems in the district. In this case, the landlord claimed (among other things) that the tenants be ordered to pay the rent arrears that had arisen.
The rent increase clause
In the case at issue, the parties had agreed that the landlord may annually index the rent (unilaterally) according to the CPI-based formula in the tenancy agreement. In addition thereto, the parties had agreed on an extra increase (a ‘percentage increase’), allowing the landlord to increase the indexed rent once again afterwards by a maximum of 5%. The tenancy agreement also provided that the rent would not be changed if such change would result in a lower rent than the most recent rent.Before the Subdistrict Court weighed the arguments of the parties, it observed that the tenancy agreement was concluded between the landlord as a trader and the tenants as consumers, and that this makes it necessary to test it ex officio against EU and Dutch consumer law, more specifically against the Unfair Terms Directive.
According to the Unfair Terms Directive, a term in an agreement qualifies as “unfair” if “contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.” For the purpose of this assessment “all circumstances around the conclusion of the contract must be weighed and all other terms of the contract, taking into account the nature of the goods or services for which the contract was concluded, must be referred to.”
The adjudication by the Subdistrict Court
First of all, the Subdistrict Court observed that the landlord has stipulated the right to implement, in addition to the indexation based on the CPI, an extra increase of 5% maximum, and that it is therefore not clear which percentage comes on top of the indexation. In addition, the Subdistrict Court considered it relevant that the rent adjustment clause solely concerns the option for the landlord to increase the rent, and that under the tenancy agreement a decrease of the rent is out of the question. Despite the landlord’s explanation at the hearing that the ‘percentage increase’ can be used as a ‘correction following market developments’, the Subdistrict Court emphasized that this does not follow from the clause, and that there is also no “clear and transparent explanation on how and under which circumstances this correction will be applied”. In the opinion of the Subdistrict Court, this leaves the tenants completely at the mercy of the landlord.The Subdistrict Court arrived at the conclusion that the balance between the parties’ rights and obligations arising from the agreement was severely disrupted to the detriment of the tenants. The rent adjustment clause therefore qualifies as ‘unfair’ under the Unfair Terms Directive, and is eligible for reversal. In other words: the rent adjustment clause is, in its entirety, deemed to have never existed. This means that the tenants have paid too much rent to the landlord (rather than too little, as the landlord initially argued). The Subdistrict Court therefore denied the landlord’s claim for payment of the rent arrears.
