In my earlier blog of 17 August 2023, I discussed the judgment of the Court of Amsterdam of 12 May 2023 that has caused much commotion. In this case, the Subdistrict Court held that in a tenancy agreement with a private tenant, it is unfair to increase the rent by 5% on top of the normal rent indexation based on the CPI index, according to the Directive on Unfair Terms in Consumer Contracts. The consequence of this judgment is that the entire rent increase clause must be annulled and is therefore declared inapplicable.
Since then, the Amsterdam Subdistrict Court has delivered many rulings in which it tested similar rent increase clauses ex officio against the Directive, and held these clauses to be unfair. This ex officio review means that the court examines of its own motion whether or not a rent increase clause is unfair under the Directive, without a need for the tenant to invoke the Directive.
Consequences of these rulings
Pursuant to the Directive and established case law of the Court of Justice of the European Union (CJEU), a rent increase clause that is contrary to the Directive must be annulled in its entirety; this was the consideration of the Court of Amsterdam in its ruling of 3 August 2023. Not only the additional rent increase that was considered to be unfair (e.g. the aforesaid 5% increase) is eligible for annulment, but also the inflation adjustment according to the CPI index. Because the annulment of the rent increase clause entails that the landlord never had a valid ground for increasing the rent, the tenant can reclaim rent increases he has already paid. What is more, the Court of Amsterdam is of the opinion that according to CJEU case law, an unfair clause should not be replaced by anything. An unfair rent increase clause cannot be replaced by a fair clause. This means that increasing rents in the future will not be possible either. In short, these Amsterdam rulings have enormous potential financial consequences for both private and public-sector landlords. Moreover, the rulings lead to inequality between the tenants of public-sector housing and those of expensive and mid-price rented houses. The latter group of tenants would not owe any rent increases from the commencement date of their tenancy agreement, whereas public-sector tenants are charged a rent increase each year.
Preliminary questions to the Dutch Supreme Court
The path chosen by the Court of Amsterdam is not followed by all the Subdistrict Courts. Given the lack of clarity that has arisen on whether an additional rent increase can indeed be regarded unfair, and the big implications of this, the Court of Amsterdam has turned to the Supreme Court for clarification. On 11 January 2024, the Court of Amsterdam submitted five preliminary questions that deal with the scope and the consequences of an unfair rent increase clause.
In summary, the Supreme Court will have to pass judgment on the following questions:
- A) Is the additional rent increase on top of the normal CPI-based rent indexation unfair? What standards should be applied and what viewpoints are relevant to the assessment of this problem?
B) Is the entire rent increase clause eligible for annulment, or only the unfair part of it? - If a rent increase clause is unfair, does this mean that all increases from the start of the tenancy agreement lapse, also with regard to the future?
- Should the Court check ex officio – even if the tenant has not appeared in the proceedings – which amount has been overpaid from the start of the tenancy agreement, and deduct that amount from any rent arrears claimed by the landlord?
- Can a landlord invoke the statute of limitations?
- Are any other options available to limit the period for which the tenant can claim back the excess rent paid?
It is not yet known when the Supreme Court will answer these preliminary questions. We will keep a close eye on related developments. Should you have any questions about this article, or about a rent increase clause in your rental agreement, please contact one of our rental law specialists Eline Goemans, Loes ter Meer or Paula Schilperoort.
