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Remember last year's skyrocketing rent indexation? There is news!

Blogs Real estate, Construction & Environment Mariam Evadgian
The General Provisions that accompany the Council for Real Estate's model lease contracts ( ROZ) have, since the 1980s, contained a formula by which the annual rent indexation was calculated. That formula - due to the skyrocketing inflation of the past year in particular - has caused much controversy. In calculating the new rent, the consumer price index ( CPI) had to be included in that formula, and this led to exponential rent increases, especially last year - as tenants argued - and thus unreasonable outcomes. Those "unreasonable" outcomes in turn led to several court proceedings and rulings. CBS noted an inaccuracy in the formula (which was the cause of those exponential rent increases and which we discussed in this blog explained) and intervened. It introduced a new calculation method in June 2023. However, this did not solve the problem and the many discussions surrounding rent increases. The General Provisions stipulated that CBS could be asked for a binding opinion if the basis of the calculation was changed (which it was), but as it turned out, this dispute resolution by CBS turned out not to be possible at all, because giving a binding opinion would not be in line with CBS' legal mission. Meanwhile, the ROZ has modified the model lease contracts for the lease and rental of office and retail spaces. Although the General Provisions have remained unchanged, the model lease contracts themselves include a provision stating that the relevant articles of the General Provisions do not apply. Furthermore, the model lease contracts have added a number of options from which parties may choose in the context of rent indexation. The options are:
  • a rent price indexation in accordance with the General Provisions where (simply) the CPI is (still) used;
  • a rent price indexation similar to the formula in the General Provisions, but where the parties can agree on an index of their choice (for example, the service price index, producer price index or input price index for new construction instead of the CPI);
  • a rent price indexation with a fixed percentage; or
  • want to waive automatic rent price indexation altogether;
  Finally, from now on, rent can also be adjusted downward in case of deflation (which was not possible before). It remains to be seen whether these new provisions (now definitively) prevent the discussions surrounding rent indexation, but probably not. In any case, the new provisions do seem to create more contractual freedom for parties, as parties are now forced to choose one of several options. As a result, there is more room for negotiation when it comes to making agreements regarding annual rent indexation. If you would like to know more or have any questions as a result of this blog, please feel free to contact Mariam Evadgian or any of the other members of the section Property, Construction & Government.