Lease goes before sale, but do all clauses remain in effect?
Under article 226 of Book 7 of the Dutch Civil Code (“DCC”), in which the maxim "lease goes before sale" is legally enshrined, not all lease clauses remain in effect when a building is sold. Only rights and obligations that become exigible after the transfer date devolve on the acquirer. Furthermore, pursuant to article 226(3) of Book 7 DCC, only the clauses (i.e. rights and obligations) are transferred that are directly connected to granting the use of the sold building (property) in exchange for a payment made by the lessee. For the purposes of assessing whether that is the situation, both the substance of the clauses and the circumstances of the case must be examined. Yet in practice we do not often see cases where lease clauses do not remain in effect.
However, the District Court of Overijssel recently ruled that the required connection was lacking. Below is a brief summary of the case.
In the case at bar, A (lessee) and B (lessor) were former partners in an LP. At a certain point, a dispute arose between the parties, which resulted in the dissolution of the LP. In connection with that dispute, A and B concluded a settlement agreement under which A could offset the rent if B failed to meet certain conditions. Among other things, those conditions concerned a non-compete clause. However, the lease was subject to general terms and conditions (in all likelihood the 2003 ROZ model) and article 18 of those terms and conditions states that the lessee is not entitled to offset any claims against rental payments.
B sold the building, as a result of which C became the lessor. After the transfer, B failed to fulfil its obligation under the settlement agreement and A wished to offset the rent. C did not consent to that. A adopted the position that the right of offset was transferred to C pursuant to the provisions of article 226(1) of Book 7 DCC.
First and foremost, the subdistrict court held that the arrangement made in the settlement agreement did not form part of the lease. In addition, the subdistrict court held that, even if that had been the case and the offset clauses must be regarded as lease clauses, there is no reason to suppose that C, as the acquirer of the building and successive lessor, is bound by those offset clauses. The subdistrict court held that in the case at bar, the required direct connection within the meaning of article 226(3) of Book 7 DCC was lacking, since it concerned an arrangement to offset rent owed by A if B failed to pay the fee for payroll accounting in full or on time or if B violated the non-compete clause and consequently owed a fixed amount in damages. Neither have anything to do which the use of the building or the rent due for the building. Against that backdrop, the conditional offset arrangement can be traced back to the then existing mere circumstance that A and B could be reciprocal debtors. Bearing that in mind, the subdistrict court held that the offset arrangement could not be regarded as part of the enjoyment that A could expect under the lease, which any and all successive owners, including C, had to grant it.
This is an interesting example of the application of article 226(3) of Book 7 DCC. If A deemed the right of offset to be an essential condition, it could have negotiated that in the event that the building was sold, the lease (including any and all riders and additional agreements) would be transferred pursuant to article 159 of Book 6 DCC, which lays down the rules for transferring contracts, since transfers pursuant to this article involve the devolution of all rights and obligations. A perpetual clause could also have been added for more security.
