Ground lease conditions may stipulate that the landowner’s consent is required in order to transfer the right of leasehold. If that consent is refused without providing reasonable grounds, then, pursuant to Article 91(4) of Book 5 of the Dutch Civil Code, that consent may be replaced by authorisation granted by the subdistrict court, making it as yet possible to transfer the right of leasehold. A recent judgment rendered by the District Court of Noord-Holland (ECLI:NL:RBNHO:2018:8469) clearly describes the criteria that the subdistrict court uses to examine whether consent was refused without reasonable grounds.
The following is a summary of the long history leading up that case, which a leaseholder had brought before the district court. As a result of a traffic measure introduced by the landowner (the Municipality of Enkhuizen), the leaseholder’s business was no longer viable and the leaseholder ran into financial problems. For a long time, the leaseholder discussed with the landowner the sale of his business and the rights of leasehold to the landowner, but that sale did not materialise because the municipal council refused to make the necessary credit available for the acquisition. The leaseholder found another buyer and wanted to sell to that buyer as soon as possible because the leaseholder’s bank was threatening to sell the leaseholder’s business at auction. The landowner was aware of the leaseholder’s dire financial situation, did not propose any solutions for it, did not address the various alternatives proposed by the leaseholder, not even the ones proposed at the court hearing and refused to give its consent for the transfer because it wanted to keep the option open to redevelop the area and was concerned that a new leaseholder might hinder that redevelopment. The landowner wanted to wait for a scenario where the preconditions for the redevelopment of the area were known.
The subdistrict court made it clear in the relevant judgment that refusing to give consent is unreasonable where:
a. refusing to give consent or the condition associated with the consent effectively renders it impossible to transfer the right of leasehold, which is incompatible with the legal principle which promotes free transferability of goods; and/or
b. the landowner through its refusal acts contrary to the legislature’s intention and imposes conditions that do not relate to the legal act concerned. In this respect we note that consent may in principle be refused (for example) if the acquirer’s envisaged use is contrary to the substance of the right of leasehold; and/or
c. the landowner acts contrary to the notarial deed establishing the right of leasehold or the applicable general ground lease conditions.
Naturally, the fact that the landowner was a government body also played a role in the court’s assessment. Government bodies must observe the general principles of good governance, which means among other things that the leaseholder’s interests must demonstrably have been taken into account in the decision to refuse consent.
Given the fact that the latter was not demonstrated and it was not apparent either that the landowner would have a solution in the short term, which effectively rendered the rights of leasehold non-transferable, the court ruled that the municipality had refused its consent without reasonable ground. Therefore, the leaseholder’s request to be given substitute consent was granted.