The basic principle of letting residential property is that the rent charged has been agreed between the landlord and the tenant (Section 246 Book 7 Civil Code). This freedom of contract is limited considerably, however, by the rent protection system contained in Section 247 to 265 Book 7 Civil Code and the Housing Rents (Implementation) Act. These articles contain a provision for determining the rent for subsidised housing that is subject to regulated rents. The rent of those houses is based on ‘reasonable rent’ and not on commercial rents. The quality of the property and the attendant rent are determined using points. If the rent exceeds a specific limit (‘the rent-control ceiling’) the landlord has more latitude to determine the rent. The point system, the maximised rents and the maximised rent increase do not apply to this so-called liberalized rental housing (‘non-subsidised houses’).
Several private landlords disagreed with the provision and filed joint proceedings against the State. They want the Dutch rent laws with respect to subsidised housing to be declared non-binding as they affect proprietary rights without valid grounds and therefore violate Article 1 of the First Protocol to the European Convention for the Protection of Human Rights. House owners are entitled to free market rent, at any right to a reasonable return including reasonable profit. The State has argued that the regulation in question indeed interferes with proprietary rights. This interference is however legitimate, so the State argued, as the Dutch rental system aims at keeping rents affordable for the less privileged, countering the position of power of landlords and ensuring that the rents reflect the quality of the properties and may not rise to unreasonable levels (in particular in areas of scarcity).
In its decision of 4 December 2013 the Court held as follows. The Netherlands is bound by the criteria of the European Convention of Human Rights. The Court may formally declare laws non-binding if and to the extent that they unmistakably have no binding force because they are contrary to treaty provisions or Community law. However, the rent laws have been adopted by the Dutch legislator and the Court should be careful not to take over as legislator. The legislator has a broad margin of discretion in limiting proprietary rights and according to the Court the Dutch legislator did not exceed the limits of its discretionary powers. The objectives listed by the State are within the political realm of the legislator and in that sense are not suitable for a content-specific appraisal by the Court. The Court also reasoned that there is a fair balance between public interests and the protection of ownership. The failure of landlords to obtain a reasonable profit does not automatically imply violation of the proprietary right laid down in Article 1 of the First Protocol. Decisive is always whether there is a reasonable balance between the interests of the owner of the property of the one part, including the interest in generating return, and the public interest of the other part, including the tenants’ interests. In the Netherlands there is no general rule entitling home owners to reasonable profit and/or instructing home owners to let their properties (against their will). To landlords it is always foreseeable, therefore, that they subject to the provisions of mandatory rent law if they offer their properties as subsidised homes. Moreover, so the Court decided, individual landlords of subsidised homes have effective remedies at their disposal to submit to the Dutch (sub-district) court that in their specific situation their proprietary right has been violated. Private landlords, after all, can file a claim for termination of the rental agreement with the sub-district court, or demand an increase in rent. Moreover, in exceptional cases an exemption may be granted on the provisions of mandatory rent law by relying on Section 6:248 Civil Code (reasonableness and fairness) and Section 6:258 Civil Code (unforeseen circumstances).
In its judgment of 4 December 2013 the Court of The Hague held that the system of Dutch rent laws and regulations cannot be qualified as unlawful towards private landlords of subsidised properties. The landlords consider filing appeal against this judgment and/or lodging a complaint with the European Commission about the alleged infringements of their proprietary rights. It cannot be ruled out that in individual cases the application of the rent laws produces a result that is in breach of the proprietary right laid down in Article 1 of the First Protocol. A (sub-district) court will however not easily reach that conclusion. Complaints of individual (Dutch) landlords with the European Court of Human Rights about interference with their proprietary rights were declared inadmissible on 2 July 2013.
Jetske Heikens
heikens@slangen-advocaten.nl
7 January 2014
