LEGAL

Is Your Office in Your Home or Is Your Home in Your Office?

By Arthur de Groot

Nowadays, corporate frugality might result in a-not-entirely-unexpected-but-really-not-welcome change in employment contract. Many employees of multinational companies, who previously were awarded expat contracts, are presented with the choice of leaving the company or accepting a local contract. What this means, differs from one company to the other, but most often the first privilege to go, is housing for the family paid for by the company.

Those thus ‘deprived’ of one of the most attractive perks of expat life will suddenly find themselves struggling not only with rather exorbitant housing costs, but also realizing that they are not alone in their search for an affordable dream house, and that there is a jungle of rules and regulations out there that can be both confusing and frustrating to navigate.

Rumor has it that in the Randstad, the number of small enterprises set up by the trailing spouses of expat employees is on the rise at present; and it comes as no surprise that most of these businesses are being set up in the comfort of the expat’s own living room. When the restructuring of family funds is high on the agenda, the possibility of deducting the costs of an office from the overall rent can become an interesting issue. Likewise, for a company that perhaps had to move to less glamorous premises for pecuniary reasons, the issue of what is and what is not regarded as office space by law is worth investigating.

And, last but not least, let’s not forget the lucky few who are made redundant, and who are given a nice golden handshake as they go out the door... Apparently, starting a consultancy firm or an e-business seems more of a first option to many of them, rather than uprooting the whole family and returning to the home country.

In all of the above cases, housing will be the factor that will contribute to making or breaking it in the new situation. Although limited by its scope and the space available, this article aims to provide you with general information in this issue, in order to give you a greater understanding of the legal aspects of housing and tenancy law.

In the Netherlands, the rental market constitutes approximately 50% of the housing market; ownership of office- and commercial premises is a smaller slice of the cake than perhaps expected by expats, as most entrepreneurs are inclined to rent rather than buy their office or commercial space. 75% of the overall rental market is subsidized housing – the highest percentage within the EU. Rental policy and the rights of tenants have therefore always been high on the national political agenda. Rent levels in the regulated housing segment in the Netherlands are adapted on a yearly basis by the government. Since 95% of the overall subsidized housing sector fall under this rule, it is the rather small segment of usually up-market rental properties that are subject to the normal market forces.

Seen through the eyes of expat employees and entrepreneurs, the terms of duration, renewal and termination of a lease or a tenancy agreement under Dutch Law can come as a surprise, even in cases that are purely a matter of tenancy law, and not part of a broader scope (e.g. administrative law, construction law, notary law).

To start with, let’s establish the context of it all: except for some specific statutory and not-statutory provisions of administrative law, lease agreements in the Netherlands are governed by general rules of civil law. Dutch civil law has its roots in Roman Law, later enriched by the French Code Civil. Roman Law reached the Netherlands in the 15th century, immediately grabbing the attention of lawmakers and scholars alike. In the 17th and 18th century, members of the so-called ‘school of elegant jurisprudence’, including my namesake, De Groot (Hugo Grotius), merged Roman law with a few legal concepts taken from the then-customary law of the Netherlands, only to have it later replaced by the aforementioned Code Civil, the Burgerlijk Wetboek (BW).

Though not typically Dutch, the BW’s rental and ownership (apartment) legislation has a strong social, pro-tenant approach. The BW distinguishes between three different types of lease/tenancy agreements:
• tenancy agreement of accommodation and housing (Article 7:233 BW)
• commercial lease agreements (retailers) (Article 7:290 BW)
• office lease and other business premises (Article 7:230a BW).

From the lawmakers’ point of view, a well-founded set of general regulations applies to all categories. As the applicable mandatory legal regimes are different for both office lease and commercial lease agreements, it is very important to spell out all rental terms and conditions in clearly formulated contracts. Commercial premises have specific regulations concerning contract length and termination, rent determination, and substitution. These are mandatory regulations, and therefore do not allow deviations to the tenant’s disadvantage. For office lease and other business premises, the legal regulations are left to the discretion of the contracting parties. Parties should therefore stipulate all the provisions in properly drafted contracts.

Depending upon the kind of premises involved (buildings split into apartments, houses and parts thereof) and their main destination (office, commercial, private or a mix thereof; double usage), further more specific rules must be agreed upon.

In my practice, I see a lot of foreign entrepreneurs in a mixed private-professional tenancy. If permitted by municipal zoning plans, such tenancy constructions may give rise to the question which legal regime is applicable, that of housing or that of businesses.

Which brings us back to the issue of getting it right – right from the start. After finding the right place (location, location, location...), the drafting and reviewing of the lease agreement comes next. The assistance of an experienced real estate lawyer could be the key that will turn your dream into reality, as legal scrutiny of the opportunities and possible risks weaved into the lease agreements is essential for the success of the new business venture, as well as for the peace of mind of the family.

For more information, contact Arthur de Groot of GMW Advocaten at a.degroot@gmw.nl / 070 - 361 50 48 or go their English-language site under www.gmw.nl.