Defects commercial premises often cause disputes between tenant and landlord. Yet not every setback to leased premises constitutes a defect in the legal sense. The law defines a defect in Article 7:204 DCC as any condition or characteristic of the property, or any other circumstance not attributable to the tenant, as a result of which the property cannot provide the tenant with the enjoyment they were entitled to expect when entering into the agreement.
This definition is broader than it appears at first sight. It concerns not only physical damage such as a leaking roof or a broken central-heating system. A circumstance outside the premises themselves, such as serious noise nuisance caused by works for which the landlord is responsible, can also constitute a defect. What is decisive is whether the enjoyment the tenant could reasonably expect is impaired. Minor wear and tear consistent with normal use is not a defect.
Who is responsible: landlord or tenant?
The main rule
The main rule of Article 7:206 DCC is clear: the landlord is obliged to remedy defects at the tenant’s request. That obligation applies unless remedy is impossible, or unless the expenditure for it cannot reasonably be required of the landlord. The landlord therefore cannot simply escape the duty to repair by invoking the costs.
For minor repairs an exception applies. Repairs that, by virtue of the law or custom, are for the tenant’s account need not be carried out by the landlord. Think of replacing a broken door handle, repairing a damaged skirting board or remedying minor defects that tenants may reasonably be expected to carry out themselves. The boundary between a ‘minor repair for the tenant’ and ‘major maintenance for the landlord’ is not always sharp and regularly leads to discussion in practice.
Contractual deviations via ROZ terms
In practice, leases for commercial premises are almost always concluded on the basis of the standard models of the Council for Real Estate (ROZ). The ROZ general provisions for commercial premises contain far-reaching deviations from the statutory main rule: many maintenance obligations are contractually shifted from the landlord to the tenant.
Thus, in the ROZ models, matters such as interior maintenance, the maintenance of installations, the replacement of wearing parts and sometimes even larger repairs are placed at the tenant’s expense. This is in principle permitted, because the 7:230a regime and, with court approval, also the 7:290 regime allow deviation from the law. The limits are determined by reasonableness and fairness and the rules on unreasonably onerous clauses.
It is therefore essential to read the general provisions carefully before signing a lease and to understand which maintenance obligations rest on you as the tenant.
Tenant rights for defects commercial premises
Demanding remedy
The first step in the event of a defect is issuing a notice of default: a written demand to the landlord to remedy the defect within a reasonable period. Without a notice of default the landlord is not in default and you as the tenant have no claim to the statutory remedies. The notice of default must describe concretely what the defect is, within what period remedy must take place and what consequences you attach to a failure to remedy.
Rent reduction
If, despite a notice of default, the landlord fails to remedy the defect, the tenant is entitled under Article 7:207 DCC to a proportionate rent reduction for the period during which the defect exists. The reduction is calculated according to the ratio between the enjoyment the tenant actually has and the enjoyment they would have had without the defect. The tenant can enforce this reduction via the subdistrict court.
Rent reduction takes effect from the moment the defect is reported to the landlord, not only from the moment of the court ruling. It is therefore advisable always to report defects in writing and as soon as possible, so that the commencement date of the reduction is well documented.
Compensation
If the defect is attributable to the landlord, for example because they failed to carry out necessary maintenance while they knew or should have known that the defect was imminent, the tenant can claim additional compensation under Article 7:208 DCC. That damage may consist of consequential loss, such as lost turnover due to the defect or costs the tenant has had to incur to continue their business operations.
Self-repair and set-off
If, after a proper notice of default and the expiry of the set period, the landlord fails to remedy the defect, the tenant is in principle entitled to have the repair carried out themselves and to set off the reasonable costs against the rent (Art. 7:206(3) DCC). This right is, however, subject to limits.
First, it must genuinely concern a defect the landlord is required to remedy. Anyone who repairs a maintenance obligation that contractually rests on them as the tenant and passes on the costs will get nowhere. Second, the tenant must be able to demonstrate that they gave the landlord the opportunity to remedy the defect beforehand and that the landlord failed to do so. Third, the costs incurred must not be disproportionate.
Set-off against the rent without these conditions being met can lead to proceedings for rent arrears. It is therefore advisable to seek legal advice before proceeding to set-off.
Maintenance, ROZ terms and exoneration clauses
The ROZ general provisions divide maintenance into exterior maintenance (for the landlord) and interior maintenance (for the tenant), but the exact boundary differs per contract version. Moreover, the general provisions regularly contain exoneration clauses: provisions by which the landlord excludes or limits liability for certain damage.
An exoneration is not always valid. If the damage results from intent or conscious recklessness on the part of the landlord, or if the exoneration is unacceptable in the given circumstances according to standards of reasonableness and fairness, the court can set the clause aside. The same applies if an exoneration qualifies as an unreasonably onerous clause within the meaning of Article 6:233 DCC. With consumers this is quickly the case; with commercial tenants the bar is higher, but there too there are limits.
Have your lease reviewed before signing for the division of maintenance and exoneration clauses, especially for large premises or high rents. The cost of legal advice is usually limited in relation to the financial risks you take if you sign a contract without knowing the general provisions.
Rent review over time
For 7:290 commercial space the law also offers the possibility of rent review. After the agreed rental period has expired, or after five years in the case of a long-running contract, either party can ask the subdistrict court to adjust the rent to the average of the rents of comparable commercial space in the locality over the past five years (Art. 7:303 DCC). This requires a mandatory expert opinion: the court appoints one or more experts who establish the market-conforming rent.
This procedure is open both to the landlord who considers the rent has become too low and to the tenant who believes they are paying too much. The outcome is binding, unless the parties decide otherwise by mutual agreement. For 7:230a commercial space this statutory right to rent review does not exist. Rent adjustment there is only possible by contractual route, usually via an indexation clause.
Rent review completes the circle of the legal dynamics surrounding commercial premises: not only access to the premises and termination, but also the price you pay, is co-determined by the applicable regime.
More from this series on commercial lease law
This article is part of our three-part series on commercial lease law. Read the other parts as well:
- Part 1: 7:290 or 7:230a DCC? Which tenancy regime applies to your commercial premises
- Part 2: Terminating a commercial lease: notice periods, grounds and pitfalls
Read also: 7:290 or 7:230a DCC? Which tenancy regime applies to your commercial premises and Terminating a commercial lease: notice periods, grounds and pitfalls.
Conclusion
Defects in commercial premises are a frequent and sometimes costly problem. Whether it concerns a leaking roof, a defective heating installation or overdue maintenance that hinders business operations: as a tenant you have concrete rights, but you must actively invoke those rights and follow the correct procedure. Always report defects in writing, issue a notice of default and record everything.
As a landlord it is advisable to maintain a clear maintenance plan and not to allow defects to persist. Liability for consequential loss can quickly mount to considerable amounts.
Law & More advises both tenants and landlords of commercial premises on defects, the division of maintenance, rent review and related matters. Contact us for a no-obligation conversation.
Frequently asked questions
Am I entitled to a rent reduction for a defect in my commercial premises?
Yes. If there is a defect within the meaning of Article 7:204 DCC and the landlord does not remedy it in good time after a notice of default, you can claim a proportionate rent reduction under Article 7:207 DCC. That reduction takes effect from the moment of the written report of the defect.
What minor repairs are for my account as a tenant?
Minor repairs are repairs that, by virtue of the law or custom, are reasonably for the tenant’s account, such as replacing broken switches, sealing small gaps in joints or repairing parts that wear out through daily use. The boundary with major maintenance, which is for the landlord, can be unclear in practice and is sometimes further described contractually in the ROZ provisions.
May I have a defect repaired myself and deduct the costs from the rent?
That is possible, but only if the statutory conditions are met: a notice of default has been sent, the landlord has allowed the period to expire, it concerns a defect the landlord is required to remedy and the costs are reasonable. Set-off without meeting those conditions can lead to proceedings for rent arrears.
Can I as a tenant have the rent reviewed?
For 7:290 commercial space you can, after the agreed rental period or after five years, ask the subdistrict court to adjust the rent to the market-conforming rent of comparable space in the locality (Art. 7:303 DCC). For 7:230a commercial space this statutory right does not exist.
