September, 2022 – The Netherlands – Certa Advocaten

Introduction

Upon the discovery of drugs and/or other prohibited substances or goods used to manufacture the drugs, mayors may close a business premises. As a property owner, you are faced with a closed building that no one is allowed to enter. The space cannot be rented or sold. As an owner, you suffer damage as a result. The conspicuous trend with business premises is to close it indefinitely. This creates uncertainty: when can the premises be reopened and used? Disaster scenarios take place in which business premises are closed for years. In this article you will read about the Dutch closure order, what the options are for reopening, how the opportunity arises to terminate the lease and what you can do as an owner to get your damage compensated. Finally, you’ll read our conclusion and implications for practice in the Netherlands.

Closure Order

When selling, supplying, dispensing or having a commercial stock of drugs, the mayor may close the business premises. This is a power based on the Damocles Act. The mayor uses this power by means of a closure order. This prohibits entry into and use of the premises.

The purpose of the closure is to restore public order. This requires a period of calm. The purpose of closure is to reduce the risk of repetition. It also sends a signal to the outside world that no more activities can take place in the building that threaten public order. For example, a building can no longer be used for or a target of criminal purposes or actions.

Proportionality

When closing, the mayor must assess whether the consequences of a closure are “proportionate.” In other words, whether the closure is proportionate to its purpose. In case law, we see a trend that the administrative courts check more strictly whether the closure is proportionate. The mayor must provide “sound reasons” and take into account (the concurrence of) all circumstances. It is not enough for the mayor to simply refer to his policy. In practice, this may mean that the mayor has to suffice with a warning or a shorter closure period.

Closing time

The duration of closure is related to the restoration of public order. This is always customized, as each case is different. Remarkably enough, the starting point of the policy of the mayor of Amsterdam, for example, is that “[p]ublically accessible and non-publicly accessible establishments and premises” are closed indefinitely. In our opinion, the mayor thus fails to weigh which closure period is proportional and shifts the responsibility for revoking the closure order to the owner. In doing so, the mayor is disregarding its obligation to ascertain whether the need for closure still exists at any given time. We have procedures in place to address this.

According to the policy, the Mayor of Amsterdam considers the duration of the closure to be partly dependent on the time needed for the operator and/or owner to take measures. Therefore, it is important that you as an owner take appropriate action soon – also against the tenant (read below).

Possibilities of reopening

To reopen the premises, you as the owner can file what is called a “reopening request”. With this you ask the mayor to revoke the closure order. The mayor does not do this lightly and in short must have confidence that the public is restored and there is no risk of recidivism.

In most cases we do not recommend betting on one horse. As an owner you can – in addition to the reopening request – object to the closure order and request a preliminary injunction from the preliminary injunction court. After the objection phase, you can appeal to the administrative courts. Under certain circumstances, this will increase the chances of reopening the premises more quickly and of compensation for damages.

Termination of the lease and eviction

As a landlord, if the mayor closes the business premises, you have the authority to terminate the rental agreement out of court. The public order has been disturbed by the tenant. This means that – as a landlord – you can send a letter to your tenant informing him that the rental agreement will be terminated out of court and give him a deadline to vacate the premises voluntarily. You can only terminate the rental agreement out of court if the leased property is actually closed. If the mayor has only expressed the intention, it is too early. Please note: the tenant cannot enter the business premises if it’s closed and therefore cannot vacate them. The eviction must take place with the consent of the municipality or after the revocation of the closure order. If the tenant does not want to vacate the leased premises voluntarily, eviction can be demanded in a procedure.

The court will test – if the tenant defends – whether the landlord has used its power in accordance with the standards of reasonableness and fairness (proportionality). The landlord must show that it was proportionate to dissolve the rental agreement out of court. The dissolution may not constitute a misuse of power. The court may take into account to what extent the tenant can be blamed. In the case of a hemp farm or drug discovery, this possibly will be assumed. We advise the landlord to inform the tenant of his reasons for dissolving the contract in the letter announcing the termination.

The termination of the lease is often of great importance for the reopening request. If the tenant can no longer enter the business premises, the mayor will be more likely to cooperate.

Damages

The landlord often suffers damages as a result of the closure of the business premises. For example, the rental payments are no longer paid. In addition, the illegal practices (including a hemp farm) or the closure itself can cause damage to the business premises. If the tenant fails to comply with the obligations under the lease, the landlord can recover this damage from the tenant, unless the damage cannot be attributed to the tenant. If the lease has already been terminated out of court, depending on the circumstances of the case, damages may be recovered on the basis of the tenant’s wrongful act. If proceedings are initiated, damages may be included.

If the mayor has wrongfully closed the business premises, he may also be obliged to pay damages under circumstances.

Conclusion and implications for practice

As a landlord, it is a good idea to coordinate the Dutch administrative and civil law steps in the event of a mayoral closure. This prevents the business premises from remaining closed for too long and/or you from being stuck with a tenant who seriously disturbs the public order. Furthermore, under certain circumstances you can recover your damages from both the tenant and the mayor.

Questions about (an intended) closure of your business premises in the Netherlands? Please contact us. Together we will ensure that the right steps are taken towards the municipality and the tenant. If necessary, we will go to court together as experienced litigators. For those who want progress.

Werner Altenaar, lawyer administrative law

Lisanne Hennink, lawyer rental law

Amsterdam, September 14 2022

Certa Advocaten B.V., practice group real estate