On 16 February last, the Dutch Supreme Court rendered a judgment concerning the scope of the removal and furnishing expenses within the meaning of article 297(1) of Book 7 of the Dutch Civil Code (‘DCC’). At a lessor’s request, the court can terminate a lease for commercial premises within the meaning of article 290 of Book 7 DCC. That regime covers shops, restaurants, hotels and other commercial premises. Article 297 of Book 7 DCC provides that in its judgment granting the lessor’s claim to terminate the lease, the court may specify an amount payable by the lessor to the lessee as a contribution towards the lessee’s removal and furnishing expenses.
A large volume of case law of the lower courts exists concerning the question of what cost items fall within the scope of the contribution pursuant to article 297 of Book 7 DCC and what percentage of the costs must be paid. Nevertheless, a lot of uncertainty still exists, as the rulings in the court cases vary. Often, lessees mistakenly think that they are entitled to full compensation of the costs.
In its judgment of 16 February, the Supreme Court clearly answered the question of whether goodwill, payable by the lessee in connection with new premises, falls within the scope of article 297 of Book 7 DCC. The Supreme Court upheld the court of appeal’s judgment:
"The text of article 297(1) of Book 7 DCC does not provide any indication that "removal and furnishing expenses" also include consideration for goodwill payable in connection with new premises. After all, the wording of the provision concerns the actual occupation of new commercial business premises (and the associated costs), while consideration for goodwill concerns, in short, the earnings projections of the business to be carried out in the new commercial premises."
The foregoing means that the lessee is not entitled to compensation for goodwill it has to pay. This payment of goodwill by the lessee must not be confused with the compensation for goodwill laid down in article 308 of Book 7 DCC, as the latter is compensation that the lessee is paid for the benefit that the lessor enjoys as a consequence of the fact that the leased premises are used for operating a business similar to that conducted by the former lessee.
It had already been established in case law of lower courts that an amount payable by a lessee for fixtures, fittings and/or equipment left behind in the new premises or other costs payable by a lessee to empty new commercial premises do not fall within the scope of the contribution towards removal and furnishing expenses.
Now that this Supreme Court judgment has been rendered, many lessees can cross yet another cost item of their lists.
Entitlement to a transfer tax refund if a condition subsequent is fulfilled If property is acquired subject to a condition subsequent, acquisition takes place the moment the legal and/or beneficial title to the property is transferred. This means that the acquirer must immediately remit transfer tax in connection with the acquisition of the property. The remitted transfer tax can subsequently be claimed back if the transfer of the property is annulled due to the fulfilment of a condition subsequent. The legislature has made transfer tax refunds subject to the condition that refund requests can only be granted if the pre-acquisition situation can be restored in terms of both fact and law. This follows from section 19 of the Dutch Taxation of Legal Transactions Act (Wet op belastingen van rechtsverkeer).
The court recently addressed the question of whether a pre-acquisition situation could be restored in terms of fact and law where the buyer paid €40,000 to the seller, which would not be refunded if the transfer were annulled, since the buyer and the seller had agreed that the buyer did not have to pay the purchase price for the acquisition but would instead owe the seller an amount of €2,000 until the purchase price of €1,000,000 was paid. They had furthermore agreed that the monthly payments would not be refunded if the transfer were annulled.
In the case at hand, the court ruled that as a consequence of the annulment, the seller reacquired ownership of the property and had at all times retained use of the property. The purchase price did not have to be repaid, as it had never been paid by the buyer. This meant that, to that extent, the pre-acquisition situation had been restored both in terms of fact and law.
This is because with respect to the payment of €40,000, the court distinguishes two situations: the situation in which the condition subsequent is not fulfilled and the amounts paid by the buyer are deducted from the purchase price, and the situation in which the condition subsequent is fulfilled and those amounts are not deducted from the purchase price. Despite the fact that the origin of the amount was unclear, the court held that where the condition subsequent was fulfilled, the payments could not concern the acquisition since the acquisition had in fact been reversed. The court then inferred from this that the two provisions in the transfer deed could not, within reason, be interpreted other than being a record of the purchase price of €1,000,000 on the one hand and a separate payment of €2,000 per month agreed by the interested party in case the condition subsequent was fulfilled.
We infer from the judgment that some room exists to settle amounts between parties without this standing in the way of successfully claiming a transfer tax refund in cases where a condition subsequent materialises.