An independent butcher shop is integrated into a larger supermarket complex based on a Shop in Shop agreement. The agreement is not qualified as a lease agreement by the parties. At the end of the contractual term of the agreement, the butcher shop claimed the protection of the Act on commercial leases to obtain an extension of its agreement.
The Belgian High Court reiterates that the Act on commercial leases only applies on lease agreements where the lessee (i) as a retail trader sells products or services to end consumers(ii) directly to the general public (iii) in the rented space .
The most important criterion is thus the “direct contact with the public”. Retail trade is location sensitive and a relocation of the retail trade business would cause a loss of clientele. If there is no direct contact with the public, the lessee does not need the specific protection of the Act on commercial leases, since in that case, the location of its business is less important. The High Court further explains that the contact with the public, must be the general public. Contact with a limited or specialized public is therefore not sufficient.
In the past the High Court already explained that there is no contact with the general public for a retailer operating from within a larger market, for which the visitors must pay an entrance fee in order to have access (High Court decision of 2 March 1989). Based on this decision, case law and most scholars agreed that the same applies to a retailer operating its business in the framework of another activity (such as the restaurant in a zoo (Civ. Tongeren 30 March 1987), the bar in a theatre or a sport complex, the library or tea room in a hospital or an independent butcher/bakery in a larger super market).
This now seems to be confirmed by the High Court decision of 30 March 2014, but at the same time the Court stresses that the contact with the general public must be interpreted taking into account the purpose of the specific protection offered by the Act on commercial leases. As soon as the lessee can constitute its own clientele, due to the direct contact in the rented space, this clientele should be protected, by applying the Act on commercial leases. The clientele thus constituted by the retailer must be significantly different from the clientele of the supermarket.
The High Court stresses that this must be proven and cannot be presumed. The specific circumstance to be taken into account are:
- The permanent character of the shop in shop
- The location (within the supermarket, is there direct access, or is the shop in shop only accessible from within the supermarket, is the shop in shop close to the entrance of the super market…)
- Is the shop in shop operated autonomically (e.g. are the goods paid at a general cash register for the supermarket or not?; who decides on the product range?...).
With this decision the High Court further develops its existing case law regarding the application of the Act on commercial leases. For each specific situation, it must be assessed whether the shop in shop can constitute a clientele that is significantly different from the clientele of the larger department store in which it is integrated.
This makes it almost impossible to assess the exact qualification of a contract beforehand, since the client base of the shop in shop can evolve. It cannot be excluded that a shop in shop becomes so successful that the roles become reversed and it is the shop in shop that attracts clients, from which the larger department store benefits.
In general however, the High Court seems to presume that a shop in shop benefits primarily from the clientele of the department store and is therefore not ‘in direct contact with the general public”.