Tested by the Constitutional Court
Balance Between the Protection of a
Business and the Protection of the
Lessors Right of Ownership
In two recent rulings the Constitutional Court has confirmed
that an owner-lessor may refuse the renewal of a lease
only under certain conditions.
The Court also respects the legislators wish to ensure a certain stability and
continuity for a trader who leases a property for his commercial
In this contribution on the Commercial Lease Act we go briefly into two aspects that are to be taken into account by a lessor in a commercial lease agreement, in particular the transfer of the leased premises and the right to renewal of the lease.
1. Transfer of Leased Premises
Upon the transfer of a leased premise, as a lessor the new transferee-owner cannot refuse a lease renewal without reason with regard to the original lessee.
In section 16 of the Commercial Lease Act the legislator provides for a strict list of reasons of termination.
In a ruling of 27 March 2014 the Constitutional Court had to rule on whether a legal person-transferee can evict a commercial lessee from an immovable property in favour of a de facto association with which the transferee maintains "close ties".
Up to now, in section 12 with reference to section 16, 1° of the Commercial Lease Act the legislator provides for a possibility for the natural person-transferee of refusing a renewal of the lease to the existing lessee if there is a "family relationship" between the new transferee and the natural person or the members of the partnership in favour of whom the lease is terminated.
The Mechelen Court of First Instance notes that the Commercial Lease Act does not provide for the same possibility for a lessor who is a legal person and who wants the premises to be taken into use by another legal person or a de facto association with which the lessor maintains "close ties".
In this ruling the Constitutional Court has decided that section 12 of the Commercial Lease Act does not imply any discrimination. According to the Court, it is not unreasonable for the legislator to assume that a possibility of termination in favour of de facto associations with which the transferee is said to maintain "close ties" in one way or another, might give rise to abuses. After all, a de facto association has no legal personality and can at all times be formed in an informal way. If this reason is allowed, its would affect the lessees legitimate interests to protect his business.
2. Not Just a "Right to" Renewal of Lease
According to the civil law rule a lease ends ipso jure, automatically, when the time specified in the lease has expired, without a notice of termination being required (section 1737 of the Civil Code). Unlike the Agricultural Tenancies Act or the Housing Rental Act, as far as the commercial lease is concerned the legislator has not provided for an automatic renewal of the lease.
On the other hand, section 13 of the Commercial Lease Act grants the lessee a preferential right to ask the lessor for a renewal of his current lease.
According to section 14 of the Commercial Lease Act a lessee wishing to make use of the right to renewal will have to inform the lessor of his wish by means of a judicial officers writ or by registered letter, not earlier than 18 months and not later than 15 months prior to the end of the current lease. This notification must meet a number of explicit conditions whereby it is advisable for the lessor and lessee to work out an arrangement between themselves.
The same section also provides that if, after the end of the lease, the lessee is left in the possession of the leased premises, a new lease will be concluded for an indefinite period of time.
In a ruling of 22 May 2014 the Constitutional Court had to rule on the question whether these two sections of the Commercial Lease Act, read in conjunction with article 1 of the First Additional Protocol of the European Convention of Human Rights (1 FP ECHR), constitutes an unjustified discrimination in the obligations of lessees with regard to lessors, and besides whether the regime in the Commercial Lease Act in this field is not too rigid in comparison with the Agricultural Tenancies Act and the Housing Rental Act.
The Court keeps up the current regulation and by doing so it follows the point of view of the Council of Ministers and the parliamentary preparation of the Commercial Lease Act.
On the one hand, the legislator has tried to ensure a certain stability for the trading lessee of a business in order to guarantee duration and initiative and to ensure the renewal of the lease when the owner has no good reasons to make use of other places otherwise.
On the other hand, the lessors right of ownership cannot be permanently encumbered by an automatic renewal of the lease by the lessees commercial property.
In this context the Tongeren Commercial Court refers to article 1 FP CHR which guarantees the fundamental right to protection of property.
The difficulty lies in the fact that both the owner-lessor and the lessee with a business can invoke a subjective right of ownership. The lessees interest refers to the possibility of continuing his business, which is regarded as a property within the meaning of article 1 FP ECHR. The owner-lessors interest implies the free use of his property as guaranteed by the same provision and section 544 of the Civil Code.
In this ruling, the Constitutional Court decided that the legislator did not exceed his margin of discretion by imposing a special thoughtfulness and a timely notification of his will to renew the lease on the commercial lessee as a trade participant.
The Commercial Lease Act contains a number of specific provisions of imperative law which are regarded as essential for the stability and continuity of the trader-lessees commercial activities.
The owner-lessor can refuse the renewal of the lease only under certain conditions. With its two rulings the Constitutional Court has reaffirmed the legislators objective.
On the one hand, pursuant to the Commercial Lease Act the possibility of termination cannot be extended in favour of the de facto association with which the owner-transferee is said to have close ties, which is in the interest of the protection of the trader-lessees business.
On the other hand, this protection of the business is not absolute. The lessor-owner may refuse the renewal of the lease if the lessee fails to timely notify the lessor-owner of his intention.
The lessee already has the right to obtain a new commercial lease for an indefinite period of time in the event of inaction by the lessor-owner by leaving the lessee in the premises. The lessor-owner can, however, oppose such new commercial lease, subject to 18 months notice.
13 May 2015
Jan Vanbeckevoort - firstname.lastname@example.org
Alain De Jonge - email@example.com
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