The Bottom Line
- Bad Clauses Don’t Spoil the Bunch: A Dutch appellate court has ruled that a rent review clause containing both a standard inflation adjustment and an unfair surcharge can be split. The unfair part can be voided without invalidating the entire mechanism.
- Inflation vs. Surcharge: Rent increases tied directly to the Consumer Price Index (CPI) are generally considered fair. However, additional discretionary annual surcharges (in this case, up to 5%) are likely to be deemed unfair and unenforceable unless exceptionally well-justified.
- Contract Review is Crucial: This ruling, following a recent Supreme Court precedent, signals a clear path for courts. Businesses, particularly in real estate, must review their standard consumer contracts to isolate and justify any terms that go beyond direct inflation compensation.
The Details
This case centered on a dispute over rent arrears for a residential property in the Netherlands’ liberalized (non-rent-controlled) sector. The landlord’s standard rental agreement contained a two-part clause for annual rent increases: a standard adjustment based on the official Consumer Price Index (CPI), plus a provision giving the landlord the right to add a further surcharge of up to 5%. When the case first went to a lower court, the judge reviewed the clause for fairness under the EU Unfair Contract Terms Directive and found the entire mechanism to be unfair. This decision had the severe consequence of nullifying all past rent increases, reverting the rent to its original 2020 level.
On appeal, The Hague Court of Appeal overturned this key part of the decision, guided by a recent landmark ruling from the Dutch Supreme Court. The court established that the two components of the rent review clause could be legally “split” and assessed for fairness independently. This principle of severability is a significant development, preventing a single problematic element from invalidating an entire contractual mechanism. It allows courts to perform a more surgical analysis, preserving the parts of the contract that are fair while striking down those that are not.
Applying this logic, the Court of Appeal upheld the CPI-based indexation as a fair and legitimate method for a landlord to protect the value of their rental income against inflation. However, it voided the clause allowing an additional 5% surcharge. The court found this term created a significant imbalance in the contract to the detriment of the consumer (the tenant) and that the landlord had failed to provide a compelling justification for it. Because the landlord had, in practice, only ever applied the valid CPI-based increases, their claim for rent arrears based on the indexed rent was ultimately successful. The ruling provides critical clarity: while standard indexation is safe ground, discretionary mark-ups are a significant legal risk.
Source
Source: Gerechtshof Den Haag (The Hague Court of Appeal)
