Renting commercial property

The advantages and disadvantages of renting 

Renting property has many pros and cons compared to buying a property. 

Advantages of renting 

• You get more flexibility. Cancelling a lease is usually easier than selling a property. 

• Your lessor will usually pay for major maintenance. 

• You do not have to invest a lot of money all at once as you do when buying a property.  

Disadvantages of renting 

• You are dependent on your relationship with the lessor. 

• Rents usually increase every year. 

• Hard to cancel early. Potentially long terms. 

• You have to consult with your lessor before making major modifications. 

Alternatives 

Renting commercial space comes with various obligations. If you do not want these obligations, you could explore other ways to rent commercial space for a short period of time or with fewer obligations in some other way, such as renting a chair at a salon or experimenting with a pop-up space. Another option is renting flexible workspace in a multi-company building. Consider the various possibilities.

Rules for renting commercial property

There are different rules for renting commercial property. This depends on what type of space it is. 

1. Publicly accessible commercial space for businesses 

Examples of publicly accessible commercial space for businesses include retail space and space for hospitality businesses. As a rule, the initial rental period for these spaces is 5 years, after which it can be extended by another 5 years. The lessor cannot end the lease during these periods, which gives you the certainty you need to safely expand your customer base or invest in the building. The downside is that it is also difficult to terminate the lease early. If you want to close your business mid-term, you are stuck with the current lease period. The landlord can then claim damages as high as the amount you would otherwise pay in rent. The only way to end the contract early is to find someone willing to take it over. The landlord will then have to agree to that.

Do you think these rental periods are too long? Then you can ask the landlord to agree on a shorter period in the first lease. If your business does not do as well as hoped, you will not be stuck with a long contract. The same period of time to terminate the contract applies to the landlord. If you as a tenant and landlord continue with each other after the first contract, the second contract is automatically valid for 5 years.

2. Miscellaneous commercial space 

Miscellaneous commercial space includes rented storage space or office space. You can determine the rental period yourself in consultation with the lessor, deciding on a definite or indefinite period. When entering into a contract, think carefully about your expectations for the future. 

There is no mandatory rental period for miscellaneous commercial space, but you are protected against eviction. This means that the tenant has the right to petition the court for a 1-year extension if the lessor cancels the lease. 

Mandatory energy label for offices 

Office buildings larger than 100 m2 are required by law to have a class-C energy label or higher. Properties that do not meet these requirements can not be used as an office. It is the responsibility of the lessor or owner of the building to ensure that it meets the energy requirements. 

The lease contract

Landlords often use model contracts of the Raad voor Onroerende Zaken (ROZ, Real Estate Council) when drawing up a lease contract. Are you renting hospitality or retail space? There is a so-called Huurdersvariant (renter's version, in Dutch) of these models for your sector. In this version, sector organisations have made changes to the models that take the renter's interests into account.

Consult a commercial estate agent or lawyer when drawing up a lease. They are specialised in making clear arrangements. 

What should be included in a lease contract? 

A lease should contain at least the following information: 

• a description of the space in question 

• the surface area of the space 

• the rent and when it is due

• the building’s zoning category 

• the rental term and cancellation period

• options for extending the lease after the rental period expires 

And also:

• a provision for annual rent adjustments 

• agreements on service charges 

• agreements on utility costs (gas, electricity, water, etc) 

• maintenance agreements 

• subletting agreements 

• municipal tax agreements 

Compare the rent 

Once you know the rent for the commercial space you have in mind, check out how much similar spaces nearby cost by consulting local commercial brokers or websites like Funda in Business or bedrijfspand.com (both in Dutch). It is a lot easier to negotiate a good rent in advance than it is to adjust the rent after you have signed a contract. 
To determine the rent for commercial space for medium-sized businesses, brokers use a fixed calculation method laid down by law, as well as comparing it to similar properties. 

Check the demarcation list

If you rent business premises, you will want to know what costs you are responsible for as a tenant. You can find this information in the demarcation list. This is a document that states who pays what costs. For example, you as the tenant are often responsible for painting the walls, while the landlord repairs large cracks. Or you pay for new lamps, but the landlord replaces defective wiring. So check this list carefully before you sign the lease. That way you know exactly where you stand.

Check the environment plan 

Check the municipal environment plan before you sign the lease to make sure you are actually allowed to run your business at that location. Ask whether the municipality has plans to redevelop or redesign the area in the future, as this could have a major effect on your turnover. 

Taking over a lease: subrogation 

If you are acquiring a business based in a commercial space for medium-sized businesses, you are able to take over the existing lease from the seller. This is called subrogation and is regulated by law. The advantage is that you do not have to renegotiate the rent or terms, preventing a sudden rent increase from putting a spanner in the works. 

Is rent subject to VAT? 

Generally speaking, renting commercial space is exempt from VAT. This exemption can be disadvantageous for the lessor, because they will be unable to recover VAT paid on maintenance costs from the tax authorities. You can therefore choose to add VAT onto the rent in consultation with the lessor. If you have to pay VAT, you will not be disadvantaged in any way, as you can claim back the VAT you pay on the rent from the tax authorities. However, if you are an entrepreneur using the small businesses scheme (KOR), you will not be allowed to claim back the VAT. If this applies to you, talk to the lessor and ask them whether you can rent without VAT. 

The costs you incur for renting your commercial space are business expenses, which means you can deduct them from your income when filing your income tax return.