POP-UP STORES GET SPECIAL LEASE RULES

The Flemish Parliament has adopted a new decree concerning pop-up stores. The decree introduces special lease rules for trade licences with a term of one year maximum. The aim is to provide a stable regulatory framework which guarantees that the contract cannot be requalified as a commercial lease. The decree has now been sent to the Flemish government for enactment and will then be published in the Staatsblad [Official Gazette]. It will enter into force on the first day of the second month after publication.

Calendar icon13 June 2016

Lowering the threshold

The decree wants to create a clear legal framework for short-term rental of commercial premises. The members of parliament who drew up the text think that there is extensive legal uncertainty under tenancy at will that has emerged from legal practice, while drawing up a lease under ordinary tenancy law that will with certainty not be qualified as a commercial lease entails high costs.  The aim is to lower the threshold so that owners of empty properties can let their real estate to a pop-up concept, while making it easier for entrepreneurs to rent a commercial property as a springboard to  the fixed establishment of a retail outlet.

 

Decretal framework for the rental of commercial premises for less than one year

It was stressed in the Explanatory Memorandum that the purpose of the new legislative regime was  not to erode the existing commercial lease legislation, nor to impair the existing local autonomy to regulate commercial matters (e.g. in terms of spatial planning  or required permits). The aim was in fact to provide a decretal framework for what is described as the last non-regulated part of the lease legislation, i.e. the rental of commercial premises for less than one year.

The decree introduces separate rules for commercial leases concluded for a term of less than one year. All these contracts will henceforth fall under these lease rules, whereby all sorts of existing solutions based on tenancy at will and ordinary tenancy law can no longer be applied.

The key aspects of the new lease rules can be summarized as follows:

 

1. Term  (Article 2, 3 & 4)

The new regulatory framework comprises the rental of commercial premises for a term of less than one year. As soon as the term of one year is reached, the lease falls under the Commercial Lease Act. This restriction is applicable to the combined term of successive leases.

The lease shall expire automatically at the end of the stipulated period, without any notice being required from either party. Tacit renewal is excluded.

 

2. Lease renewal  (Article 4)

The tenant is not granted any right of renewal. Tacit or oral extensions are not authorized. The parties may agree in writing that the lease is extended under the same conditions, although the maximum term of one year may not be exceeded through the extension.  Leases that are extended, whereby the total period of the lease exceeds the term of one year, thus fall under the scope of the commercial lease in general. As soon as the term of the lease exceeds one year, Article 2 of the decree proposal provides for an automatic requalification as a commercial lease, entered for at least 9 years, effective as of the date on which the initial short-term lease entered into force.

 

3. Termination options  (Article 5, 6 & 14)

The tenant has the option to terminate the lease, subject to a period of notice and compensation of 1 month. The notice must be served by process server or by post, by registered letter.

The landlord is not granted any termination option. Furthermore, the tenant cannot be evicted by the new owner if the leased premises are disposed of.

There is an option to terminate the lease early in writing through mutual consultation.

The tenant may not claim compensation when the lease is terminated, unless the parties have agreed otherwise.

 

 4. Link with the standard 9-year commercial lease  (Article 4 & 15 to 18)

No option is provided to switch to a standard 9-year commercial lease.

The parties are offered only the option to terminate the lease early by mutual consultation, and then to conclude a standard 9-year commercial lease. After the expiry of the short-term lease, the parties are naturally free to draw up, by mutual consultation, a new lease which falls under the commercial lease system.

 

5. Rent and charges  (Article 8)

The rent includes all taxes applicable on property; other costs such as gas and electricity are at the tenant’s expense. Proof of these costs can be provided by all legal means.

The obligation to register the lease lies with the landlord, who will also pay the registration charges, unless contractually stipulated otherwise.

 

6. Alteration works (Articles 9 to 12)

The tenant is entitled to carry out alternation works to the leased premises that are useful for the company, provided that the costs do not exceed one year’s rent. The parties may make other arrangements on this matter and enter them in the written lease.

The tenant must inform the landlord in writing before proceeding to conversions.

Unless agreed otherwise, the landlord may require the tenant to remove such works before leaving. If the landlord decides to keep the works, he is not bound to pay any compensation to the tenant.

 

7. Assignment of lease and subletting (Article 13)

Assignment of lease and subletting are prohibited, but it is possible to deviate from this prohibition by mutual agreement during the term of the agreement.

 

8. Competent courts (Articles 15 to 18)

Any and all disputes arising out of the application of the lease shall be referred to the justice of the peace.

The possibility exists to call on the counterparty for an amicable settlement.

 

9. Transitional arrangement (Article 19)

The new regulation shall not apply to current leases.

 

10. Amendment of the commercial lease legislation

The exception rule in the Commercial Lease Act, whereby this does not apply on the “lease which, owing to the nature or intended use of the property or according to established practice, is normally granted for less than one year” is amended to  the “lease which is concluded in writing for a term that is equal to or shorter than one year.” All leases that are shorter than one year therefore do not fall under the  Commercial Lease Act, while all agreements concluded for a longer term fall under the scope of application, even if they are normally concluded for less than one year owing to the nature or intended use of the premises or according to established practices.

 

11. Entry into force

The decree shall enter into force on the first day of the second month following the day of publication in the Belgisch Staatsblad [Belgian Official Gazette].

Overview
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