Taking a critical look at your lease agreement for your office space

If you’re renting office space, chances are you’ve signed a lease agreement based on the standard model created by the ‘Raad voor Onroerende Zaken’ (ROZ). This might feel familiar at first glance. Many landlords might even claim it’s ‘standard.’ But is it really?

The background

The lease contract for office and business premises is, in principle, flexible in form, unlike those for residential and retail spaces. A simple note outlining agreements is legally binding, but in the past, this approach led to disputes between both parties. The Real Estate Council, an association primarily representing property owners, developed an initial version of a standardized lease contract in 1996. Over the decades, this model has been revised several times, with the most recent version dating back to 2015. The advantage of the ROZ model is that it covers almost every aspect, but the drawback is that many clauses are designed to favor the building owner. Understandably, they prefer to label the contract as ‘standard.’ However, it’s worth noting that during discussions around the 2015 model, representatives of tenants were present, but they had limited influence. Therefore, it’s up to you or your advisor to ensure that your interests are adequately safeguarded.

The adjustments

As outlined previously, the ROZ model covers many aspects, so it’s about modifying the provisions that are relevant to you. In this blog, we’ll discuss some key adjustments. Ultimately, it’s part of the negotiation process with the landlord to determine which terms they will or won’t accept.”

Annual Rent Price Indexation

According to the ROZ model, the rent is annually indexed based on the CPI index ‘All Households.’ We’ve all witnessed how this index can soar under certain circumstances, reaching as high as 14.5% last year. While such a surge is indeed exceptional, it can have far-reaching consequences if your rent suddenly increases by such a percentage. This can be prevented by capping or smoothing out the annual indexation.

Maintenance Obligations

Especially given the recent introduction of the Label C requirement for office buildings and the mandatory measures stemming from the Activities Decree, a clear demarcation of maintenance obligations between you and the landlord is crucial. As a simple example: the ROZ model states that the tenant is responsible for replacing light sources (bulbs). This might seem reasonable if it’s just a few bulbs per year. However, what if the landlord insists that you replace all the bulbs with LED lights? That might not have been the intention of the drafters, but it’s there in the agreement. As a second example, we often hear from tenants who have been dealing with building system malfunctions for a long time. The ROZ model merely stipulates that the landlord must start repairs as soon as possible, but it doesn’t specify when the issue must be resolved. You could then start withholding rent, but this often doesn’t improve the situation. Prevention is better than cure in these cases too.

Vacancy

There may be circumstances where you can no longer use the office entirely or wish to, such as due to a takeover or the implementation of hybrid working, resulting in a part of your office being structurally vacant. Based on the ROZ model, you are obligated to keep the rented property fully and actually in use, and oh yes, subletting is not just allowed either. So, you can also get quite stuck here, making it wise to negotiate better agreements with the landlord.

Delivery Obligation

As a final recommendation, let’s look at how the rented property must be delivered upon termination of the lease agreement. If you don’t agree on anything, the landlord may require you to return the property in its original state. This is quite extensive, and landlords can make life difficult for you here. It’s not just about removing office walls and carpeting, but also repairing damage, painting walls, leveling the floor, replacing ceiling tiles, adjusting the climate control system, and the list goes on. Costs: easily €80-100 per m². Therefore, it’s definitely worthwhile to include this point in contract negotiations.

In Conclusion

As mentioned in the introduction, we advise you to carefully examine the risks you are facing and to discuss these during negotiations. It’s impractical to completely tailor the contract to your needs, as the ROZ model has unfortunately become ‘too standard’.

With our experience, we can always help identify opportunities within your lease agreement. For instance, we can conduct a quick scan of your contract, examining opportunities and risks, the flexibility ratio, required square meters, perform market research, financial analysis, and analyze commuting distances.

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