For many landlords in the private rental sector, annual rent increases have long been taken for granted. However, a recent court ruling has cast serious doubt on this practice, causing considerable concern across the real estate sector. The consequences could be far-reaching, affecting not only future rent increases but also amounts already paid in the past.
Following an earlier request for guidance from the Supreme Court of the Netherlands on this matter, the District Court of Amsterdam has now referred preliminary questions to the Court of Justice of the European Union concerning a widely used rent adjustment clause: is the provision allowing landlords to increase rent annually actually fair?
Lawyers Harm Heynen and Luc Golsteijn, both specialising in tenancy law, explain the current developments and what they mean in practice for landlords in the liberalised rental sector.
Almost every tenancy agreement for properties in the private rental sector contains a rent adjustment clause. In practice, this clause often consists of two elements: an increase based on inflation and an additional percentage increase that the landlord may apply on top of this.
This structure originates from the ROZ model agreement, the standard contract developed by the Dutch Real Estate Council (Raad van Onroerende Zaken), which is used by the vast majority of landlords.
Ultimately, that ruling was referred to the Supreme Court of the Netherlands to determine whether it was correct.
Harm explains how the debate began. “A few years ago, courts became increasingly aware of their obligation to assess whether clauses in tenancy agreements with consumers are unfair. This requirement follows from European legislation. In previous cases, the District Court of Amsterdam had already ruled that clauses allowing landlords to apply an additional annual percentage increase on top of inflation adjustments could be unfair. Ultimately, the matter was referred to the Supreme Court of the Netherlands to determine whether that interpretation was correct.”
In November 2024, the Supreme Court ruled that the two components of the clause could be assessed separately and that an additional increase of, for example, three per cent was not necessarily unfair.
“That brought a sense of relief among property investors,” Harm explains. “But now the uncertainty has returned.”
This is because the District Court of Amsterdam remains unconvinced. According to critics, the Supreme Court’s reasoning does not fully align with the strict approach taken by the Court of Justice of the European Union on this issue.
“The European Court has previously ruled that if a clause contains several elements and is considered unfair as a whole, the entire clause must be disregarded,” Harm explains. “The District Court of Amsterdam questions whether the separation made by the Supreme Court is permissible and has now referred that question to the European Court.”
The Court of Justice of the European Union must answer two questions. Can the two components of the clause be assessed separately, or must the clause be considered as a whole? And if they can be assessed separately, is the additional percentage increase permissible? The European Court is expected to deliver its ruling within twelve to sixteen months.
The consequences could be significant. If the European Court rules that the entire clause is unfair, the clause will be invalid in its entirety. This would mean not only that landlords could no longer adjust the rent under that clause in the future, but also that tenants might be entitled to reclaim rent increases they have paid in the past.
How far back such claims could extend remains unclear. Harm explains: “That question should have been included in the referral to the European Court, but it wasn’t. So we won’t have clarity on that issue for the time being.”
This legal uncertainty adds to a series of changes that have already affected the private rental sector in recent years. The option of offering temporary tenancy agreements has largely been abolished. The Affordable Rent Act (Wet betaalbare huur) has brought more rental properties under regulation through a stricter points-based system. In addition, tax measures relating to Box 3, the Dutch tax regime for savings and investments, have further reduced returns.
“It is the cumulative effect of all these measures,” Luc explains. “Legislators have made changes in several areas simultaneously, affecting both tenancy and rent regulation and taxation. Changing one aspect of the system may have a manageable impact. But when everything changes at once, it becomes extremely difficult for everyone in the market to maintain a clear understanding of what is happening. Landlords have a legitimate interest in achieving a reasonable return on their investments. In some cases, those returns are now under severe pressure.”
As a result, some private landlords have sold their rental properties in recent years. This has reduced the supply of mid-market rental housing, placing further pressure on the housing market.
Nevertheless, some landlords are deliberately choosing to retain their properties. Luc explains: “They take a long-term view. They consider not only rental income but also the potential increase in property values. There are also early signs of change in the political debate. Policymakers are beginning to examine whether adjustments are needed in certain areas. Progress remains cautious, but at least it is a sign that the problems are being recognised.”
“If such a comprehensive clause is subsequently found to be unfair, it becomes invalid in its entirety.”
Both lawyers advise landlords who are currently entering into new tenancy agreements to limit rent adjustment clauses to inflation-based increases for the time being and to leave out any additional percentage increase.
“If such a comprehensive clause is subsequently found to be unfair, it becomes invalid in its entirety,” Harm explains. “If you only agree on an inflation adjustment, you can be almost certain that the clause will withstand legal scrutiny.”
Luc adds: “Precisely because so much is at stake, caution is advisable at this stage. Let the European Court reach its decision and then adjust future tenancy agreements accordingly.”
The advice to exercise patience and wait for greater clarity also applies to landlords considering selling their properties.
“Within the next eighteen months, we should have a clearer picture,” Luc explains. “The European Court will deliver its ruling, Minister Boekholt-O’Sullivan for Housing and Spatial Planning has announced plans to amend certain aspects of the Affordable Rent Act, and an evaluation of that legislation is scheduled for 2027.”
“If you are a private landlord and can afford to wait, give it another eighteen months. We have seen in the past that the regulatory environment can shift from being very strict to becoming less restrictive.”
