19 January 2018
Relocating your business to another country is not something you do overnight. Not only does it take a lot of planning, but making lots of decisions is of course also part of the process. Finding a perfect location is perhaps the most important decision to make, at least from a real estate perspective. To make sure that you will achieve the most fitting real estate solution when moving your business to the Netherlands, some knowledge of Dutch real estate law is key.
In practice, we see that many pharmaceutical companies prefer to be located nearby a (university) hospital. In that way, you may be able to cooperate and make use of or share facilities with the (university) hospital. If you have found a perfect location, negotiations will commence. This means that at some point, you will be confronted with Dutch real estate law. What do you have to take into account and what are your options to 'hold' real estate?
What do you have to take into account?
Dutch real estate law has certain particularities when compared to Common Law systems. To give an example, oral agreements are binding under Dutch law. This means that a lease agreement can be considered binding as from the moment that parties have reached an oral agreement on the total square meters to lease, the rental amount and the lease term 'only'. It is therefore important to realise that a contract may already have been concluded the moment that parties have reached agreement on the essentials of the contract, without agreeing on all (other important) provisions yet.
To give another example, an agreement does not only have the legal consequences agreed on between parties, but also those that may follow from the law, custom or the rules of reasonableness and fairness. In comparison with Common Law, such 'implied terms' are more commonly used and broadly accepted under Dutch law. It does not require obviousness nor a necessity to give business efficacy.
What are your options to 'hold' real estate?
Dutch law offers several options to 'hold' real estate. In general, real estate rights can be divided in two categories: real rights and personal rights. A real right relates to the real estate and is independent of the person that holds it. Real rights are to be registered in the public registers, can be transferred and can generally be mortgaged. A personal right is linked to a person and, unlike a real right, cannot be transferred without the cooperation from the other party and cannot be mortgaged.
Freehold and leasehold are examples of real rights. Freehold is the most comprehensive real estate right. The owner has the exclusive right of use and the freedom to encumber the real estate at its discretion.
A right of leasehold entitles the leaseholder to hold and to use another party's real estate. A right of leasehold may be temporary, permanent or perpetual. The parties themselves can agree on the specifics such as duration, designated use, development and/or compensation when the right of leasehold ends. Therefore, a right of leasehold offers parties a certain degree of freedom.
There are several ways in which the ownership of real rights can be acquired in the Netherlands. The ownership can be directly acquired (the buyer acquires the ownership or a real right relating to the real estate), the legal structure in which the ownership is regulated can be acquired (share transaction, acquisition on the level of the holding company or acquisition of a contractual position), or bank loans (secured or unsecured) related to the real estate can be acquired, also known as a loan-to-own strategy.
Lease is an example of a personal right. A lease provides the tenant a personal right to use the leased property. The lease is only binding between the landlord and the tenant. An exception to the rule in question is that a lease agreement transfers by operation of law when the leased property is transferred to a new owner. The new owner will thus become the landlord by operation of law in order to protect the tenant's position.
The lease regime relating to the lease of real estate is divided into three categories: (i) residential real estate, (ii) commercial real estate and (iii) other commercial real estate, that includes for example office space and laboratories. The business of pharmaceutical companies falls within the category of other commercial real estate.
The lease of other commercial real estate is not specifically regulated. This means that the parties are relatively free to agree at their discretion on the specific lease conditions. Tenants are protected by the law against eviction in order to protect them against overly strict termination clauses. If a tenant does not accept the termination of the lease by the landlord, although in accordance with the stipulations of the lease, it is entitled to continue to use the leased property for a period of two months after the end of the contractual lease period. That period may be extended to 12 months at the tenant's request, which is enforceable by law. It is not possible to derogate from this provision to the tenant's detriment.
If you cannot find an existing location for your business, you may consider to develop and construct one yourself. In this respect, you have many options to structure such a (re)development project. To provide you with an example, you may choose to acquire a plot of land, sell it to a developer, whom will develop and construct a laboratory on it in accordance with your wishes and needs, for its own account and risk. The developer will then, when the construction is finished, lease it to you. From a legal perspective, you must carefully consider the options for the underlying legal relationship in order to achieve the most suitable outcome. Many factors play a part in determining what option suits you the most.
What we can do
Van Doorne's real estate team closely monitors all changes and trends. We are involved in all types of (re)development projects and real estate transactions. Assisting and advising pharmaceutical companies, hospitals, universities with all their housing and (re)development questions is something we are very experienced in. We understand your business and would like to share our knowledge and experience with you in order to achieve the best real estate solutions for you.
Please contact Mark Moolhuizen to discuss the possibilities.