Increase of rental price free sector per 1 July 2020

26-5-2020 — 

Rental increase free sector per 1 July 2020
As a landlord of housing accommodation (s), you may increase the rent annually. Although this may be deviated from, it is standard in the Netherlands to increase rental prices as of 1 July. If you rent out in the social sector (bare rent < € 737,14), you must inform the tenants about the rent increase at least 2 calendar months in advance. This is not necessary in the free sector (bare rent > € 737,14).

Do you have to increase on July 1?
You do not necessarily have to increase on July 1. We are now in the middle of a crisis, of which the duration and outcome are not clear, although it now seems to be moving in the right direction. We also notice that there is some movement in the rental market again.
You can also skip the rent increase for a year, you can do it at a later time in the year (provided you increase at most once a year) or with a lower percentage than allowed. We would like to advise you to carefully consider whether you want to increase in the current situation. It can raise eyebrows with tenants, who may therefore decide to give notice. In recent months we were forced to help various tenants who have fallen sharply in income. They already have trouble paying the rent, let alone the rent increase.
Moreover, there is a risk at this time that your tenants give notice if you increase (too much). Especially since they can rent cheaper elsewhere now since there are a lot more listings at this moment. If you are planning to raise the rental price, ask yourself who your tenant is, what his / her financial situation is and whether your rental price may rise above market rates after a rent increase. If your tenant leaves, then as long as almost no expats come to the Netherlands due to the Corona crisis, you may have vacancy for some time.
Do you have a tenant in one of the affected sectors, such as the hospitality industry or the travel industry? Then there is a good chance that they have seen their income fall significantly or are afraid that this will happen in the near future. It would be better to see in a few months whether you want to increase later this year or wait until next July. If you do this, it is helpful to inform your tenants that you are NOT raising the rent now. We know from our own experience that this is very much appreciated.

Moral appeal to landlords
In the media and politics, calls are now being made regularly to moderate rental prices in order not to further trouble tenants as we are in the midst of the corona crisis. A moral appeal is made on landlords to show social behaviour to their tenants.

Minister Ollongren last May 15 sent a letter to the president of the House of Representatives containing a number of proposals. Among other things, a proposal to increase the rent by up to max. 2.5% + inflation:
Ollongren: ‘I will therefore maximize the annual rent increase in the free sector at inflation + 2.5%, in line with the maximum in the social sector. This applies to all rental contracts in the private sector for a period of three years. I realize that this is a major measure. However, the current historical shortage on the housing market in combination with an expected economic crisis also calls for exceptional measures. Based on the rent increases in the private sector in recent years, I expect landlords to take account of this maximization with the upcoming rent increase as well.  I also encourage landlords - especially during this exceptional period - to look closely at the rent increase that is really needed.’

Possible indexation clauses in the rental agreement
In the social sector, strict rules apply to the annual rent increase. The government determines what the maximum rent increase may be, based on the tenant's income.
In the private sector, other rules apply, where the landlord may determine to a certain extent how much the annual rent increase amounts to. All this depends on the provision that is included in the rental agreement. Provided of course that the maximum of 2.5% + inflation is met!
A number of options are possible:
-An indexation clause; the rent is increased annually by a percentage that can be derived from the inflation figures of the Central Bureau of Statistics (CBS). The rent will then go up with the average price development in our country. For rent increases as of July 1, the percentage is 1.4%. Home of Orange uses 'the indexation clause' in its rental agreements for homes in the private sector (basic rent > € 737.14).
-A storage percentage; the rent increases with the price index for consumers plus a surcharge percentage, for example 1.4% + 2%.
-A market rental provision; the market rent provision allows, after a few years, the rent to be increased sharply in one go in order to bring the rent in line with the market rents for comparable homes. If a landlord uses this clause, he must also be able to substantiate the rent increase based on comparable homes in the neighbourhood.
-No clause for rent increases has been included; in that case, the landlord may in principle propose any rent increase.

Points of attention rent increase
Would you like to implement a rent increase for your home in the private sector on 1 July (or perhaps later) this year to your tenants? Then consider the following:
-The rent increase is only calculated on the basic rent, not on additional supplies such as service costs or gas, water and light;
-The rent may be increased once every 12 months;
-The landlord does not have to, as is the case in the social sector, inform the tenant of the rent increase within a certain period;
-The landlord may cancel a lease if the tenant refuses to pay the rent increase;
-Rents in the greater Amsterdam region are still rising only slightly or even stagnating. But now with the Corona crisis, there are much more listings of rental housing and prices are even falling. If your tenant already pays a market-based rent and if you implement a relatively high rent increase, the tenant may decide to look for another house that is more affordable. And that is currently easier to find than before the Corona crisis. Do you have a nice tenant that you would like to keep? Then be careful with an (extreme) rent increase that potentially ensures that the tenant leaves your home. After all, you will have to incur costs again to find a new tenant and you also have a chance of vacancy.
-A tenant does not have to agree to the proposed rent increase, but the landlord can then go to court. If the judge finds the rent increase reasonable, the tenant is given the choice to simply pay the extra rent every month. Otherwise, the lease will be terminated. Only the judge can then terminate the rent.

Who will implement the rent increase?
If Home of Orange is responsible for the financial management of your home (s), we also take care of the annual rent increase for the landlord. If you are the financial manager of the house, you are responsible for this yourself.