Private sector landlords could lose billions due to halted rent increases

Major private sector rental property landlords fear losing billions as a result of rulings by judges that have halted their rent increases in recent years. This is confirmed by the trade association IVBN statement from the FD.

These landlords have rent increase clauses in their contracts. This states the maximum amount they can increase their rent each year. Usually that is inflation and a few percent on top.

But in several legal cases, sub-district judges have ruled in individual cases that such a rent increase clause is against European directives, in terms of unfair terms in consumer contracts. This guidance states that a rent increase may not be too disadvantageous for a tenant.

And according to the judges, that was true. This could ultimately mean that years of rent increases have to be reversed and consumers have to pay back rent.

It’s still a long way off. Landlords have appealed. And a judge also asked the highest court in the country, the High Court, how she was looking at this.

But if the High Court eventually rules against the landlords, they may have to pay back up to 6.4 billion euros in rent over the past 15 years. This was done by real estate consultancy firm CBRE on behalf of IVBN, the group’s representative institutional investors in rental properties. If the inflation correction is upheld by the Supreme Court, but the amount is not over the top, the damage would be up to 1.7 billion at most.

According to IVBN, refunds will lead to financial problems for landlords and huge losses for pension partners. Pension funds invest heavily in rental property.

The Woonbond, which represents the interests of tenants, says that rents in the private sector have increased too quickly in the last few years. The association believes that the statements “are a starting point for a fairer rental price“We are also not interested in large landlords collapsing,” said a spokesman.

Annual rent increases in the private sector have been limited by law since 2021. Since then, the government has confirmed the maximum increase. That is inflation or the average wage increase of a labor agreement and a few percent. For 2024 it is 5.5 percent (4.5 percent inflation plus 1).