Renting commercial space
- Willeke Leensma
- How to
- 20 Mar 2019
- Edited 9 Jan 2023
- 4 min
- Starting, Managing and growing
You are looking for commercial space. What to look for in commercial space depends heavily on what your business does. If running your business from home is simply not an option, renting commercial space is probably your best bet. Depending on what kind of business you run, you can choose to rent office space, retail space, or a practice. Find out everything there is to know about the pros and cons of renting, different types of renting, and how to draw up a lease.
Buying commercial property is not easy for startups. If you want to take out a mortgage (in Dutch), you will have to provide collateral to a bank, which you might not have. That is why many startups choose to rent commercial space.
The pros and cons of renting
Renting property has many pros and cons. We have listed some of them below.
Pros of renting
You get more flexibility. Cancelling a lease is usually easier than selling a property.
Your lessor will usually pay for major maintenance.
You can use your assets for other purposes.
Cons of renting
You are dependent on your relationship with the lessor.
Rents usually increase every year.
You do not benefit from rising property values.
Hard to cancel early. Potentially long terms.
You have to consult with your lessor before making major modifications.
Renting commercial space comes with various obligations. If you do not want these obligations, you could explore other ways to rent commercial space for a short period of time or with fewer obligations in some other way, such as renting a chair at a salon or experimenting with a pop-up space. Another option is renting flexible workspace in a multi-company building, which has facilities that you share with other self-employed professionals such as a reception desk, meeting room, and coffee machine. In a multi-company building, you and other entrepreneurs work in the same place. Read all about the pros and cons (in Dutch) of renting space in a multi-company building.
Types of commercial space
If you have decided to rent commercial space, there are two types of commercial tenancy law to choose from, each of which comes with different rules (in Dutch) about rental price protection and rental periods.
1. Publicly accessible commercial space for businesses
Examples of publicly accessible commercial space for businesses include retail space and space for hospitality businesses. As a rule, the initial rental period for these spaces is 5 years, after which it can be extended by another 5 years. The lessor cannot end the lease during these periods, which gives you the certainty you need to safely expand your customer base or invest in the building. The downside is that it is also difficult to terminate the lease early. In fact, it is practically impossible to do so in the first 5 years. If you want to close your business mid-term, you are stuck with the current lease period.
If these fixed rental periods are too big a step for your startup, you can also agree on an initial rental period of 2 years or less as a trial arrangement, while you explore whether your business is viable. In that case, the lessor would also be entitled to cancel the lease after the initial 2-year period. If the tenant and lessor agree to continue after the trial period, the follow-up lease will automatically have a 5-year rental period.
2. Miscellaneous commercial space
Miscellaneous commercial space includes rented storage space or office space. You can determine the rental period yourself in consultation with the lessor, deciding on a definite or indefinite period. When entering into a contract, think carefully about your expectations for the future.
There is no mandatory rental period for miscellaneous commercial space, but you are protected against eviction, which means that the tenant has the right to petition the court for a 1-year extension if the lessor cancels the lease.
Mandatory energy label for offices
Starting from 2023, office buildings larger than 100 m2 are required by law to have a class-C energy label or higher. Properties that do not meet these requirements can no longer be used as an office. It is the responsibility of the lessor or owner of the building to ensure that it meets the energy requirements.
You should preferably have the lease in writing. You can download model contracts (in Dutch) from the ROZ Real Estate Council of the Netherlands.
Before signing the lease, take pictures of the space you want to rent and enclose them with the lease.
Tip: Consult a commercial broker or lawyer when drawing up a lease. They are specialised in making clear arrangements and can help you avoid trouble with the lessor caused by unclear agreements.
What should a lease say?
A lease should contain at least the following information:
a description of the space in question
the surface area of the space
the rent and payment term
a provision for annual rent adjustments
the building’s zoning category
the rental period and notice period
agreements on service charges
agreements on utilities
municipal tax agreements
options for extending the lease after the rental period expires
Compare the rent
Once you know the rent for the commercial space you have in mind, check out how much similar spaces nearby cost by consulting local commercial brokers or websites like Funda in Business or bedrijfspand.com (in Dutch). It is a lot easier to negotiate a good rent in advance than it is to adjust the rent after you have signed a contract.
To determine the rent for commercial space for medium-sized businesses, brokers use a fixed calculation method laid down by law, as well as comparing it to similar properties.
Check the zoning plan
Check the municipal zoning plan before you sign the lease to make sure whether you are actually allowed to run your business at that location. Ask whether the municipality has plans to redevelop or redesign the area in the future, as this could have a major effect on your turnover.
Taking over a lease: subrogation
If you are acquiring a business based in a commercial space for medium-sized businesses, you are able to take over the existing lease from the seller. This is called subrogation and is regulated by law. The advantage is that you do not have to renegotiate the rent or terms, preventing a sudden rent increase from putting a spanner in the works.
Is rent subject to VAT?
Generally speaking, renting commercial space is exempt from VAT. This exemption can be disadvantageous for the lessor, because they will be unable to recover VAT paid on maintenance costs from the tax authorities. You can therefore choose to add VAT onto the rent in consultation with the lessor. If you have to pay VAT, you will not be disadvantaged in any way, as you can claim back the VAT you pay on the rent from the tax authorities.
If you are an entrepreneur and claim benefits under the small businesses scheme, you will not be allowed to claim back the VAT. If this applies to you, talk to the lessor and ask them whether you can rent without VAT.
The costs you incur for renting your commercial space are business expenses, which means you can deduct them from your income when filing your income tax return.