32. Contingencies and commitments

The total liabilities for obligations entered into for construction contracts, rental and lease instalments stood at €195 million at year-end (2022: €354 million). Rental and lease instalment liabilities are accounted for under Lease liabilities. Vesteda has not provided security for these liabilities. The liabilities can be specified as follows:

As part of the provisions in Note 24 are applicable to the future investment portfolio, the liabilities have also been adapted for the commitments related to the future investment portfolio.

Dutch court practices may impact the Fund’s ability to increase rent by ex officio review of contract clauses

During 2023, district courts, starting in Amsterdam but spreading throughout the country, started the trend of applying the ex officio review to rent agreements in court cases regarding rent arrears and/or evictions. Ex officio review means that the court applies rules of European consumer law even if the consumer (i.e. the tenant) has not petitioned for it. The review implies that the court will assess whether certain contract clauses are deemed “fair” within the meaning of Directive 93/13/EEC (the “Directive”), even if the case at hand regards a different topic. Various district courts ruled that specific rent increase clauses (CPI plus a maximum top-up percent) were not deemed fair and therefor null and void. This could imply that all rent increases under such a contract are deemed not valid and therefore should be repaid by the lessor. The court verdicts vary though (one district court, for example, ruled that CPI plus 1% would be deemed reasonable) as well as the underlying motivation. The cases are subject to appeal still, so the final outcome may change over time. In addition, the district court of Amsterdam asked preliminary questions to the Dutch Supreme Court on the interpretation of the Directive and possible consequences of annulment of the rent increase clauses at hand. IVBN members will make use of the possibility to issue input on the questions to the Supreme Court. It is not known when exactly the Dutch Supreme Court will decide on these questions, but it is expected that the Supreme Court will formulate answers by late 2024 the earliest. Should this ex officio review become common practice and be applied to a large number of contracts that are currently into effect, this could adversely affect the results of operations and could result in Vesteda having to repay significant amounts of unduly charged rent, impair Vesteda’s ability to increase contract rents in the future and may also impact valuation of investment property in due course.