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This article explains the possibility for companies to develop a good perfectly adapted to its needs, to sell it to an investor and to re-lease it (sale and leaseback). From a business perspective, this is an attractive option for companies that want to both develop their own sites and free up the equity for use elsewhere.
Brexit had a major impact on imports and exports to and from the European Union. Since January 1, 2021, UK businesses exporting to the European Union face longer waiting times at the border, more paperwork and higher VAT. To avoid red tape, setting up a branch in the European Union is a solution for many of these companies. Due to Brexit, Dutch business premises including warehouses, distribution centers and data centers are in high demand by UK and other non-Dutch businesses. The Netherlands serves as a hub for the continent, companies provide services to the European domestic market from a central location in the Netherlands.
Businesses looking to locate in the Netherlands have several choices when it comes to finding suitable accommodation, including buying or renting commercial space. The logistics real estate market is scarce in part due to the strong growth in online sales, so these companies may also choose to build their own distribution centers. This article discusses from a legal point of view the combination of building business premises from scratch in the Netherlands, then selling and leasing them (in other words “a sale-leaseback” ).
Dutch construction contracts
One option for a company looking to set up a logistics center or data center in the Netherlands is to have such a facility built from scratch. The advantage of this is that the premises can be built entirely according to your own views and wishes. In general, there are two ways of giving shape to such a construction contract. There is the traditional procurement method, which involves a classic triangle between the owner, the architect and the contractor. Alternatively, this can be done by the integrated procurement method, where at least the design and construction are united and carried out by one party. Both methods will be briefly explained below.
Traditional procurement method
The traditional course breaks down into design, submission and construction. With this method of contracting, the owner negotiates and concludes separate contracts with design professionals (eg an architect) and a building contractor. The project owner hires these design professionals to provide the design documents and construction contractors are invited to submit bids to perform the work based on the design as defined in the tender documents. The client concludes separate contracts. The contract is awarded to the lowest tenderer or to the tenderer on the basis of the economically most advantageous tender.
Today, the traditional procurement method is still frequently used, especially in construction projects of a minor nature in terms of project size. Using two separate contracts, the most commonly used standard terms for contracts with design professionals are “The New Regulations 2005” governing the legal relationship between owner / architect, engineer and consultant (DNR 2005, with minor updates dating back to 2013). For contracts with companies, the contracting authorities rely on the provisions of specifications defined in the UAC 2012 (Uniform Administrative Conditions for the Execution of Works and Technical Installation Works 2012).
Integrated procurement method
For projects of a more substantial nature, or if other circumstances require it (for example the desire to obtain a finished product), the owners decide more and more not to conclude two separate contracts with professionals. design on the one hand and a construction contractor on the other, but contract with a single party for the design and construction of a work by means of an integrated contract. The co-contractor then undertakes to carry out both the design and the execution of the work. In some cases, the contract also includes the performance of long-term maintenance of the completed structure after its completion and acceptance. “Design and build”, “design and build”, “turnkey”, “Bahama model” and “maintenance” are just a few of the terms frequently used in this context. They are, however, rather loosely defined. The generic term “integrated contracts” covers all these types of contracts. Current market practice is for project owners to rely on the model agreement with the corresponding uniform administrative conditions for integrated contracts (UAV-GC 2005, which is currently under revision).
A characteristic of integrated contracts is that they combine several functions in the construction process. The functions of the construction process in the model agreement with the corresponding UAV-GC 2005 are initiation, design, construction and long-term maintenance. As is the case in most other construction contracts, the client continues to play the role of initiator: the client specifies his expectations in his schedule of requirements. Under the standard agreement with the corresponding UAV-GC 2005, the contractor assumes (part of) responsibility for the design and construction functions: the contractor performs the design and construction work on the basis the requirements of the client. At the discretion of the project owner, the scope of the contractor’s responsibilities may be extended to include the long-term maintenance of this work. This is not necessary, but the model agreement with the corresponding UAV-GC 2005 provides for this possibility in standard clauses. If the client makes use of this possibility, long-term maintenance must be ordered simultaneously with the execution of the work; ie if the client wishes to declare the model agreement with the corresponding UAV-GC 2005 applicable to the integrated contract. The contractor will then begin the performance of long-term maintenance on the day of completion and acceptance of the work performed.
Sale and leaseback
Because investing in real estate is often not the core business of companies looking for logistics real estate, sale and leaseback transactions are increasingly used in practice. Fully constructed business premises, such as a warehouse, distribution center or data center, are sold to a real estate investor and then re-let for an extended period. The big advantage of this is that the capital is no longer tied up in bricks and mortar, but can be invested in the core business of the company. Usually the lease payment and the sale price are closely related as they are agreed upon as part of a composite transaction. A sale-leaseback transaction typically takes the form of a separate purchase agreement and lease.