Judge puts an end to the sale of government real estate

Hedy van der Poel had warned the municipality of Rhenen. For about five years she had been working with a group of self-employed persons on the purchase of the old fire station in the center of the city. There had been permit processes, grants awarded, financing discussions and planning procedures. But the biggest obstacle came when everything was already in place: a court decision – which could jeopardize the sale of many government real estate.

In mid-February, the property would be transferred to the foundation that Van der Poel co-founded. And the very next day the renovation was to start, which was to turn the old barracks, now partly a workplace, into a multifunctional community house. During the day it would be a workplace, the rest of the city could go there for art and workshops.

So when the municipality decided to publicly announce the transfer in mid-January, Van der Poel and the other initiators were shocked. Did the council know how much was at stake? In the meantime, they had invested more than two hundred thousand euros, not to mention the many hours of unpaid work that the self-employed had lost. They thought it was an open invitation. The municipality appeased them: the sale had gone according to the rules. The disclosure was a formality.

Old buildings

A few days later, Gert van de Glind read the announcement in the newspaper. The local real estate entrepreneur owns dozens of properties throughout the Netherlands, six of which are in Rhenen itself – “if you say so, I have more in other cities”. When the barracks went up for sale years ago, he had called the municipality about the national monument; Van de Glind likes old buildings. He never got a call back and actually, he says, he thought the sale to the self-employed had long since been completed.

So he did what Van der Poel had feared: Van de Glind started summary proceedings. It’s not about the money, he says, it’s about the principle. “Why didn’t I have a fair chance to buy the property? And why did it have to take three years since the signing of the purchase agreement before the property was transferred? I think three months is a long time.”

‘Didam judgment’

The court ruling that followed in mid-March seems to undo all the work of the citizens’ initiative: the purchase agreement from 2020 was annulled by the judge. All interested parties must be given a fair chance to purchase the property.

The statement is a result of the ‘Didam judgment’ that the Supreme Court pointed out in November 2021. In a case brought by a supermarket entrepreneur, angry that the old town hall in Didam had been sold to the competitor, the highest court ruled that the government had to follow competition rules when selling land and buildings.

In other words: governments must offer all potential buyers an equal chance to compete. The choice of a buyer must be made according to “objective, verifiable and reasonable criteria”, in the public eye. This should prevent a private handshake with real estate developers. Deviation from these rules is only allowed if there is one serious candidate. In a handful of municipalities, judges have since reversed land sales that were concluded after the judgment.

But never before has a purchase agreement from before the Didam judgment been swept aside with retroactive effect. Since the judgment in Rhenen, lawyers have expressed their surprise and fear online, because the judgment can have major consequences.

Legal Zeitgeist

But how ‘unfair’ was the sale? Could Rhenen ‘could also have thought of’ that the principle of equality should be applied, as the judge concluded? Lawyers Alrik Bijkerk and Anne Kusters, specialized in the Didam judgment and not involved in the Rhenen case, doubt that. They point to the legal zeitgeist at the time of the sale, a year before the judgment: in the Didam case, both the Court of Appeal and the Advocate General at the Supreme Court, who advises the highest judges, had correctly concluded that public equality was not an obligation in real estate sales.

The municipality said it had done a “market survey”, but no one would have been really interested in the old barracks. Van der Poel of the citizens’ initiative: “We were told that we were the only ones with a concrete plan.” According to real estate entrepreneur Van der Glind, however, it was “a few calls to some local entrepreneurs”. According to the judge, a real exploration should have been public and transparent.

The question is also to what extent equality, or the lack of it, actually matters retroactively. “There is also the principle of trust,” says Van der Poel. “You have to be able to trust that an agreement with the government is really an agreement.” In other cases, judges weighed this heavily. In Rhenen, according to the judge, that did not matter: according to him, the constitutionally established equality always weighs more.

The lack of clarity is a direct result of the judgment itself. It is not clear from the judgment of the Supreme Court whether the rules should also be applied retroactively, says Bijkerk. His colleague Kusters adds: “Didam provides clarity about the future, not about the past.” Lawyers therefore follow Didam cases with above-average interest, they say: what precedent is being created? And what are the consequences for the sale of government real estate to private individuals and developers?

What if a higher court upholds the ruling on the Rhenen sale? Then, says lawyer Sammie Elbertsen, who specializes in ‘Didam’: “you open a legal Pandora’s box”. Lawyer Kusters says: “You then put a huge bomb under a lot of agreements.”

Any sale of government land and buildings where competition law has not been followed can then be declared null and void, says her colleague Bijkerk. “The legal basis under sales from years ago then expires.”

Matter of principle

We do not know, says Van der Poel a week after the verdict, “what happens to us”. On a Wednesday morning, five freelancers are working on the ground floor of the building, the user agreement with the municipality still applies. She shows the building: it is not dilapidated, they can already organize some small activities there. But the large-scale renovation that is presented on drawings on the window has been postponed for the time being – if it comes at all.

It is unclear to her what Van der Glind wants with the building. The real estate entrepreneur himself: “There has to be something socio-cultural or I don’t know what. Maybe a city hotel.”

Van der Glind does not expect an appeal, but he is prepared to proceed to the Supreme Court. “I will now continue, it is slowly becoming a matter of principle.” He was not concerned with the possible national consequences of his ruling. Asked to do so, he says: “As a real estate dealer, I can always sell a property to Pietje or Jantje, but a government body must be transparent. It is good if handclapping is reversed.”

The municipality declined to comment.