A legal dispute between two supermarkets in Didam, Gelderland, has caused a small revolution in the practice of land sales by municipalities. Due to a judgment of the Supreme Court, municipalities are no longer allowed to sell ‘one-to-one’ land and real estate to project developers. From now on, the municipality must map out whether there are other interested buyers and enable them to bid. Compensation may also be claimed retroactively by injured project developers.
The Supreme Court reviewed a decision by the court in Den Bosch about a dispute between a supermarket owner and the municipality of Montferland, which includes Didam. The municipality wanted to sell an extension of the old town hall to a project developer who wanted to establish a Coop supermarket there. The local Aldi was therefore able to move to the center, in the vacant Coop building. When the franchisee of the neighboring Albert Heijn got wind of this, he initiated summary proceedings. After all, it had never been announced that the extension in the center would be sold, and he wanted to move there too.
According to tender lawyer Anke Stellingwerff Beintema, partner at Maasdam Broers Fischer advocaten, the initial ‘private’ sale of the municipality of Montferland to the project developer was in itself a common practice. “If the municipality sells a ‘pure’ land position or real estate – that is, without attaching a specific contract to the buyer – then it does not have to be put out to public tender according to the Public Procurement Act. That seemed to be the case here too.” An example of an assignment is when a municipality sells land to a project developer who then has to build public infrastructure on it. Stellingwerff Beintema, who teaches procurement law at the Free University, also used the Montferland case in her lectures. “It is a very interesting case study of how tendering works.”
This judgment counters favoritism and arbitrariness
Jan Hebly professor of construction and procurement law
The judgment of the judge in preliminary relief proceedings was in favor of the municipality of Montferland and Aldi, after which the Albert Heijn franchisee decided to appeal to the court in Den Bosch. But that judge also decided that there was nothing wrong with the sale from a legal point of view.
Although the private sale between Montferland and the project developer is common in daily practice, according to Stellingwerff Beintema, she still finds it remarkable from a legal point of view. She refers to an older decision by the Council of State, which concerned a ‘scarce license’ – in this case for a casino in Vlaardingen and canal boats in Amsterdam. At first sight something very different from real estate and land, but according to the lawyer it is indeed relevant. “What the municipality sells is scarce. You cannot give everyone a tour boat license – after all, there is only limited space for it in the canals. So you must be transparent as a municipality and let all interested parties know that they can apply and what they must comply with. In my view, the same applies to real estate and land, which is also scarce.”
In other words: the Council of State required the municipalities of Amsterdam and Vlaardingen to adhere to the principles of good governance. Everyone is equal before the law, so should have an equal opportunity to buy from the council.
The Albert Heijn entrepreneur from Didam appealed to the Supreme Court against the judgment of the Court of Appeal. The Supreme Court tests the reasoning of the Court of Appeal against the law, and checks whether the law has been interpreted correctly. The judgment of the Supreme Court was in line with what the Council of State said earlier about the provision of scarce rights: according to general principles of good governance, the municipality must make it clear that it wants to sell land or real estate.
It may have been a supermarket riot in Didam in Gelderland, but procurement lawyers throughout the Netherlands were eagerly awaiting the verdict of the highest civil court. This has consequences for all sales by governments to market parties. Attorney Stefan Dalmolen of Delta Advocaten represents a client who has a direct interest in the judgment. “With this client, the most beautiful lot in a business park was missed because the municipality in question sold it privately to another party. While people knew that there were more interested people.”
Big implications
The precise implications of the judgment are still uncertain. The question soon arises as to whether the government targets for housing (1 million extra homes in 2030) are at stake as a result. According to lawyer Anke Stellingwerff Beintema, projects may be delayed due to the judgment. “Because first a public procedure has to be followed, and it is no longer possible to award one-to-one. And that is regularly considered the most desirable scenario,” said the lawyer.
Professor of construction and procurement law Jan Hebly of Leiden University speaks of an “important decision”, but thinks that delays will not be too bad. “Launching a competition for the highest bid does not have to be more time-consuming than a private award. The land sales department of the municipality is mainly working differently: no longer approaching project developers themselves, but informing them through an advertisement in a local or national newspaper.”
An additional advantage, according to Hebly, is that land and real estate sales become more transparent. “It goes against favoritism and arbitrariness. Gone are the days when a friend of the alderman can get a piece of land for a reasonable price.” The judgment may also mean that a considerable number of compensation cases are coming from parties who missed out on a plot or building due to a private award. „The point of discussion is always whether this [het arrest van de Hoge Raad] has been valid from the start,” says Professor Hebly. “In current cases, I can imagine that this ruling will certainly play a role.”
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