Today (November 15, 2024), the Supreme Court ruled on Didam II. It looks good for municipalities. We are therefore providing you with an update. Nuances will follow later.
Didam I: Background
The Municipality (Montferland) negotiated exclusively with developer ‘Groenstaete’ (with partners COOP and Aldi) about the development of an area and the sale of a location for a supermarket. This resulted in a purchase and cooperation agreement with Groenstaete.
Competitor developer ‘Didam Have’ (with partner Albert Heijn) also wanted to conclude such an agreement. Didam Have objected to its exclusion. In 2021 (Didam I), the Supreme Court ruled that the law requires public authorities to issue a tender when selling real estate (3:14BW jo. ABBB/formal principle of equality).
In April 2023, in view of Didam I, the Court ruled that the Municipality should have organized a tender. According to the Court, Groenstaete was not the only party eligible for the purchase and cooperation agreement, despite the fact that it had a broader ownership position in the project area than the supermarket location and despite the fact that Groenstaete had contacts with COOP and Aldi. The Court annulled the agreement(s). The Court further ruled that the property may only be sold after a tender.
The Municipality and Groenstaete then appealed to the Supreme Court (Didam II). They believe that an exception to the Didam rule applies and that the annulment is not possible.
The questions to the Supreme Court in Didam II
- When is a government obliged to organize a tender when selling real estate and what are the exceptions?
In May 2024, the Advocate General concluded that the Court of Cassation should have examined more closely whether an exception applied after Didam I. According to the law, a zoning plan is established on the basis of the criterion of good spatial planning. Providing room for competition is not part of this legal procedure. In principle, the application of the criterion of good spatial planning can be used to fully justify a difference in treatment of landowners. According to the AG, Coop’s ‘controlled land position’ as described by Groenstaete can also justify the municipality’s decision not to issue a tender.
- What are the consequences if the municipality fails to comply with its obligation?
According to the AG, if the municipality fails to comply with its tender obligation, this constitutes an unlawful act, resulting in compensation (loss of opportunity). In his opinion, there are insufficient grounds for nullity and voidability.
Supreme Court in Didam II
- When is a government required to organize a tender when selling real estate, and what are the exceptions?
The Supreme Court does not provide an exposé on the specific content of possible exceptions, nor does it say that an exception applied in the Didam case. However, the Supreme Court’s approach does not appear to be restrictive or strict. The Supreme Court confirms the scope available to municipalities to adopt development plans and spatial plans. The Didam rules do not affect that right in any way. That is the starting point.
Nevertheless, if those plans lead to the intention to sell immovable property, the Didam rules must be applied. This means that, prior to the sale, the municipality must analyze whether it is established in advance or can reasonably be assumed that, on the basis of objective, verifiable, and reasonable criteria, only one serious candidate is eligible. If not, a tender is necessary. If so, the municipality must justify in advance in a publication why, on the basis of such criteria, it can be assumed that there is only one serious candidate, so that third parties can challenge this (in court).
Even if the municipality has developed plans that include objective business conditions that, according to the municipality, only one party can meet, the municipality must justify this in an announcement.
The Didam rules do not (therefore) require an auction or sale to the highest bidder. The candidates to whom a property may be sold depend on the objective, verifiable, and reasonable criteria to be set by the municipality, taking into account its policy discretion. The Didam rules offer scope to include these criteria in policy rules.
- What are the consequences if the municipality fails to comply with its obligation?
If the municipality fails to comply with its tender obligation, this does indeed constitute an unlawful act, resulting in compensation. There are insufficient grounds for nullity and voidability, as there is no conflict with a mandatory legal provision and the Didam rules are not intended to affect the validity of the agreement concluded in contravention thereof by means of nullity or voidability.
If you have any questions on this subject, please contact Mr. P. Courtens and/or Mr. H.C. Lejeune, who can be reached on 043 3216640 and are available at both locations, Maastricht and Heerlen.
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