Hotel development

Building and renovating hotels

When it comes to building a new hotel or renovating an existing one, developers and prospective developers and hoteliers need to keep a number of issues in mind.

Some of these will be addressed in the following, with specific attention to those most critical for preventing the construction or renovation of the hotel leading to practical and/or legal problems.

Arrangements with building owner

Firstly, the developer or hotelier, if the building is leased, must make arrangements with the building owner prior to the start of construction or renovation. A number of aspects must be covered here, including the rent after completion of the construction/renovation, the period of the lease, the level of finishing, the party ordering the works and which will bear the expense (and risk), insurance issues and, for certain cases, temporary rent reduction during the renovation.

In cases of subletting/sub tenancy, also make sure that the building owner is kept informed of the renovation, and not just the tenant/sublessee. In cases in which the building owner is participating in the investment, arrangements must be made on the payment period for the invoices if the lessee pays these in advance.

New hotel

In cases involving the building of an entirely new hotel, the most important thing is to make sure whether the desired hotel can be built under the operative zoning plan. Is the property zoned for hotel use? If not, a zoning plan exemption must first be obtained through either an area permit or a change in the zoning plan. In such cases it is important for the hotelier/developer to be aware that such procedures can take a long time (from six months in the best case to over 18 in the worst). Even after obtaining the exemption, another factor that can significantly impede construction is that once granted, stakeholders such as local residents still have a number of legal means available to oppose an area permit or change of zoning plan. This must be kept in mind during the negotiations. As should be clear, conflicting interests can be in play here. On the one hand, the property owner wants to get the property leased quickly, but on the other, leasing the property to a hotelier can be a very interesting prospect. As a property owner, how much time do you give the hotelier to obtain the required planning permissions? In practice, issues like this come up regularly enough that it is worth considering incorporating conditions subsequent or conditions precedent into the agreement to govern them.

Existing hotel

If a running lease is already in place, then the hotelier is advised to keep tabs on the obligations under the lease very closely. Renovating any property, including a hotel, generally requires the written permission of the lessor, while the costs must generally be borne by the lessee. A lease will also often state that at the end of the lease any renovations must be undone and the property must be returned in the state in which it was found at the time the lease was signed. As a hotelier, if you want to renovate you should make additional or more specific arrangements on the renovations. One thing that you can try to stipulate is a suspension of the rent during the period of renovation. Also agree that at the end of the lease, the lessee will be paid compensation by the lessor for the renovations. Make sure that the lessor is aware of all plans, and have the plans initialled, to avoid a situation in which after the fact the lessor takes the position that it was informed of the renovations, but not of the extent or drastic nature of the renovations as carried out.

Fire safety

Another issue to be aware of is that good arrangements must be made with the property owner on fire safety and the question of who will hold or apply for the required use permit. If problems relating to this use permit arise, who is responsible? This question is particularly relevant in regard to issues relating to fire safety systems, and these generally involve very high costs. In some cases, solutions as referred to in the law as "equivalent and cost-saving" may be adequate. Our firm has extensive experience in this area.

Zoning plan

A property must be zoned appropriately under the operative zoning plan in order to be outfitted and operated as a hotel. In the municipality of Amsterdam, if you intend to operate an independent bar/restaurant (also open to non-hotel guests), you need both a hotel permit and a restaurant/café permit. The exact policy varies by municipality. Consequently, is a good idea to study the exact prescriptions and definitions of the operative zoning plan. If the property intended for use as a hotel does not yet have a zoning permit as a hotel, planning permission must first be obtained from the municipality. Meester Attorneys is an ideal partner for supporting the entrepreneur and the municipality in accelerating the decision-making process, and if planning procedures are initiated, it may be a good idea to actively involve local parties in the planning at an early stage in order to alleviate fears and concerns. Doing so can also prevent later objection procedures initiated by local residents.

The zoning plan also indicates the construction requirements the building must meet in terms of maximum gutter height, ridge height, façade width, etc. It is especially important in the case of renovation to consider whether the construction provisions of the zoning plan will still be met after the renovation. Here again, exemptions are often a possibility, but one must consider that these can require a good deal of time to obtain.

Expert assistance

For any renovation plans, it is always advisable to engage expert assistance. Not every municipality has sufficient expertise in evaluating building plans for hotels; in some cases, they are not sufficiently familiar with the hotel star classification system, for example, or the required floor space per hotel room. Municipal officials can also make procedural mistakes in any number of areas, like procedures on making the documents available for review, or errors in building plans in regard to fire safety due to lack of expertise in this area. Expert supervision can also give the municipality additional certainty in regard to the acquisition of the required permits (area permit for construction, area permit for fire safety) and zoning plan exemptions (if required). Although even the municipality can never provide 100% certainty on whether any such permits will hold up against potential legal proceedings by third parties, there is a great deal of work that can be done in the preliminary phase to avoid errors or omissions in the decision-making. In addition, for a change in zoning plan many municipalities require a hotelier to sign a "planning damages agreement" to cover the possibility of local residents claiming damages due to the coming of the hotel. Although once signed it is difficult to get out of such a planning damages agreement completely, it can be formulated to a significant degree in the hotelier's favour.

Permits

Along with planning permission and building in accordance with the construction provisions of the zoning plan, there are a number of other aspects requiring permits.

Firstly, the hotel must have a use permit under the Occupancy Decree. To obtain this permit, the hotel must be in compliance with all fire safety requirements as set out in the Buildings Decree 2012 and the Occupancy Decree. It is of crucial importance to make sure that in any construction or renovation, the hotel will continue to meet these requirements after completion; if not, it cannot be used. If the hotel is established in an old building or a listed building, it can be very difficult to comply with fire safety requirements, particularly because strictly speaking, any renovations are subject to the same requirements as new construction (rather than existing construction) as set out in the Buildings Decree 2012. Exemptions are possible, however, so that in such cases a renovation could be classified as an existing building, or an "equivalent solution" could be created for certain fire safety requirements. Of course, as with many things, here an ounce of prevention is worth a pound of cure, so it is very important to take a good look prior to the construction or renovation to consider whether all fire safety requirements can be met, or whether an exemption or equivalent solution is possible.

The fire safety requirements also dictate the maximum number of people who can stay in a hotel, which is of course a significant aspect of the future operations.

Along with the use permit, if alcohol is to be served the hotel must also have a license under the Licensing and Catering Act. To obtain this license the hotel bar must be in compliance with the layout requirements under both the Licensing and Catering Act and the Layout Requirements (Licensing and Catering Act) Decree. These include that the space must be an enclosed area with a minimum floorspace of 35m², with a minimum ceiling height of 2.4m (for existing buildings) or 2.6m (for new buildings). There are also requirements on the number and location of toilet facilities, and there must be an adequate mechanical ventilation system. If these requirements are not met, the license will not be granted. These layout requirements must be addressed prior to the building/renovation.

If the building is a listed building, then an area permit for the listed building must also be obtained. The considerations for such a permit are by no means always cut and dried. In many cases, the only indications of whether such a permit will or will not be granted will be found in the description of the object given upon its designation as a listed building. Consequently, it is often worth consulting the listed buildings committee or buildings aesthetics committee to avoid making significant investments in a renovation that will ultimately be blocked due to the listed status of the building.

It should be noted here that the required permits, almost all of which are currently incorporated into the area permit, may in some cases be applied for in phases or by means of preliminary consultation with the municipality. Applying for the area permit tactically can prevent some problems or at least prevent unnecessary investments. This is another area where expert supervision can certainly be very useful.

The reasonable requirements of aesthetics that a new building or renovation must meet are also a point of concern. Whether the proposed construction/renovation meets local aesthetics requirements as set out in the municipal aesthetics memorandum must be reviewed. One subject that merits mention here is wall advertising. Naturally, a hotelier wants to bring his or her hotel to the attention of passersby as much as possible, but it is entirely possible that any such indication would be qualified as wall advertising and restricted under the municipal aesthetics memorandum. Because most wall advertising is subject to a permit, this must be considered carefully and ahead of time.

Another relevant point is the noise requirements to which the hotel is subject. Although with very few exceptions, hotel rooms are not qualified as a measuring point within the definition of the Noise Abatement Act and the Activities Decree derived from it, the hotelier is of course expected to examine on the one hand whether rooms are noise proof to a reasonable degree so that guests are not kept awake at night by other guests, and on the other (certainly if the hotel also hosts conferences, weddings or other types of events) whether spaces in which group activities are to be held can accommodate a sufficiently high noise level as required for such activities without disturbing hotel guests in the rooms. This, too, must be taken into account at an appropriate stage of the building/renovation process.

Finally, provisions of environmental law must be kept in mind in regard to certain aspects such as noise production of equipment like air conditioning or ventilation conduits. These must not only be installed in accordance with the building requirements of the Buildings Decree 2003 (2m from the property line), but meet statutory requirements in regard to noise, vibrations and odour. Here again, prevention is better than cure.

Role of the architect

Architecturally, there are many aspects that must be taken into account in the construction or renovation of a hotel. As a hotelier, you may face the question of which parties to engage in the process. Do you keep everything in-house as much as possible or do you engage an expert for aspects such as project management and contact with the municipality?

There can be a separate role for the architect here. Although it may be counterintuitive, the architect is not necessarily the best party to submit the permit application. Of course one can expect the architect to be sufficiently on top of building requirements under the zoning plan, Buildings Decree 2003, Use Decree, etc., but not all architects have fully appreciated that there are further layout requirements under more specific legislation, such as the Layout Requirements (Licensing and Catering Act) Decree and the reasonable requirements of aesthetics as applicable to aspects such as wall advertising.

In addition, it is often advisable to be tactical in applying for the required permits. If the building is a listed building, for example, one might wish to first obtain as much certainty as possible on the permission for modifying the listed building before applying for other permits. It may also be wise to first obtain certainty on the municipality's planning cooperation (if required) before actually applying for an area permit for the construction or renovation.

Architects do not always go about this in a sufficiently strategic manner.

The relationship with the contractor also merits attention. The problems that can arise are myriad; delays and high financial losses from lost hotel income, nuisance prompting guests to demand their money back or the hotel's decision to extend guests a discount due to early morning work, change orders, insurance, etc. For these and other reasons, it is advisable to stipulate a final, substantial, payment instalment as an incentive for completion of the work. Also make provisions in the event that the contractor goes bankrupt; for example, make sure that you are not obliged to do business with a particular contractor, but do stipulate that the contract with the contractor can be cancelled. Make sure there is adequate contractual security. A hotelier can opt to stipulate that the UAV (Uniform Administrative Conditions for the Execution of Works) applies. As a hotelier, if you do not wish to agree on an arbitration clause, then agree with the contractor that the district court is competent to adjudicate disputes.

Also take good notes of every construction meeting and of all arrangements that result from these meetings, in order to avoid any future problems. It may also be very worthwhile to stipulate guarantees with the contractor pertaining to noise requirements and noise standards that can be achieved in the public areas in relation to the hotel rooms. Also make arrangements on the level of outfitting. All levels of finishing are not created equal. Often, the final finishing of the rooms, which is of the greatest importance to the hotelier, is very expensive for the contractor. Further, the contractor and architect must take the neighbours into account. The first consideration is the protection offered to the neighbours under the Dutch Civil Code. Article 50, Book 5, for example, states that no windows or other openings may be built within two metres of the property boundary without the permission of the neighbours. Another thing to check is whether there are any jointly owned (common) construction walls shared with the neighbours; if so, the neighbours must be consulted. And, last but not least, of course efforts must be made to maintain good contacts with them in general in relation to the impending construction/renovation, so they are kept sufficiently informed of the nuisance they can expect. Take consideration of the neighbours as much as possible, and try to keep the nuisance to a minimum to avoid unnecessary conflicts.

Project supervision

Experience has shown us that, with hotel development, there is a need for a more wide-ranging form of support than exclusively legal support. Many of the (legal) problems our office has encountered, particularly in the concluding phases of (hotel) development, could in many cases have been brought under control in an earlier phase. Depending on the wishes of the developer/investor, we use a variable team of experts with knowledge and expertise concerning process supervision, constructional aspects, assessment of plans, specifications, and the like. Such a combination of knowledge and expertise can in turn be effectively deployed in drawing up (development) agreements and other documents. The advantage of working this way is that constructional and legal aspects requiring special attention are recognised relatively early in the trajectory, so that the requisite action can be taken before there is a problem, preventing unnecessary delays. Some practical examples:

• Working in an early phase toward attaining a shorter permit trajectory with the municipality involved can result in a substantially shorter development period. We have seen how, through our efforts, development time could be reduced by a minimum of 6 months.
• Early recognition of problems pertaining to, e.g., a parking norm, hotel reclassification, specific aspects of fire safety, and the like.
• Attending early to the requisite permits for the (future) independent running of a restaurant and hall rental, will ensure that the use of such spaces is not limited to just hotel guests.
• By already getting involved in the design phase, and working closely with the developer’s design team, it is possible to prevent a lack of correspondence between specifications and technical drawings in the tendering phase. This saves much time after the tendering phase and makes possible a more smoothly running process.

 

Noise standards

The noise standards in the Netherlands are regulated by the Environmental Management Act and the activities decree derived from it. This legislation guarantees a maximum noise level for buildings (and in particular, residences) that can be observable inside and at the building exterior. Hotel rooms are generally not seen as measurement points for the purposes of this legislation, because short-term stays are not qualified as residence. Note that this could be different if a hotel room is occupied by a single person for a prolonged period of time.

Although by and large hotel rooms will not be qualified as measurement points for the purposes of the law, as we have already pointed out, hoteliers will, of course, be very concerned that their hotel rooms are not extremely noisy and that only minimal noise will be audible or noticeable in any hotel room. If the choice is made to voluntarily follow the standards from the activities decree, it in any case provides an objective standard available to evaluate whether the noise level in the hotel rooms is not too high. Beyond this, the hotel itself must also not produce too much noise; this is measured based on the noise level at the exterior of neighbouring residences or (where the hotel is built in contact with neighbouring residences) the noise level inside these residences. Note that not all spaces inside the building or in adjoining residences are qualified as measurement points; this refers principally to living rooms, bedrooms and kitchens of more than 11 m².

If the hotel hosts conferences, receptions/parties, weddings or other similar activities in addition to the regular hotel activities, then the noise level these activities will produce must be investigated in advance to determine whether this is feasible. If this is not feasible in the current situation, then supplemental construction measures must be taken to insulate the areas in which such activities will take place.

Relationship with neighbours

As should be clear from the foregoing, neighbours who protest against the construction/renovation of the hotel can cause significant problems. As directly interested parties, they have many legal avenues to protest against this type of activity: based on required planning permissions, permits needed, and the enforcement of environmental standards in regard to noise and odour, to name just a few.

As such, it is extremely advisable to maintain the best possible relations with the neighbours. One way of achieving this is to involve the neighbours in the plans at an early stage. Keeping them fully informed of the intended building/renovation plans can remove a great deal of fears and concerns. Additionally, sometimes relatively small measures can go a long way towards alleviating neighbours' concerns, like scheduling of the activities, placement of equipment and/or measuring the noise level of certain activities in advance.

All in all, there are a great many issues to keep in mind in the process of building or renovating a hotel. The foregoing of course only addresses these at the most basic level, and there is a great deal more to be said and written about each of them.