What are the advantages and disadvantages of a shop premises with a flat above?

Justus Hayes - Research ·
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A shop premises with upper-floor apartment has both advantages and disadvantages compared to regular retail space. The biggest advantage is flexibility: you can use the upper floor as living space, storage space, or rent it out for additional income. The biggest disadvantage is the legal complexity, because different tenancy law regimes apply to the residential and commercial parts. In this article, we answer the most frequently asked questions about renting mixed-use property, so you can make a well-informed decision.

What makes a shop premises with upper-floor apartment different from regular retail space?

A shop premises with upper-floor apartment is a mixed-use property in which a commercial ground floor is combined with a residential unit on the upper floor. This fundamentally distinguishes it from regular retail space, where the entire property has a commercial designation. The combination of two functions in one building brings different legal, financial, and practical rules with it.

Regular retail space falls entirely under commercial tenancy law (Article 7:290 of the Dutch Civil Code), but in a mixed-use property, the rules of residential tenancy law apply to the residential part. This has direct consequences for rental prices, notice periods, and the rights of tenant and landlord. Landlords of mixed-use property must also take into account a different valuation method, since the two components each have their own valuation approach.

In practical terms, such properties are often found in historic city centres, such as in Utrecht, Haarlem, or Groningen, where the built environment has traditionally consisted of combined residential and retail properties. They are popular with independent entrepreneurs who want to combine a boutique, studio, or service business with a living space or storage area. For those looking to rent retail space, it is important to understand this distinction clearly before scheduling a viewing.

What are the advantages of renting a shop premises with upper-floor apartment?

The advantages of a shop premises with upper-floor apartment are primarily practical and financial in nature. You have access to additional space that you can adapt to your business needs, you can combine living costs with business costs, and you have the option to rent out the upper apartment as an additional source of income. For starting entrepreneurs, this can significantly lower the threshold to establishing a physical point of sale.

  • Cost savings through combination: If you live in the upper apartment yourself, housing costs and business costs are combined in a single rental contract. This can be more advantageous than entering into two separate lease agreements.
  • Extra storage capacity: The upper floor is ideally suited as storage space, workshop, or office, without needing to rent additional commercial space separately.
  • Rental potential: If you do not use the upper apartment yourself, you can rent it out. This generates rental income that reduces the net rent burden of your shop.
  • On-site presence: Living above your shop means you can be on the spot quickly in the event of incidents, deliveries, or unexpected busy periods.
  • Distinctive character: Combined residential and retail properties in historic city centres often have an authentic appearance that suits a distinctive retail concept.

For entrepreneurs making the move from online to offline, a mixed-use property offers a soft landing: the total monthly costs are often more manageable than with a combination of separate lease agreements.

What are the disadvantages and risks of a mixed-use retail property?

The disadvantages of a shop premises with upper-floor apartment are primarily legal and operational in nature. The combination of two tenancy law regimes makes the contract structure more complex, and the upper apartment can limit the tenant’s negotiating position. Moreover, mixed-use properties are not always well suited to retail formats that require a large floor area or a specific shop layout.

  • Complex tenancy law situation: The residential part falls under tenant protection, meaning the landlord finds it more difficult to terminate this part. This may sound like an advantage, but it can also lead to complicated contract negotiations in which the landlord is reluctant.
  • Limited scalability: Those who later want to expand to a larger retail space may find themselves tied to a residential contract that is not easy to terminate.
  • Higher maintenance costs: Mixed-use properties often have an older structural condition. Maintenance obligations for the residential part may differ from what you are used to as a retail tenant.
  • Unclear service charges: With mixed-use property, the allocation of service charges and utilities between the shop and the residence is not always transparently recorded.
  • Limited availability in prime locations: On the best shopping streets in cities such as Amsterdam, Rotterdam, or The Hague, combined residential and retail properties are rare. Those looking for a prime location will find that the regular supply of retail space is larger and more accessible.

It is advisable to always consult a specialised retail agent who can assess the lease terms when dealing with a mixed-use property. KroesePaternotte holds rental contract data going back to 1984, enabling them to quickly assess whether the asking rent and contract terms are in line with the market.

Which lease agreement applies to a shop premises with upper-floor apartment?

In principle, two separate tenancy law regimes apply simultaneously to a shop premises with upper-floor apartment. The retail part falls under commercial tenancy law (Article 7:290 of the Dutch Civil Code), while the residential part falls under residential tenancy law. In practice, these are often combined in a single mixed-use lease agreement, but the legal protection per part remains different.

For the retail part, the standard lease period of two times five years applies, with a statutory notice period of one year. The rent can be revised at the end of a lease period on the basis of market-conform rental prices. For the residential part, the rules of social or private-sector tenancy law apply, depending on the points assessment.

In practice, landlords and tenants make agreements about how the rent is split between the commercial and residential parts. This is relevant for tax purposes and for the question of which part of the rent is subject to rent revision. A poorly drafted contract can lead to disputes over termination, rent increases, or the use of the space. Always have a mixed-use lease agreement reviewed by a specialist before signing. Through direct contact with a retail specialist, you can quickly gain clarity about what a specific contract contains and what is customary in the market.

When is a shop premises with upper-floor apartment a good choice?

A shop premises with upper-floor apartment is a good choice when, as an entrepreneur, you benefit from the extra space, the combination of living and working suits your situation, and you are willing to accept the legal complexity. It is less suitable if you are looking for a scalable retail location on a busy shopping street.

Concrete situations in which a mixed-use property works well:

  • You are opening a boutique, studio, or small-scale service business and want to live above your premises to keep costs under control.
  • You need extra storage space or a workspace that is directly connected to your shop.
  • You want to rent out the upper apartment and use the rental income to reduce your retail costs.
  • You work in a city or neighbourhood where combined residential and retail properties are the norm and actually reinforce the character of the location.

If your primary goal is to find the best retail location for maximum foot traffic and visibility, then regular retail space is almost always the better choice. In prime locations in Dutch cities, the supply of dedicated retail space is larger, more accessible, and more professionally managed.

Are you unsure which type of property best suits your concept? View the current listings of KroesePaternotte or get in touch for a personal consultation. As a specialised retail agent, KroesePaternotte has access to both regular retail space and mixed-use properties, including locations that never appear on public portals. This ensures that your choice is based on a complete market overview and not on what happens to be available online.

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