#Commercial Lease Lawyer in France

A commercial lease (bail commercial) is one of the most strategic assets of a trading business. It determines the location, the stability of operations and, often, the value of the business (fonds de commerce). Its regime, set out in Articles L145-1 et seq. of the French Commercial Code (Code de commerce), is mandatory (ordre public) in its essentials: it protects the tenant while strictly framing the landlord’s rights. We assist traders, retail chains, investors and property owners at every stage of the life of the lease, from its conclusion to its assignment.

Who we act for

We advise tenants (independent traders, franchise networks, growing retail chains) as well as landlords (owners, property companies, investors). The issues differ: the tenant seeks certainty over its location and control over the rent; the landlord looks to profitability, the tenant’s solvency and the value of its asset. Our role is to anticipate points of friction before they turn into disputes.

A protective, mandatory status

The commercial lease regime applies to leases of premises in which a business is operated, where the tenant is registered. Its main feature is stability: the lease is concluded for a minimum term of nine years, and the tenant has a right to terminate every three years. This term, known as “3-6-9”, gives the business stability while leaving flexibility to exit.

As most of the rules are mandatory, a clause contrary to the regime is often deemed not written (réputée non écrite). Hence the importance of rigorous drafting from the outset: permitted use of the premises, allocation of charges and works, conditions of review and renewal, schedules of condition on entry and exit.

Permitted use and allocation of works

The permitted use clause defines the authorised activities: too narrow, it restricts the tenant; too broad, it worries the landlord. The allocation of works and charges, regulated by law, must appear in a precise inventory annexed to the lease. Imprecision on these points is one of the main sources of dispute during the lease.

Rent review and setting the rent

Commercial rent follows its own mechanisms: three-yearly review, sliding-scale (indexation) clause and setting of the rent of the renewed lease. The principle is the rent cap (plafonnement), subject to exceptions (a material change in the factors determining rental value, such as local commercial factors, a lease of more than nine years or one tacitly extended beyond twelve years, Article L145-34 of the Commercial Code (in French)) which may justify lifting the cap (déplafonnement). Disputes often crystallise around rental value and whether or not the cap applies.

Keeping track of indexation and review dates under the lease avoids costly catch-up payments. By way of illustration, a retail chain whose nine-year lease is coming to an end may see its rent uncapped on renewal if the commercial appeal of the area has changed significantly: anticipating this risk changes the negotiation strategy.

Renewal and the eviction indemnity

When the lease expires, the tenant has a right to renewal. The landlord may refuse, but must then, except for serious and legitimate grounds, pay an eviction indemnity (indemnité d’éviction). Article L145-14 of the Commercial Code provides that this indemnity is “equal to the loss caused by the failure to renew” and includes “in particular the market value of the business”, plus the costs of moving, relocation and transfer.

The battle is fought over the valuation method (replacement indemnity where the business is lost, transfer indemnity where the activity can be moved) and over the tenant’s right to remain in the premises until the indemnity is actually paid.

Changing the permitted use (déspécialisation)

The permitted use of the lease limits the authorised activities. To broaden it, the tenant uses a change of use (déspécialisation), either partial (related or complementary activities) or full (different activities), governed by Articles L145-47 et seq. of the Commercial Code. The procedure is formal: it requires notice to the landlord and, depending on the case, gives rise to a right to adjust the rent.

Subletting and assignment

Subletting is prohibited by default. Article L145-31 of the Commercial Code states that “unless otherwise stipulated in the lease or agreed by the landlord, any total or partial subletting is prohibited”. Where it is authorised, the landlord must be notified and invited to take part in the deed. Assignment of the lease, for its part, is often free when it accompanies the sale of the business, but may be restricted by approval clauses or clauses making the assignor a guarantor, which must be negotiated with care.

The short-term lease, a regulated alternative

Before committing to a nine-year lease, the parties may use a short-term lease that derogates from the regime (bail dérogatoire, known as a “bail de courte durée”), concluded for a limited term set by law. It makes it possible to test a location or an activity without immediately falling under the protective regime. Beware, however: if the tenant remains in the premises beyond the term without objection, the relationship turns into a full commercial lease. The line between flexibility and certainty must therefore be managed from the outset, or an unanticipated recharacterisation may follow.

Points to watch

• Check the permitted use clause before any change of activity or any subletting.
• Track review and indexation dates to avoid catch-up payments.
• Anticipate the exit scenario from signature: renewal, eviction, assignment.
• Record any agreement (works, subletting, change of use) in writing and in the legal form required.

How we assist you

• Drafting and negotiation of commercial leases, amendments and renewals.
• Notices to quit, renewal requests, assessment and challenge of the eviction indemnity.
• Rent review and lifting of the rent cap, indexation clauses.
• Change of use, subletting, assignment of the lease and of the business.
• Disputes before the commercial rent judge (juge des loyers commerciaux) and the civil courts.

Frequently asked questions

Can a French landlord refuse to renew a commercial lease without an indemnity?

Only if it can show serious and legitimate grounds or a case of refusal provided for by law. Otherwise, an eviction indemnity is due.

Can you sublet your commercial premises?

As a rule, no: you need a clause in the lease or the landlord’s agreement, and you must follow the procedure inviting the landlord to take part in the deed (Article L145-31).

How long is a commercial lease in France?

Nine years at least, with a right for the tenant to terminate every three years, subject to exceptions provided for by law (in particular the short-term bail dérogatoire).

Official sources

• Article L145-14 of the French Commercial Code, eviction indemnity: Légifrance (in French)
• Article L145-31 of the French Commercial Code, subletting: Légifrance (in French)

Every situation is different and professional ethics prohibit us from promising any outcome. To make a commercial lease, a renewal or an exit legally sound, our lawyers in commercial leases and business sales assist you, together with our corporate team.