Extension or renewal of the commercial lease
Verified 01 January 2023 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice
The commercial lease does not take automatically termination at the end of the contract. At the end of the lease, the lessor (also known as the landlord) notifies a leave with or without a renewal offer, or the lessee gives leave or makes an application to renew the lease. When the lessee and the lessor do not come forward, the lease is extended then tacitly for an indefinite period. We're talking about tacit extensionn.
Where neither party (i.e. the owner nil the tenant) is not apparent, the commercial lease is tacitly extended for an indefinite period. There's no no new commercial lease formation.
Therefore, the parties continue to apply the provisions of the lease agreement. For example: the tenant must continue to pay rent and expenses. The lessor must also comply with all obligations contained in the lease. The rent on the commercial lease remains the same during the tacit renewal. However, a triennial rent review may be considered.
To end the tacit extension, a leave of absence must be sent (by the landlord or tenant) by the act of a commissioner of justice (formerly the act of a bailiff) at any time but at least 6 months in advance and for the last day of the calendar quarter.
For example, if the owner sends a leave of absence on April 4, 2021, the effect of this leave is deferred until December 31: six-month period April 4 to October 4 plus the time to reach the end of the calendar quarter.
In the case of an extension unspoken from the lease, the lessee no longer holds the right to the lease, which may prevent him from selling his business. It will be up to the purchaser of the land to negotiate with the owner of the premises the renewal of the lease or the conclusion of a new lease.
If the lease duration exceeds 12 years, the owner may remove the ceiling the rent (i.e. the rent will be set at the rental value)
It is recommended to the tenant to come forward before the lease is not 12 years old to prevent the rent from being removed from the ceiling (i.e. rental value).
The parties may decide to renew the commercial lease agreement. It is then of a new contract to be applied after the previous one has expired and may contain new conditions.
At the end of the term of the lease (minimum 9 years), the tenant has a right to renew his commercial lease.
In order to benefit from this right to renewal, the tenant must comply with the following conditions:
- Obligation for the tenant to be proprietor of the goodwill
- Obligation for tenant dto be registered the Trade and business Register (RCS) for a trader or the National company Register (RNE) for a craftsman
- Effective use of goodwill on the premises during the 3 years preceding the date of expiry of the lease or of its renewal
Where a transfer of the right to the lease occurs in the last 3 years of the commercial lease, the new purchaser may apply for the renewal of his lease only if he has himself operated the land for at least three years even if he carries on the same activity as the transferor. In order to avoid being deprived of the right to renewal on the grounds of non-operation, the transferee must negotiate with the owner.
At the end of the contractual term, the lease does not automatically renew, a document (leave or renewal application) will be required for the lease to end, and the commercial lease renewal will be implemented.
Lease holiday given by lessor (or owner)
The lessor may give leave with or without a lease renewal offer.
Leave is granted :
- by act of Commissioner of Justice (formerly act of bailiff)
- 6 months in advance and for the last day of the calendar quarter.
This leave must specify the following:
- Reasons for giving
- Indication that the tenant who wishes to contest the leave or to seek payment of an eviction fee must bring the matter before the court before the expiry of a period of two years.
Lease Renewal Offer Leave
The landlord giving the leave with lease renewal offer allows commercial lease renewal.
This leave is usually granted for an increase rent. In the leave, the landlord must disclose the rent he proposes.
The tenant then has 3 choices:
- Accept the renewal and the new rent, expressly by giving his agreement by act of the Commissioner of Justice (formerly of bailiff) or by registered letter with acknowledgement of receipt. The tenant can also give his agreement tacitly, for example by spontaneously paying the rent increase proposed by the landlord or
- Accept renewal, but rrefuse the new rent. In this case, the landlord and the tenant can decide amicably the amount of the rent. However, if there is no amicable agreement, either party may refer the matter to the departmental conciliation commission (or to the court if no conciliation is possible) or
- Decline the renewal offer. In this case, the commercial lease ends without the tenant being able to obtain a eviction allowance.
Leave without a lease renewal offer
In this case, the lessor must justify the legitimate reasons for refusing the renewal. For example: seizure of the premises for reasons of unsanitary conditions, the fact that the tenant does not comply with the obligations of the lease (non-payment of charges, failure to repair the premises provided for in the lease, failure to use the land).
The lessor may also justify the fact that the goodwill does not comply with the rules applicable to commercial leases.
If the reasons given are not justified, the lessor pays the lessee a eviction allowance for non-renewal of the commercial lease.
Concerning living quarters rented incidentally to commercial premises, the lessor may refuse to renew the lease exclusively on the part concerning accommodation to inhabit his premises himself or to have them inhabited by his spouse, his ascendants, or his descendants.
This right to take back is only possible ifif the beneficiary of the right of take-back does not have a homen correspondent to his normal needs and those of his family members habitually living or domiciled with him.
The right to take back may not be exercised if:
- Deprivation of use of the dwelling-rooms causes the tenant serious disruption to the exploitation of the land or
- Whether the commercial premises and the accommodation spaces form an indivisible whole.
Application for renewal of the commercial lease by the tenant
The application for renewal of the commercial lease must be sent by the tenant to the owner of the premises within 6 months before the expiry of the lease.
- Be sent by registered letter with AR or by act of Commissioner of Justice (formerly act of bailiff)and
- Comprise the mention listed in Article L. 145-10, paragraph 4, of the French Commercial Code : "within 3 months of notification of the application for renewal, the lessor must, by a bailiff's act, inform the applicant if he refuses the renewal, giving the reasons for this refusal. If the lessor has not made known its intentions within that period, it shall be deemed to have accepted the principle of renewing the previous lease."
Lessor agrees to renewal of commercial lease
The lessor must make known its decision within three months. If no reply is received, the lessor shall be deemed to have accepted the renewal.
The lessor is not obliged to formally accept (in writing) the renewal of the commercial lease. However, the lessor who agrees with the renewal but wants to get a rent increase must make the request by act of commissioner of justice (formerly a bailiff).
Lessor refuses renewal of commercial lease
The lessor may deny commercial lease renewall respecting all of the following:
- By act of Commissioner of Justice (formerly act of bailiff)
- Specify the reasons for the refusal (serious and legitimate grounds as non-payment of charges or failure to repair the premises provided for in the lease or failure to operate the business)
- Indicate that the tenant who wishes to challenge the refusal of renewal, or request payment of an eviction allowance, must bring the matter before the court before the expiry of a period of 2 years from the date on which he is aware of the refusal of renewal.
Concerning accommodation spaces commercial premises accessories, the lessor may refuse to renew the lease. Refusal of renewal may be justified because the lessor is resident there himself or has his relatives reside there. For example, his spouse, his ascendants, his descendants. This is on condition that they do not have a dwelling corresponding to their normal needs.
In case of disagreement on the application of the rules of the rent ceiling of the lease, and after failure of an amicable solution, it is possible to seize the departmental conciliation commission commercial leases, usually located near the prefecture.
If the case is not resolved before the commission, it may be referred to the President of the Judicial Tribunal, who shall decide as rent judge.
In order to bring an action before the commercial rent judge, the party who disputes the setting of the rent must file his memoir at the registry of the competent court. The Registry shall indicate the date on which the other party will be assigned.
Consequently, the judge is seised by the handing over of a copy of the summons to the Registry.
The memory must contain certain information. For example, the identity of the parties, a copy of the commercial lease, the identification of the leased premises, a copy of the leave with offer of renewal.
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