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What are the rules for leasing and managing a commercial fund?

Verified 01 January 2023 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice

The leasing or self-management allows the owner of a trade fund (landlord) to grant to another trader (tenant-manager) right to use freely this fund. The tenant-manager shall operate the fund at his own risk, on payment of royalty.

Tenant-Manager

The tenant-manager must have the statustrader and registered in the RCS and the RNE no later than 15 days after the start of its activity.

As such, it must comply with accounting obligations and fill out legal conditions to carry on a commercial activity.

Warning  

Stewardship rental should not be confused with employee management. The purpose of the fund is to manage the operation of the fund, for remuneration, on behalf of and at the risk of the owner. In this context, the manager-employee does not have merchant status independent.

Lessor

If the lessor who owns the trade fund holds a commercial lease without owning the walls, he must get theaexplicit authorisation of premises owner to conclude a management lease.

On the other hand, if the lessor also owns the premises in which the fund is operated, no authorisation is required.

Please note

The lessor no longer does it by himself of acts of trade, he loses his trade status and is no longer registered in the RCS: titleContent or RNE: titleContent.

Until the publication of the management lease in a legal ad support, the owner of the fund is jointly and severally liable contracted by the tenant-manager in connection with the operation of the fund.

In other words, a creditor (a supplier, for example) may turn against both the tenant-manager and the lessor to obtain payment of an invoice.

This liability of the lessor excludes the tenant's personal or tort debts (contributions, old-age insurance, unnecessary expenses, etc.), even if they are related to the operation of the fund.

The lessor shall also be jointly and severally liable, until the contract is published, for direct taxes (income or business tax, company property tax ...) established as a result of the operation of the fund.

VAT is an indirect tax and is therefore not affected.

It is recommended to have the contract written by a professional (lawyer, notary...).

Duration

The management lease may be concluded at durationdetermined or unspecified.

Most often, the contract is concluded for 1 Year by tacit extension.

Advertising

The management lease shall be subject to a notice published in legal ad support, in 15 days following his signature.

This obligation of disclosure is also required when the contract expires.

Tenant-Manager

The tenant-manager must meet the following obligations:

  • Operate the fund according to its destination —It cannot modify or add a new activity without the agreement of the lessor.
  • Maintain fund in working order : it has to replace the end-of-life equipment, renew patents, maintain premises.
  • Pay royalty : under the terms of the contract.

The lessee must also respect the clauses that could possibly be included in the management lease:

  • Non-competition clause : it limits the manager's right of reinstatement after the end of the contract, for a given period and in a given geographical area.
  • Clause prohibiting any assignment or sublease management leasing.
  • Accounting free-to-read clause of the tenant-manager by the owner of the fund.

FYI  

One security deposit (called guarantee) can also be requested from the tenant-manager to guarantee the equipment and the payment of the fees.

Its amount is freely determined by the parties.

It shall be returned by the lessor at the end of the management lease.

Lessor

The lessor shall comply with the following obligations:

  • Issue all elements necessary for the operation of the fund : the customers, the sign and the trade name, the patents, brands and designs, if any, the licences necessary for the operation, the furniture, the stock, the equipment.
  • Guarantee peaceful exploitation of the fund : this includes warranty of hidden defects and eviction guarantee. The fund must also meet health and safety standards.

The lessor must also comply with any clauses that may be included in the management lease:

  • Non-competition clause : it prohibits the lessor during the contract from operating a competing fund in a specific geographic area.
  • Merchandise take-back clause at the end of the contract.

The tenant-manager must pay the landlord one rent called royalty.

The amount of the fee shall freely by contract and may be revised at the request of a party by registered letter.

The fee may adopt variable ::

  • Fixed sum
  • Profit Percentage
  • Percentage on turnover
  • Percentage on both earnings and turnover

Payment may be made either monthly or quarterly.

The fee shall be subject to VAT: titleContent at the normal rate of 20% for the lessor, who can pass it on to the lessee, provided it is specified in the contract.

The lessor shall declare it as operating profit in the BIC: titleContent.

For the tenant-manager, the fee is deductible income tax or business tax as a charge on its trade.

The management lease shall terminate in one of the following situations:

  • The fixed-term contract expires and is not renewed : there is no obligation on the lessor to renew the contract.
  • The contract shall be terminated unilaterally by one of the parties : a notice must then be respected, its duration is usually 3 months.
  • Tenant-manager fails to meet one of his obligations : in case of non-payment of the fee, for example.

At the end of the management lease, the landlord recovers the right to exploit the commercial fund, the current employment contracts continue.

The tenant is not entitled to no compensation, even though it has contributed by its competence to enhance the value of the fund.

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