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Commercial lease

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

A commercial lease is a contract for the rental of premises in which a commercial, industrial or craft activity is carried out. The premises must be used to operate a business. By signing a commercial lease, the tenant and landlord automatically benefit from a set of rules called the status of commercial leases.

The status of commercial leases is a set of rules that automatically applies to the commercial lease agreement.

It allows the tenant to benefit from various advantages: the right to lease renewal after 9 years, the payment of a eviction allowance in the case of non-renewal or rent review every 3 years or based on sliding scale clause.

For the commercial lease status to apply, the following 4 conditions must be met:

  • Lease Agreement
  • Concerning a building or premises for commercial, craft or industrial use
  • Operating a business in the premises
  • Registration of the lessee of the lease at the SCR: titleContent or at RNE: titleContent

The status of commercial leases applies also under conditions educational institutions, municipal services operated by the board, public companies and Epic: titleContent and certain cooperative businesses.

Lease Agreement

It is characterized by the obligation for the owner to make available to the tenant a premises for commercial use. In return, the tenant pays rent. It's a commercial lease.

To carry on a commercial or craft activity, it is possible to conclude a contract other than the commercial lease. It can be a short-term lease or a derogatory lease (or short-term lease).

FYI  

The professions cannot sign a commercial lease. Since their activity is not commercial, they must sign a business lease.

Commercial building or premises

The lease contract must relate to a ‘building’ or ‘premises’ which is a building construction of a stable and permanent character. The tenant must have the assurance of being able to remain in possession of the leased premises throughout the duration of the contract, without the owner (also called lessor) can move it as desired.

The conclusion ofa commercial lease is only possible if the room is at commercial use, i.e. used in the pursuit of a commercial, craft or industrial activity:

  • The activity commercial is defined by the performance of acts of commerce as the purchase of goods for resale. The sale of clothing, books or food products are commercial activities.
  • The activity handcrafted is an independent professional activity producing, processing, repairing or providing services. The trades of hairdresser, chocolate maker or butcher are craft activities.
  • The activity industrial is defined here as a processing activity of raw materials (e.g. wood, paper, electronics).

FYI  

A living space can be rented to a merchant provided it is converted into commercial premises. To do this, you must request an authorization for change of use from the municipality of the municipality of the place where the premises is located.

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Operation of a goodwill

The status of commercial leases applies if a goodwill is operating in the premises. The fund must be owned by a merchant or a company registered in SCR: titleContent or at RNE: titleContent.

The goodwill consists of bothtangible items (equipment and tools, goods) and of intangible items (customer, trade name, brand, lease, patents and other industrial property rights).

The existence of a clientele fund-specific is the fundamental element. The clientele is made up of people who come to the trader's premises because of his ability, his know-how and the products or goods he sells.

However, the tenant may choose to operate his business in management leasing. In this case, the lessee of the lease retains the right to the renewal of the commercial lease and the lessee-manager does not benefit from it.

The fund must be operated from effectively, that is to say, in a real, regular and consistent manner with the purpose of the lease.

To benefit from the  right to renewal of the commercial lease, the goodwill must have been effectively exploited during the 3 years preceding the date of expiry of the lease or of its extension.

Tenant Registration

The tenant must be registered to SCR: titleContent or at RNE: titleContent. However, this condition is necessary to obtain the renewal of the lease at the end of the term.

Registration in the Commercial and business Register or in the NNE shall be made by all persons exercising commercial activity.

Enrollment in the RNE, trades and crafts sector is compulsory for natural persons or businesses engaged in a craft activity and who do not employ more than 10 employees.

If more than one tenant is operating the business, each tenant must be registered with the CHN or NCBR.

There is no mandatory form for entering into a commercial lease.

The verbal lease is possible. It falls under the status of commercial leases and has a minimum duration of 9 years.

In practice, the commercial lease is established in writing provides evidence of the existence of the contract and makes it possible to clearly define the obligations of each of the parties.

The written lease shall be made out either on a medium paper or on a support electronics.

The commercial lease is necessarily written by a notary (we speak ofauthentic instrument) in the following 2 cases:

  • The lease term exceeds 12 years.
  • The lease concerns a beverage outlet, that is to say a bar, a restaurant, a supermarket, a grocery store or a wine shop.

Mandatory particulars

When the commercial lease is written, it must contain certain elements (this is what we call mandatory provisions of the commercial leases statute).

These are the following:

  • Right to lease renewal
  • Minimum lease term (9 years) and renewed lease term
  • Possibility of early lease termination by the tenant who has applied for his pension rights or invalidity pension
  • Scheme of the de-specialization to request a change of business during the lease
  • Rent Review : either three-year or based on an indexation clause
  • Amount of charges, taxes and charges
  • Regulation on security deposit : the landlord must pay the tenant interest when the security deposit exceeds 3 or 6 months of rent
  • Arrangements for the implementation of a rescission clause
  • Terms and conditions for granting leave and terminating the commercial lease
  • Terms and Conditions for Applying for a Renewal of the Lease
Freedom of the parties

Apart from the mandatory clauses and indications, the parties are free. For example, they may agree on the following:

  • Subleasing: The lessor may authorize the subleasing
  • Rent fixing: the parties shall jointly fix the initial rent
  • Activity carried out on the premises (called the destination of rented places): the activity indicated must be respected by the tenant. To make a change of business during the lease, the tenant must follow the procedure of de-specialization. If this procedure is not followed, the landlord may decide not to renew the lease without paying the tenant a compensatory sum.

FYI  

There is a lease all shops which allows all activities to be carried out in the rented places.

The owner (also called lessor) must attach the following documents to the commercial lease agreement:

  • State of play
  • Environmental annex for areas ⩾ to 2000 m2
  • Inventory of charges, taxes and fees provided by the owner related to the lease concluded or renewed since November 5, 2014
  • List of work carried out over the past 3 years and those planned for the next 3 years

FYI  

The asbestos technical diagnosis is not mandatory but it must be kept up to date and made available to the tenant by the owner of the premises.

State of play

The inventory must be attached to the lease agreement. He is obligatory upon entering the premises. An inventory of the premises will also have to be drawn up when the premises are returned, when the right to commercial lease, assignment or free transfer of the goodwill in the context of a gift or succession

It must accurately present the condition of each part and the equipment contained in the commercial premises.

It's written amicable by the landlord and tenant (referred to ascontradictory state of affairs) or by a third party authorized by them.

If the parties cannot reach an agreement, an inventory is drawn up by the Commissioner of Justice (formerly bailiff and judicial auctioneer).

The rule that "the tenant is presumed to have received the premises in good condition for rental repairs if there is no inventory" does not apply to the landlord who has refused to make an inventory.

FYI  

for leases concluded before 20 june 2014, an inventory must be drawn up when the premises are returned only if an inventory has been made at the time of taking possession.

Environmental Annex (or Green Annex)

A commercial lease for office or commercial premises of more than 2,000 square meters must include an environmental annex.

An environmental annex (called green annex) contains the following information provided by the owner:

  • Description of the energy characteristics of the equipment and systems of the building and the rented premises (waste treatment, heating, cooling, ventilation, lighting...)
  • Annual water and energy consumption of such equipment and systems
  • Annual amount of waste generated

This Annex may include obligations to limit the energy consumption of the premises.

Several objectives can be included in the Green Annex. For example: maintenance work, water consumption reduction plan, reduction of greenhouse gas emissions.

Energy Performance Diagnostic (EDP)

The DPE is joined by the lessor at the conclusion of the commercial lease.

It is a document that contains the following elements:

  • Amount of energy actually consumed or estimated
  • Greenhouse gas emissions for a standardized use of the building or part of a building
  • Information on ventilation or ventilation conditions.

Natural and Technological Hazards Report (ERNT)

L'ERNT concerns real estate situated in areas covered by a plan for the prevention of technological risks or foreseeable natural risks.

This document must be attached to the commercial lease and must be less than 6 months old.

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