Assignment of the commercial lease

Assignment of the right to lease (or assignment of the commercial lease) is a contract by which the tenant (called transferor) transfers to another person (called assignee(b) the benefit of the lease.

The tenant gives in to a new tenant (assignee(b) the use of premises, the obligation to pay the rent and to comply with the terms of the rental. The original commercial lease remains, but with a change of tenant.

In practice, most landlords prohibit their tenant from assigning their right to the lease by inserting a clause in the commercial lease agreement. However, the landlord cannot prohibit the tenant from assigning the commercial lease when he wants to sell his business. Nor can it prohibit the assignment of a lease that is transferred in the course of a merger, division, partial transfer of assets or universal transfer of assets

Assignment of commercial lease only (or assignment of lease right)

The lessee may assign his right to the lease alone, i.e. without selling its goodwill. It must then verify that the lease agreement authorizes this assignment of the sole right to the lease. It's called “no door”.

Even where the lease does not prohibit the assignment, the agreement of the owner is necessary.

The tenant must also inquire at the city hall to know if the lease is located in an area called perimeter for safeguarding local trade and crafts. In such cases, the municipality may use its right of first refusal, which means that it has a priority to acquire the right to the lease.

When the lease is transferred, the new tenant (called assignee) takes the place of the original tenant (called transferor) for the remainder of the lease term.

Assignment of commercial lease on sale of goodwill

In case of sale of the goodwill, the right to lease is obligatorily included. The purchaser of a goodwill buys all the elements of this fund (notably the brand, the equipment, the clientele, the right to lease). The customer base is the most important element: when there is no customer base, the goodwill cannot exist. In the absence of goodwill, the assignment does not constitute a sale of goodwill but a mere assignment of the right to the lease.

The owner can't object the sale of the lease on the sale of the goodwill. Indeed, the clauses contained in the lease contract which forbid the assignment of the lease upon the transfer of the goodwill is not valid.

However, the assignment may be subject to certain conditions. For example, a approval clause or a clause authorizing the assignment of the lease only in the event of the total sale of the land.

Where there is a transfer of the goodwill in a specific area called perimeter for safeguarding local trade and crafts, the town hall may exercise its right of first refusal, which means that it has a priority to acquire the right to the lease.

Transfer of the commercial lease in the event of a merger, division, transfer of part of the assets or universal transfer of assets

In this case, a business, a lessee of a commercial lease, is absorbed in the context of a melting , a split or is the subject of partial contribution of assets or a universal transfer of assets. At that point, the acquiring or receiving business of the contribution immediately becomes the owner of the right to the lease and has no formalities to perform. The owner cannot object to this transfer.

Any clause in the commercial lease that prohibits the assignment of the commercial lease in these situations is invalid.

The tenant who has applied for his pension rights or who has been granted an invalidity pension, eis authorized to assign its right to the lease alone. The owner cannot prohibit this assignment.

To carry out this assignment, the tenant must meet the following 2 conditions:

• The tenant must be a single partner of a EURL: titleContent or majority manager for at least 2 years of the SARL: titleContent who holds the lease.

• The new activity must be compatible with the destination, characteristics and location of the building.

The tenant notifies by act of commissioner of justice to the owner and preferred creditors (i.e., receiving a guarantee on the goodwill) its intention to assign the lease.

The instrument issued by the Commissioner of Justice shall specify the nature of the future activity envisaged and the price of the transfer.

Within 2 months of receiving the document, the owner has one of the following possibilities:

• Accept the change of business and agree to the assignment of the lease
• Exercise the statutory priority of redemption of the lease entitlement
• Challenge new activities and seize the court of law.

The lease may provide that the owner has the right to refuse the assignment of the commercial lease or that its authorization is necessary. Other clauses may be included in the lease agreement to specify the terms of the assignment.

Clause prohibiting the assignment of the lease alone

The parties may include in the commercial lease agreement a clause which prohibits any assignment only on the right to lease.

On the other hand, the contract may not prohibit the tenant from assigning the commercial lease in connection with the sale of the goodwill. The lessee must be able to transfer the lease to the purchaser of his land.

Clause requiring owner's authorization or approval clause

An approval clause requires the tenant to obtain the landlord's agreement before any transfer.

This clause allows the landlord to accept or reject the proposed acquisition of the lease.

The lease generally requires that the owner's authorization be given in writing.

Joint and several guarantee

This clause allows the tenant (transferor) of the commercial lease to commit in solidarity with the new tenant of the lease (called assignee(b) the payment of rents and the execution of the lease.

The landlord can claim the rent from the lessee, i.e. the former tenant, for a period of 3 years from the time of the lease assignment. This 3-year term applies to assignments of lease rights entered into after 19 June 2014.

This joint and several guarantee clause ceases when the lease expires. It has no effect in the event of renewal from the lease.

In case of extension tacitly, there is no formation of a new contract: the solidarity clause then continues to apply until the expiry of the lease.

Where the transferee (assignee) does not pay the rent, the landlord must inform its former tenant (transferor) of default within 1 month from the date the rent should have been paid.

It is preferable to inform the transferor of the non-payment by registered letter with AR for reasons of proof.

Clause providing for an appeal by the lessor to participate in the deed of assignment

The purpose of this clause is to notify the owner of the assignment of the commercial lease. In this case, the transfer takes place in the presence of the owner. He is informed of the identity of the buyer but does not have to give his authorization.

The sale of the commercial lease requires the following steps:

1. Drafting a contract for the assignment of the commercial lease

The lease assignment is established as a written contract signed between the parties or in the form of a notarial deed.

The lease assignment may also take the form of a agreeable to the contract of commercial lease.

2. Stocktaking

An inventory must be drawn up by the owner and the outgoing tenant or by a third party authorized by them (for example, a real estate agency). The state of play is maintained by each of the parties.

3. Information to the lessor

The assignment of the commercial lease shall be notified to the owner by act of commissioner of justice. This document must mention the identity of the assignee (i.e. the lessee) and his/her contact details, the date of the assignment in order to know when he/she is liable for payment of the rent, etc. ).

Such notification is not necessary if the owner has accepted the assignment of the right to the lease by notarial act.

Assignment of the right to the commercial lease shall also be notified by Commissioner of Justice to creditors registered on the goodwill.

4. Registration and publicity of the assignment

The registration of the deed of assignment of the right to the lease must be done at the company tax office (SIE) of the location of the property.

If it is a notarial act, it is registered with the notary's tax department.

The act is registered within 1 month as of his signature.

Registration fees are paid by the purchaser (assignee). The deed of assignment may provide that this is not the case. They are calculated on the transfer price as follows:

• 0%  Up to €23,000

• 3%  between €23,001  to €200,000

• And 5%  beyond €200,000

A fixed minimum duty of €25is perceived.

If the formalities are not complied with, the sale of the commercial lease cannot take place.

In addition, this may also result in the termination and/or non-renewal of the original commercial lease.