Real estate: Allocation of charges and commercial lease

Law No. 2014-626 of June 18, 2014 relating to crafts, trade and very small businesses, known as the “Pinel law” has modified the key to the distribution of charges between the lessor and the tenant.
These new provisions have just been clarified by Decree No. 2014-1317 of November 3, 2014 relating to commercial leases (OJ November 5, 2014 p. 18638) which introduces Articles R 145-35 to R 145- into the Commercial Code. 37. The new system applies to leases concluded and renewed from November 5, 2014.

I. Reminders

Before the adoption of the Pinel law, the Commercial Code did not contain any provision specifically governing the distribution of charges between the lessor and the lessee.
The matter was therefore governed by reference to the provisions of the Civil Code, themselves not very enlightening, and above all by the agreement of the parties. It was in fact accepted that the parties were completely free to agree on the definition and distribution of the charges.
The case law thus validated the “exorbitant common law clauses” making the tenant responsible for:

the total property tax;
“major” repairs referred to in article 606 of the Civil Code;
work to bring the premises into compliance;
work made necessary due to the dilapidated condition of the premises;
of all condominium fees, without exception.

In line with this case law, many leases contain clauses stipulating a rent "net of charges" which tend to make the tenant bear all the charges which, in the absence of precision, should be assumed by the lessor.
These clauses testify to the strong position of the lessors in the contractual negotiation. The legislator intended to fight against the excesses born of this situation.

II. New device

The law of June 18, 2014 put an end to the freedom of contract presiding over the distribution of charges between lessor and lessee and instituted an obligation of information at the expense of the lessor. These provisions, codified in Article L 145-40-2 of the Commercial Code, are of course of public order.

A. Allocation of charges

1. Principle: precise and limited inventory of charges

The principle laid down by the new law is that of the stipulation in the lease of a precise and limiting inventory of the categories of charges, taxes and royalties related to this lease and their distribution between the lessor and the lessee (C. com. article L 145-40-2, paragraph 1).
It is also specified that in real estate complexes with several tenants (including joint ownerships in particular), the rental contract must specify the distribution of the charges or the cost of the work between the different tenants occupying this complex.
This distribution depends on the area exploited. The amount of taxes, duties and fees that may be charged to the tenant corresponds strictly to the premises occupied by each tenant and to the share of the common areas necessary for the operation of the leased thing (C. com. article L 145-40- 2, paragraph 3). The law also refers to a Conseil d'Etat decree for the definition of charges, taxes, duties and fees which, due to their nature, cannot be charged to the tenant.

2. Apps

This highly anticipated decree was adopted on 3 November. It creates a new article R 145-35 within the Commercial Code under which the tenant cannot be charged:

1° Expenses relating to major repairs mentioned in Article 606 of the Civil Code as well as, where applicable, the fees related to the performance of this work;

It is recalled that the major repairs covered by this text are those of the large walls and vaults, the restoration of the beams and entire roofings that of the dykes and the retaining walls and fenced also in full. Jurisprudence, however, adopts a broader definition: major repairs concern the building in its structure and its general solidity, while maintenance work is that which is useful for the permanent maintenance of the building in good condition (Cass. 3 ^rd civ. July 13, 2005 n° 04-13764 – FS-PB).

2° Expenditure relating to work aimed at remedying the obsolescence or the rented property or the building in which it is located into compliance with the regulations major repairs mentioned in the paragraph previous ;
It is traditionally accepted that the work of bringing it into conformity and that of obsolescence should, unless otherwise stipulated, be borne by the lessor. One can nevertheless wonder about the scope of the provision since the prohibition only applies insofar as the work concerns major repairs. It thus appears redundant with the 1°.

3° Taxes , in particular the territorial economic contribution, taxes and royalties for which the legal person liable is the lessor or the owner of the premises or building; however, the tenant may be charged the property tax and taxes additional to the property tax as well as the taxes, duties and fees related to the use of the premises or the building or to a service from which the tenant benefits directly or indirectly;
The drafting of the Pinel law had aroused the hope among tenants of seeing definitively abolished the option of having the property tax and other taxes linked to the use of the property passed on, including in particular the TEOM (household waste collection tax ). They will be disappointed. The exception made expressly for the property tax, its additional taxes and other taxes linked to the use of the premises effectively leads to the reversal in practice of the principle laid down by the text.

4° The lessor's fees related to the management of the rents of the premises or building subject to the lease;
The provision targets real estate companies and shopping center lessors who systematically passed on management fees to tenants.

5° In a property complex, charges, taxes, fees, royalties and the cost of work relating to vacant premises or attributable to other tenants.
The distribution between the tenants of charges, taxes, duties and fees and the cost of work relating to the property complex may be conventionally weighted.
These weightings are brought to the attention of the tenants. This option of conventional weighting seems to go against the very text of Article L 145-40-2, paragraph 3 of the Commercial Code providing that the amount of taxes, duties and fees that may be charged to the tenant corresponds strictly to the premises occupied by each tenant and the share of the common areas necessary for the operation of the leased property.
Are not included in the expenses mentioned in 1° and 2° those relating to embellishment work the amount of which exceeds the cost of the identical replacement.

B. Information relating to charges

1. At the conclusion of the contract

The precise and limiting inventory of charges, taxes and levies and their distribution between the lessor and the lessee must be stipulated in the contract.
In addition, the lessor communicates to each tenant:

An estimate of the work he plans to carry out in the following three years, together with an estimated budget;
A summary statement of the work he has carried out in the previous three years, specifying their cost.

2. Under lease

The lessor must provide the lessee with:

every year :

a summary statement of the categories of charges, taxes, levies and fees related to this lease, which includes the liquidation and adjustment of the charge accounts, is communicated to the tenant no later than September 30 of the year following that for which he is established or, for buildings in joint ownership, within three months from the submission of joint ownership charges for the annual financial year. The lessor also communicates to the lessee, at his request, any document justifying the amount of charges, taxes, duties and fees charged to him (C. com. art. R 145-36);

every three years :

An estimate of the work he plans to carry out in the following three years, together with an estimated budget;
A summary statement of the work he has carried out in the previous three years, specifying their cost (C. com. art. L 145-40-2).

This information is communicated within 2 months of each three-year deadline.

as soon as possible : information on new charges, taxes, duties and fees (C. com. art. L 145-40-2).

Given the restrictive nature of the contractualized inventory, these new charges, taxes, royalties and taxes must be borne by the lessor. Indeed, the “precise” nature of the inventory seems to exclude clauses which would generically anticipate the creation of new charges and place them at the expense of the tenant.

3. Sanction

Curiously, the law does not specify the sanction attached to the non-compliance by the lessor with the various information obligations that it bears.

C. Entry into force

The system set up by the Pinel law relating to charges applies to leases entered into or renewed from the date of publication of decree no. 2014-1317 of November 3, 2014, i.e. from November 5, 2014.