Law No. 2014-624 of June 18, 2014: The Reform of Commercial Leases.
Law No. 2014-626 of June 18, 2014, concerning crafts, commerce, and very small businesses, introduces significant changes to the regulations governing commercial leases. Most of the provisions of this law entered into force on June 19, 2014.
See newsletter No. 5.
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Early termination of the commercial lease by the tenant or their successors in title
The tenant may request early termination of the lease if they have applied for retirement benefits or have been granted a disability pension. Unless otherwise stipulated in the lease agreement, the tenant may also request termination at the end of each three-year period. The law modifies the rules governing early termination by eliminating the possibility for the tenant to include a clause waiving their right to early termination (Article L.145-4 of the French Commercial Code). This new provision applies to contracts entered into or renewed on or after September 1, 2014. The
tenant's heirs are granted the right to terminate the lease in the event of the tenant's death. The heirs' request must be submitted " in accordance with the procedures and time limits set forth in Article 145-9 " (Article L.145-4, paragraph 4 of the French Commercial Code). This provision applies to any estate opened from the date the law comes into force.
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Extension of the duration of short-term leases
The term of the short-term lease is extended from two to three years. The law specifies that upon expiry of this term, the parties may not enter into a new short-term lease to operate the same business in the same premises.
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The definition of the concept of a precarious occupancy agreement
The temporary occupancy agreement was not defined by law. It is now stipulated that it is characterized, " regardless of its duration, by the fact that the occupancy of the premises is authorized only due to specific circumstances beyond the sole control of the parties " (Article L.145-5-1 of the French Commercial Code). This new provision applies to contracts concluded or renewed on or after September 1, 2014. It should be noted that the temporary occupancy agreement is not subject to the regulations governing commercial leases.
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Adjustments to the right to lease renewal
Articles L.145-15 and L.145-16 of the French Commercial Code, which provide for the nullity of clauses or agreements that have the effect of preventing the tenant from renewing their lease or that aim to prohibit them from assigning their lease, are being amended.
From now on, non-compliance with these articles will no longer be sanctioned by the nullity of the clauses. They will be deemed "unwritten ." According to the report of the National Assembly's Committee on Economic Affairs, this amendment aims to exempt these articles from the two-year statute of limitations established by Article L.145-60 of the Commercial Code.
The provisions depriving foreign nationals of the right to lease renewal are also being repealed.
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Rent review
The reference to the construction cost index is removed. Only the commercial rent index or the service sector rent index are taken into account to limit rent increases (Article L.145-34 of the French Commercial Code). In the event of an exception to the rent cap rule, the rent increase is limited to " 10% of the rent paid during the previous year ."
The law further specifies that the rent review takes effect on the date of "the request for review " (Article L.145-38, paragraph 1 of the French Commercial Code).
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The inventory of fixtures, rental charges and taxes
A new article concerning the establishment of a joint inventory of fixtures (Article L.140-40-1 of the French Commercial Code) has been adopted. An inventory of fixtures must be drawn up upon taking possession of the premises and upon their return. If the parties are unable to establish an inventory of fixtures, at the request of one of the parties, it will be drawn up by a bailiff. This new provision applies to leases concluded before its entry into force only when an inventory of fixtures was established upon taking possession.
As of September 1 , 2014, the law requires landlords to inform tenants about the allocation of rental charges, taxes, and fees related to the lease (Article L.145-40-2 of the French Commercial Code). Furthermore, upon signing the lease and then every three years thereafter, the landlord must provide the tenant with:
– A provisional statement of the work they plan to carry out in the following three years, accompanied by a provisional budget;
– A summary of the work carried out during the previous three years.
Disputes relating to charges, work, as well as disputes relating to the amount of rent during the three-year review and the rate of variation, may be submitted to the departmental conciliation commission for commercial leases, which therefore sees its jurisdiction extended (Article L.145-35 of the Commercial Code).
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Municipal pre-emption rights and delegation
The law amends Article L.214-1 of the Town Planning Code concerning the pre-emption rights of municipalities. The amount of information required in a prior declaration of intent to sell a business is increased.
Previously, the declaration of intent to sell only had to state the price and terms of the sale. Now, it must include "the price, the business activity of the prospective buyer, the number of employees of the seller, the nature of their employment contracts, and the terms of the sale. It must also include the commercial lease, if applicable, and specify the turnover when the sale concerns a commercial lease or a craft or commercial business " (Article L.214-1, paragraph 3 of the Town Planning Code).
The new Article L.214-1-1 of the Town Planning Code allows municipalities holding a pre-emption right to delegate this right to an inter-municipal public cooperation establishment. This public establishment or the municipality may delegate this right of pre-emption to " a public establishment with the appropriate vocation, to a mixed economy company, to the concession holder of a development operation or to the holder of a craft and commercial revitalization contract ".
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The benefit of a right of first refusal in the event of the sale of the premises
The law establishes a right of first refusal for tenants in the event of the sale of commercial premises, modeled on the tenant's right of pre-emption established for residential leases by the law of July 6, 1989 (Article L 145-46-1 of the French Commercial Code).
The provisions granting this right of first refusal are not mandatory and can therefore be overridden by a contrary clause in the lease. Furthermore, they do not apply in the following cases:
– a single sale of several premises within a commercial complex,
– a single sale of separate commercial premises,
– the sale of commercial premises to a co-owner of a commercial complex,
– the sale of an entire building containing commercial premises,
– the sale of premises to the landlord's spouse or to an ascendant or descendant of the landlord or their spouse.
When a landlord intends to sell commercial premises, they must now inform the tenant of their intention to sell by registered letter with acknowledgment of receipt. The landlord must specify the price and the terms of the sale. This letter constitutes an offer.
If the tenant accepts, the parties have two months to finalize the sale. Otherwise, the acceptance is void. As an exception, if the tenant specifies in their response their intention to obtain a loan, the deadline is four months.
When the premises are part of a larger complex being sold as a single unit, the tenant does not have this right of first refusal.
This article applies to leases already in effect from the sixth month following the promulgation of the law, i.e., from December 1, 2014 .
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The leave
According to Article L.145-9 of the French Commercial Code, notice of termination must be given by extrajudicial act. The law relaxes the formal requirements governing such notice. Thus, the parties may choose to send a registered letter with acknowledgment of receipt.
