Change of use under a commercial lease (partial and full): refuse, negotiate, set conditions

A retailer that has been trading from a commercial unit for ten years announces that it now wishes to sell products that have nothing to do with the permitted use stated in the lease. For a landlord or a property company (foncière), the question is not trivial: accepting means permanently changing the use of the premises, the profile of the customers they attract and sometimes the rental value of the whole property. Refusing wrongly means risking a court decision that imposes the change and leaves the owner with no leverage. This guide sets out, from the landlord's point of view, how a change of permitted use (déspécialisation) works under a commercial lease, in its two forms (partial and full), which conditions and time limits apply, and how to refuse, negotiate or set conditions on a retailer's request in order to protect the landlord's interests, in particular as regards rent and renewal.

Change of permitted use: what exactly are we talking about?

The principle of the contractual permitted use

Every commercial lease contains a permitted use clause (clause de destination) which defines precisely the activities the tenant is authorised to carry on in the premises. This clause is not a formality: it sets the scope of both parties' commitment. As a rule, the tenant may carry on only the activities listed, failing which it incurs contractual liability and exposes itself to termination of the lease.

This rigidity protects the landlord. A clause worded "sale of women's ready-to-wear" does not authorise fast food, and a clause worded "bakery and pastry shop" does not cover the sale of hot sandwiches to be eaten on the premises if that was not provided for. Conversely, an "all trades" clause opens the field widely and deprives the landlord of most means of control. The landlord's first step is therefore to check the exact wording of its clause before any discussion.

A change of permitted use (déspécialisation) is precisely the statutory mechanism that allows the tenant to move outside that contractual framework, by adding an activity or changing activity. The legislature organised it in Articles L. 145-47 to L. 145-55 of the French Commercial Code, with a view to striking a balance: allowing the trader to adapt its business to market developments without leaving the landlord wholly unprotected.

Two distinct regimes: partial and full

The Commercial Code distinguishes two situations that must never be confused, because they are subject neither to the same conditions nor to the same consequences.

A partial change of use (déspécialisation partielle, also called restricted), governed by Article L. 145-47, allows the tenant to add related or complementary activities to its original activity. The original activity remains: it is broadened. This is a right of the tenant, which the landlord can challenge only within a narrow framework.

A full change of use (déspécialisation plénière, also called total), governed by Articles L. 145-48 to L. 145-55, allows the tenant to carry on one or more activities entirely different from those provided for in the lease, including by abandoning the original activity. This is a heavier mechanism, subject to a formal procedure and to more demanding substantive conditions, and above all it gives the landlord substantial financial rights.

The characterisation adopted determines the landlord's entire strategy. The same retailer request may also give rise to a debate on characterisation: the tenant will want to present its project as a mere related addition, while the landlord will seek to show that it is in fact a change of activity falling under the full regime, which is more favourable to its interests.

Partial change of use: a tenant's right within limits

Related or complementary activities

Article L. 145-47 sets out the principle: the tenant may add to the activity provided for in the lease activities that are related or complementary. Relatedness presupposes a close link, a natural kinship between the activities (a hairdresser who sells hair products). Complementarity presupposes that the new activity is ancillary to, or a useful extension of, the main activity (a butcher who adds the sale of ready-cooked meat dishes).

For the landlord, the challenge is to assess this link in concrete terms. The courts reason in light of the evolution of commercial practice, which gradually widens what is accepted as related or complementary. An activity that would have been held to be unrelated twenty years ago may today be regarded as a natural extension. A landlord who wishes to challenge must therefore show a genuine break with the original activity, and not a mere diversification that the market regards as normal.

The procedure and the landlord's two-month period

A tenant wishing to proceed with a partial change of use must notify the landlord of its intention by a document served by a commissaire de justice (bailiff, formerly huissier) or by registered letter with acknowledgement of receipt, stating the activities it intends to add. This notification starts a two-month period during which the landlord may challenge the related or complementary nature of the activities envisaged.

This period is a frequent trap for landlords. Once the two months have passed without a formal challenge, the landlord is deemed to have accepted the related or complementary nature of the activities, and the tenant may carry on the new activities. Vigilance over the handling of mail, particularly in property companies managing a large portfolio, is therefore decisive. To be effective, the challenge must be brought before the judicial court (tribunal judiciaire), which alone has jurisdiction to decide on characterisation.

Grounds for challenge

The landlord cannot object to a partial change of use on grounds of expediency (fear of competition, preference for another retailer, wish to take back the premises). The only open debate concerns characterisation: are the added activities genuinely related or complementary to the original activity? If so, the tenant is within its rights and the landlord cannot prevent it.

This is a fundamental difference from the full change of use. In the partial case, the landlord is subject to a right of which it controls only the characterisation. Its room for manoeuvre is therefore essentially defensive, and its main interest shifts to the impact of the addition on the rent, examined below.

Full change of use: a heavier change of activity

Substantive conditions

Article L. 145-48 makes a full change of use subject to substantive conditions that the landlord must know in order to assess its chances of resisting. The change of activity must be justified in light of the economic situation and of the requirements of the rational organisation of distribution. In other words, the tenant must show that its original activity is no longer viable or relevant and that a change is economically necessary.

Above all, the new activities envisaged must be compatible with the purpose, characteristics and location of the building or of the property complex. This requirement of compatibility is an essential point of support for the landlord. Premises located in a quiet residential building, or in a shopping centre whose rules provide for an allocation of retailers, offer solid arguments to show that a noisy or dirty activity, or one that causes nuisance, is incompatible (for example a restaurant activity with extraction in a residential building unsuited to it).

Procedure and three-month period

The procedure for a full change of use, governed by Article L. 145-49, is more formal. The tenant must notify its request to the landlord, stating the activities it envisages carrying on, by a document served by a commissaire de justice or by registered letter with acknowledgement of receipt. It must also, where applicable, inform the creditors registered against the business (fonds de commerce), who may have an interest in intervening.

The landlord then has a period of three months from that notification to state its position. It may accept, refuse, or make its agreement subject to conditions. This point is critical: silence for three months amounts to acceptance. A property company that let this period pass would lose any right to object and, more seriously still, would deprive itself of the possibility of putting forward its arguments on rent and compensation. Rigorous management of this three-month period is the nerve centre of the file on the landlord's side.

Serious and legitimate grounds for refusal

Unlike a partial change of use, a full change of use may be refused by the landlord on serious and legitimate grounds, within the meaning of Article L. 145-52. The landlord may in particular object to the change if it shows an intention to take back the premises at the end of the lease in order to live in them itself or have a relative live in them, or to demolish the building in order to rebuild it, or else to add a storey to it where the execution of the works is incompatible with the carrying on of the new activity.

Beyond these expressly stated cases, case law accepts that the landlord may rely on other serious grounds relating to the nature of the new activity and its consequences for the building or the neighbours. The showing must however be concrete and documented: an unsupported refusal in principle will be set aside by the judge, who may authorise the change of activity despite the landlord's opposition.

The landlord must bear in mind that even a justified refusal may be overcome by the tenant if it provides sufficient guarantees. The strategy therefore rarely consists in a flat refusal, but rather in negotiating consideration and strictly setting conditions for the change.

The impact on rent: the landlord's main lever

This is where the landlord's real financial interest lies, and the main difference in consequences between the two regimes.

Partial change of use and setting the rent

The addition of related or complementary activities does not give the landlord a right to an immediate rent revision. Its effect is deferred: it can be taken into account only on renewal of the lease, and only if it has brought about a change in the commercial factors having a favourable effect on the tenant's business. The landlord therefore cannot derive an immediate financial benefit from a partial change of use.

In practice, the addition of related activities may nevertheless be one element among others in an attempt to escape the rent cap rule on renewal, if it reflects a notable change in the factors that determine the value of the premises. But this effect is uncertain and requires precise demonstration. The landlord should not overestimate this lever in the partial case.

Full change of use and immediate increase

The regime is radically different in the full case. Article L. 145-50 authorises the landlord to request, on the occasion of the change of activity, a change in the rent without waiting for the expiry of the lease. A full change of use is in itself a ground for lifting the rent cap (déplafonnement): it escapes the capped rent rule and allows the rent to be set at the rental value corresponding to the new activity.

In concrete terms, if premises let for an activity of little value are converted, with the landlord's agreement or court authorisation, to an activity generating a higher rental value, the landlord may have the rent reassessed accordingly. This is a powerful negotiating argument: rather than refusing, the landlord may accept the change in return for a substantial increase in rent, recorded as soon as authorisation is given.

Compensation for loss

Article L. 145-50 also provides that the change of activity may give rise to payment by the tenant of compensation equal to the amount of the loss that the landlord, and where applicable neighbouring owners, establish. That loss may result, for example, from the loss of value of a property complex whose commercial coherence is broken, or from nuisance imposed on the other occupiers.

A landlord that accepts a full change of use therefore has an interest in asserting two distinct rights at the same time: the increase in rent on the one hand, and compensation for any loss on the other. These two levers, if documented, turn a request that has been imposed into an opportunity to renegotiate the lease relationship as a whole.

Change of use and lease renewal

A change of use also has effects at the renewal stage, a strategic milestone for the landlord. A change of activity that occurs during the lease alters the actual use of the premises and therefore the terms of comparison for setting the renewed rent. The conditions that may be reopened at that point, rent included, are examined in our article on the new conditions to negotiate on renewal.

In the full case, the authorised change of activity constitutes a notable change in the characteristics of the premises, capable of justifying the lifting of the rent cap on renewal, in application of the general rules for setting the renewed rent. The landlord may then request that the rent be set at rental value, without being bound by the capped rent. A change of use, far from weakening the landlord's position on renewal, may on the contrary strengthen it.

The landlord must however ensure that its successive positions are consistent. If it has accepted a change of activity during the lease in return for a rent increase, it will have to coordinate that increase with its request to lift the cap on renewal, so as not to value the same event twice. A controlled litigation strategy requires anticipating these sequences from the moment the change of use request is received.

Refuse, negotiate, set conditions: the landlord's strategy

Anticipate through the drafting of the permitted use clause

The landlord's best protection operates upstream, when the lease is signed. A precise, restrictive and well-drafted permitted use clause greatly reduces the tenant's room for manoeuvre. Conversely, an "all trades" clause, or one that is too broadly worded, neutralises a good part of the change of use mechanism, since the tenant may operate freely within the defined scope without having to seek authorisation. On the other provisions to check at the time of signing, see our article on the clauses to check in a 3-6-9 commercial lease.

A landlord keen to retain control will favour a clause listing the authorised activities exhaustively, possibly accompanied by an exclusivity or non-competition clause within the property complex, and by a reference to the internal rules for shopping centres. These provisions shape the future debate and make it easier to show that a new activity is incompatible.

Negotiate consideration rather than refuse flatly

Faced with a request for a full change of use, refusal is not always the best option, especially as the judge may set it aside. The landlord often has an interest in turning the request into a negotiation: accepting the change of activity in return for an immediate rent increase, compensation for loss, or an undertaking by the tenant to carry out works at its own cost to make the premises compatible with the new activity.

This approach has a twofold advantage. It secures the agreement in legal terms, avoiding the uncertainty of litigation whose outcome is unpredictable, and it enhances the value of the landlord's assets. A precise written agreement recording the new conditions is better than a court authorisation wrung out in which the landlord has little control over the consideration. The cases in which this agreement must take the form of a rider (avenant), and how to draft it, are set out in our article on the rider to a commercial lease.

Set conditions

Article L. 145-49 expressly allows the landlord to make its agreement subject to conditions. The landlord may thus frame the change of use through protective provisions: limits on opening hours, an obligation to deal with nuisance (extraction, soundproofing, waste management), an undertaking to reinstate the premises, guarantees as to compliance with the co-ownership rules (règlement de copropriété) or the rules of the commercial complex, or a clause providing for the rent increase to be taken up.

These conditions must be stated within the three-month period, in clear and unambiguous form, in order to be enforceable against the tenant. A poorly drafted conditional agreement may be construed as an unconditional agreement, depriving the landlord of its safeguards. Drafting the reply to the change of use request is therefore a legal act in its own right, which warrants the involvement of legal counsel.

Conclusion

For the landlord, a change of use is not a threat to be endured but a mechanism to be managed. The distinction between a partial and a full change of use determines the entire strategy: the first is a right of the tenant that the landlord can only characterise, whereas the second gives the owner real levers: grounds for refusal, a rent increase without waiting for renewal, compensation for loss, and conditions setting a framework. The costliest mistake remains inaction: letting the two-month period expire in the partial case, or the three-month period in the full case, amounts to giving up all of one's rights.

The position is clear: in most cases it is better to negotiate a full change of use in return for a recorded rent increase than to put forward a fragile refusal. Before any reply to a retailer's request, a landlord or property company has an interest in having counsel analyse three points: the exact characterisation of the request (partial or full), the state of the time limits running, and the potential for increasing the rent. It is this prior analysis, carried out within the time limits, that determines whether the change of use ends in a loss of control or in an enhancement of the landlord's assets.

Frequently asked questions

What is the difference between a partial and a full change of use?

A partial change of use (Article L. 145-47 of the French Commercial Code) allows the tenant to add related or complementary activities to its original activity, without abandoning the original activity. A full change of use (Articles L. 145-48 et seq.) allows a complete change of activity, to one different from that provided for in the lease. The conditions, the procedure and the consequences for the rent differ sharply: the full change of use gives the landlord a right to an immediate rent increase, unlike the partial one.

Can the landlord refuse a partial change of use?

No, except on characterisation. In the case of a partial change of use, the landlord can challenge only the related or complementary nature of the added activities, within two months of notification. It cannot object on grounds of expediency such as fear of competition. If the activities are genuinely related or complementary, the tenant exercises its right and the landlord cannot prevent it.

How long does the landlord have to reply to a full change of use request?

The landlord has three months from notification of the request, under Article L. 145-49 of the French Commercial Code. It may accept, refuse on serious and legitimate grounds, or make its agreement subject to conditions. The essential point: silence during this three-month period amounts to acceptance. After that period, the landlord loses any right to object.

Does a change of use allow the rent to be increased?

Yes, but mainly in the full case. A full change of use allows the landlord to request a revision of the rent without waiting for renewal (Article L. 145-50), the rent being capable of being set at the rental value corresponding to the new activity. In the partial case, the addition of related activities has only a deferred effect, on renewal, and only if it has changed the commercial factors.

Can the landlord obtain compensation in the event of a change of use?

Yes, in the case of a full change of use. Article L. 145-50 provides that the change of activity may give rise to payment by the tenant of compensation corresponding to the loss that the landlord or neighbouring owners establish. That loss may result from a loss of value of the property complex or from nuisance imposed on the other occupiers.

Does an "all trades" clause prevent the landlord from controlling the activity?

To a large extent, yes. An "all trades" permitted use clause allows the tenant to carry on any commercial activity freely, which neutralises a good part of the change of use mechanism since no authorisation is required. To retain control over the use of the premises, the landlord has an interest in providing for a restrictive permitted use clause, listing the authorised activities precisely, from the signing of the lease.

Can a tenant overcome a refusal of a full change of use?

Yes. Even a refusal based on serious and legitimate grounds may be overcome if the tenant provides sufficient guarantees or applies to the judicial court (tribunal judiciaire), which may authorise the change of activity despite the landlord's opposition. That is why a negotiation strategy with a framework, including a rent increase and protective conditions, is often preferable to a flat refusal whose outcome in court remains uncertain.