The commercial lease statute from the landlord's side: duration, notice, renewal and security

An institutional landlord holding an office or retail asset does not simply endure the commercial lease statute: it arbitrates it. Every decision, whether granting a three-year derogation, serving notice with or without an offer to renew, accepting an assignment of the business, or requiring an independent guarantee rather than a surety, determines the asset's resale value and its viability over ten years. Yet Articles L. 145-1 et seq. of the French Commercial Code operate through fatal time limits and sanctioned formalism: a wrongly characterised notification, a reply outside the time limit, a charges clause that does not comply with Article L. 145-40-2, and the balance of power shifts lastingly towards the tenant. This guide offers an overall reading of the commercial lease under French law from the landlord's point of view, linking the four tipping points that are duration, notice, renewal and security, and referring to the dedicated guides for the detail of each mechanism.

The scope of the statute: knowing when one enters it and how one leaves it

The conditions for applying Article L. 145-1

The commercial lease statute applies to leases of buildings or premises in which a business (fonds de commerce) is operated, provided that the business belongs to the tenant and that the tenant is registered in the trade and companies register or the trades directory. Three cumulative conditions, therefore: stable and enclosed premises, a business actually operated, a regular registration. The statute is a matter of public policy by virtue of Article L. 145-15 of the Commercial Code, which deems unwritten any clauses having the effect of defeating the right to renewal.

For a landlord, the issue is less to escape the statute than to characterise the occupation correctly from the outset. Occupation tolerated without a title, a badly drafted agreement or a professional lease granted to an occupier who in reality carries on a commercial activity expose the landlord to requalification, with all its consequences: right to renewal, eviction indemnity, rent capping.

Short-term derogatory lease and precarious occupation agreement

Two tools make it possible to remain outside the statute, but they are not interchangeable. The short-term derogatory lease (bail dérogatoire) under Article L. 145-5 permits one or more successive lettings whose total duration does not exceed three years, since Law No. 2014-626 of 18 June 2014, known as the Pinel Act. The trap is well known: if the tenant stays and is left in possession beyond one month after the expiry date, a new lease subject to the statute arises. An institutional landlord must therefore manage this expiry date as a bar date, with a calendar alert and a written decision before the end of the term. The regime of this short-term lease and the conditions on which it tips into the statute are set out in our article on the short-term derogatory lease and its conversion into a 3-6-9 lease.

The precarious occupation agreement (convention d'occupation précaire), enshrined in Article L. 145-5-1, requires for its part that the precariousness result from objective circumstances independent of the parties' will alone: expropriation proceedings under way, a building earmarked for demolition, a building permit filed. It cannot be used as a derogatory lease for a fourth year. For an asset being repositioned or a building intended for major restructuring, it is on the other hand the appropriate tool for keeping transitional income without creating a right to renewal.

Duration: nine years, but which ones

The three-year break option and waiver clauses

A lease cannot be concluded for less than nine years, and the tenant has the option to give notice at the end of each three-year period under Article L. 145-4. This asymmetry structures the economics of the lease: the landlord is committed for nine years, the tenant for three.

The Pinel Act restricted the possibilities of waiving this option, but it retained several that directly concern investors: leases concluded for more than nine years, premises used exclusively as offices, single-purpose premises, storage premises. For a landlord holding an office building let to a single occupier, negotiating a firm term of six or nine years is not a mere comfort: it determines the valuation of the asset through the weighted average unexpired lease term, and therefore the exit price and refinancing capacity. The trade-off is classically between the firm term obtained and the rent-free period or contribution to the tenant's works granted in return.

Tacit extension and the twelve-year threshold

On expiry of the contractual term, the lease does not come to an end: it continues by tacit extension (tacite prolongation) under Article L. 145-9, by derogation from Articles 1736 and 1737 of the Civil Code. This situation is often endured rather than chosen. It nonetheless has major strategic interest for the landlord: where the effective duration of the lease exceeds twelve years by the effect of tacit extension, the capping of the renewal rent is excluded by operation of law by Article L. 145-34, and the rent is set at the rental value.

In other words, letting a lease run on may be a strategy for lifting the cap, provided that the rental value is actually higher than the current rent and that the landlord controls the date on which the notice or the request for renewal takes effect. In a Paris-region office market where second-hand rental values may have fallen, the calculation is reversed and tacit extension becomes a risk. The starting point of the period must be checked with care: the period is counted from the date the lease takes effect, not from its signature.

Notice: an act with a guillotine formalism

Notice is governed by Article L. 145-9. Three rules govern practice. First, notice given by the landlord must be given by extrajudicial act, served by a commissaire de justice (bailiff), registered letter being allowed only for the tenant. Second, it must be given at least six months in advance. Third, except for leases whose term depends on an event, it takes effect on the last day of the calendar quarter, a rule that in practice means notification must be made several weeks ahead of the apparent expiry date.

The content of the act is just as decisive. The notice must, on pain of nullity, state the grounds on which it is given and reproduce the provisions of Article L. 145-9 on the time limit for challenge. A notice refusing renewal that states no ground, or that relies on a legally ineffective ground, exposes the landlord to annulment of the act and to the lease continuing, with loss of the benefit of the expiry date. The details of drafting, of the distinction between notice with an offer to renew and notice with refusal, and of the treatment of notices served during tacit extension, are dealt with in our guide on the landlord's termination and notice.

One point deserves emphasis for portfolios held through multiple structures: the notice must come from the landlord, that is, from the owner on the date of the act. A sale of the asset between the management decision and the service of notice requires the act to be redone in the name of the new owner. The two-year limitation period in Article L. 145-60 also covers most actions arising from the statute, which requires close litigation monitoring of challenges to notices.

Renewal of the commercial lease: initiative, silence and exit cost

Who takes the initiative

Renewal of the commercial lease may proceed from two initiatives. Either the landlord serves notice with an offer to renew, or the tenant makes a request for renewal in the six months preceding expiry of the lease or, in the case of tacit extension, at any time during it, in accordance with Article L. 145-10.

The rule with the heaviest consequences is that of silence. Once a request for renewal is made, the landlord has three months to state its position by extrajudicial act. Failing a reply within that period, the landlord is deemed to have accepted the principle of renewal. This silence amounts to acceptance of the principle, not of the price, but it permanently deprives the landlord of the possibility of refusing and therefore of avoiding the eviction indemnity. For an asset manager following several dozen leases, this three-month period is the most frequent operational failure point of the statute.

Refusal of renewal and its price

The principle laid down by Article L. 145-14 is simple: the landlord may refuse renewal, but must then pay the evicted tenant an eviction indemnity (indemnité d'éviction) equal to the loss caused by the failure to renew. This indemnity comprises the market value of the business, determined according to the practice of the trade or, where the business can be transferred without loss of customers, the value of the leasehold right alone, plus ancillary indemnities: removal costs, re-establishment costs, transfer duties, commercial disruption. The legitimate grounds for refusal without indemnity are dealt with separately in our article on non-renewal of the commercial lease and the eviction indemnity.

Refusal of renewal is therefore not a free right, but an option whose cost must be measured before it is exercised. Three routes make it possible to avoid the indemnity, each with its own conditions:

• the serious and legitimate ground in Article L. 145-17, which presupposes a breach of the lease obligations, a prior formal notice by extrajudicial act, and persistence or repetition of the breach more than one month after it;
• a building that is unfit for habitation or due to be demolished, under the conditions of the same article;
• the right to take back possession in order to build or rebuild under Article L. 145-18, which does not release the landlord from all obligations, since it requires the landlord to offer replacement premises and to compensate for the disturbance of enjoyment.

For as long as the eviction indemnity has not actually been paid, the tenant has the right to remain in the premises and owes only an occupation indemnity set under the conditions of Article L. 145-28. This rule is a powerful negotiating lever for the tenant in building vacation operations, and it must be built into the timetable of any restructuring operation: an asset whose vacation depends on proceedings to fix the eviction indemnity is not an asset whose delivery date is under control.

The right of repentance

Article L. 145-58 allows the landlord to go back on its refusal and offer renewal, thereby avoiding payment of the eviction indemnity. This right is exercised within fifteen days of the decision, having the force of res judicata, that fixed the indemnity, and on the twofold condition that the tenant is still in the premises and has not already leased or acquired other premises intended for its re-establishment. Repentance is irrevocable.

In practice, it is insurance against a judicial valuation of the indemnity that exceeds forecasts. It does, however, presuppose that the landlord has kept the ability to renew, and therefore has not committed to works or marketing incompatible with the tenant remaining.

Rent: capping, lifting the cap and phasing

The rent of the renewed lease is in principle capped by Article L. 145-34: its variation cannot exceed that of the commercial rents index (ILC) or the tertiary activities rents index (ILAT) since the initial setting of the rent of the expired lease. Lifting the cap is the exception, and it is on this ground that most of the value is played out for a landlord.

The grounds for lifting the cap fall into two families. First, grounds relating to duration: a lease concluded for more than nine years, or an effective duration exceeding twelve years through tacit extension. Second, grounds relating to a significant change in the elements of the rental value, listed in Article L. 145-33 and detailed in Articles R. 145-3 to R. 145-8: characteristics of the premises, use of the premises, the parties' respective obligations, local commercial factors, prices commonly charged in the neighbourhood. Demonstrating a significant change in local commercial factors requires a documented file: changes in footfall, transformation of the commercial environment, new transport links, a development scheme delivered during the expired lease.

The Pinel Act introduced a significant tempering measure: where the cap is lifted on one of these grounds, the resulting increase cannot lead to rises of more than 10% of the rent paid in the previous year. This phasing spreads the effect of lifting the cap over several years and changes the economic trade-off between proceedings to fix the rent and amicable renegotiation. The full mechanism, including its interplay with the three-yearly revision in Article L. 145-38 and with the sliding-scale clause in Article L. 145-39, is the subject of our dedicated guide on lifting the cap.

Charges, works and the viability of the asset

Since the Pinel Act and Decree No. 2014-1317 of 3 November 2014, the lease must contain a precise and exhaustive inventory of the categories of charges, taxes, duties and fees relating to the lease, indicating how they are apportioned between landlord and tenant, as well as a forecast statement of works and a summary statement of works carried out. Article R. 145-35 also prohibits charging certain expenses to the tenant, first among them the major repairs under Article 606 of the Civil Code and compliance works where these fall within such major repairs, together with fees relating to the management of rents.

For an institutional landlord, the question goes beyond mere accounting allocation. It governs the viability of the asset over time. The tertiary eco-energy scheme, arising from Decree No. 2019-771 of 23 July 2019, imposes energy consumption reduction pathways on tertiary buildings with a floor area equal to or greater than 1,000 m², with a sharing of obligations between owner and occupier that must be organised contractually. The environmental annex is mandatory for office or retail premises of more than 2,000 m². A lease that is silent on these matters places the burden of energy capex on the landlord and complicates its re-invoicing, with a direct effect on net yield and on the asset's liquidity on resale.

The entry and exit inventory of fixtures (état des lieux), made mandatory by Article L. 145-40-1, determines in turn the possibility of relying on the presumption of good condition in Article 1731 of the Civil Code. Its absence in practice deprives the landlord of its claim for reinstatement on exit.

The landlord's security: before, during, after

Contractual security at the outset

The security deposit, common practice but not regulated by the statute, generally covers only a few rent quarters. Beyond that, the choice is between a surety (cautionnement) and an independent guarantee (garantie autonome). Since Ordinance No. 2021-1192 of 15 September 2021 reforming the law of security interests, suretyship is governed by Articles 2288 et seq. of the Civil Code, with strengthened formalism and information obligations, and a proportionality requirement that may lead to the reduction of the commitment of a surety who is an individual. The independent guarantee in Article 2321 of the Civil Code, which cannot be met with defences arising from the lease, gives the landlord greater security, provided that its drafting is not requalified as a suretyship for want of real autonomy of the commitment.

In commercial lease files on the landlord's side involving retail brands that are group subsidiaries, a parent company guarantee or a bank on-demand guarantee remains the expected standard. The choice of instrument, its duration, how it fits with the firm term of the lease and what happens to it on assignment of the lease are developed in our guide on the tenant's guarantees.

The termination clause and Article L. 145-41

The termination clause (clause résolutoire) inserted in the lease takes effect only one month after a payment order has remained unsuccessful, and this order must, on pain of nullity, mention that period. The judge, including in summary proceedings, may suspend the operation and effects of the clause and grant time to pay, the clause then being suspended for as long as the tenant complies with the payment schedule.

Litigation strategy turns on three points: the quality of the payment order, the speed of applying to the summary proceedings judge to have the clause recorded as having taken effect before any late regularisation, and anticipating the application for time to pay under Article 1343-5 of the Civil Code. A landlord who tolerates several months of arrears before reacting mechanically weakens its position. The mechanism is detailed in our guide on the termination clause and Article L. 145-41.

Statutory security and collective insolvency proceedings

The landlord of a building benefits from a special movable-property privilege over everything furnishing the leased premises, retained in Article 2332 of the Civil Code after the 2021 reform. Its real effectiveness depends on the amount of furniture and operating equipment present in the premises, which is often small for an office tenant.

The opening of collective insolvency proceedings radically changes the balance of power. Article L. 622-21 of the Commercial Code prohibits individual enforcement action for earlier claims, which must be filed in the debtor's liabilities. The lease continues by operation of law under Article L. 622-13, the administrator having an option to continue. Above all, Article L. 622-14 makes termination for non-payment of rents relating to occupation after the opening judgment conditional on the expiry of a period of three months from that judgment. A landlord who does not know this timetable serves ineffective acts and loses time. In compulsory liquidation, Article L. 641-12 provides a similar regime. On the treatment of earlier arrears, later rents and the landlord's ranking, see our analysis of the landlord facing the tenant's collective insolvency proceedings.

The practical rule is clear: from the opening judgment onwards, the landlord's strategy is no longer litigious but procedural. Filing of the claim within the two-month period from publication in the BODACC (official bulletin of civil and commercial notices), monitoring the administrator's option, applying to the supervising judge (juge-commissaire) for a declaration of termination at the relevant date, and checking the ranking of later claims eligible for preferential treatment.

Assignment, sub-letting and right of pre-emption

Article L. 145-16 deems unwritten any agreements prohibiting the tenant from assigning its lease to the purchaser of its business. The landlord therefore cannot lock down the assignment, but can frame it: approval, participation in the deed, retention of guarantees, a joint guarantee clause from the assignor. The latter is capped at three years from the assignment by Article L. 145-16-2, and Article L. 145-16-1 requires a landlord intending to rely on it to inform the assignor of any default in payment by the assignee within one month of the date on which the sum should have been paid. Late information deprives the landlord of the benefit of the guarantee: this is an operational monitoring task, not a drafting matter.

Total or partial sub-letting is prohibited unless the lease provides otherwise or the landlord agrees, the landlord having to be called to take part in the deed under Article L. 145-31. Where the sub-letting rent is higher than the principal rent, the landlord may require a corresponding increase in the rent under the head lease.

Finally, Article L. 145-46-1 gives the tenant a right of pre-emption where the leased premises are sold. The statutory exclusions are decisive for portfolio arbitrage: the overall sale of a building containing commercial premises, a single sale of several distinct commercial premises, or a sale to a close relative of the landlord fall outside the scheme. How the sale is structured, lot by lot or en bloc, therefore has direct consequences on the timetable and legal certainty of the sale.

What this statute requires of an institutional landlord

The commercial lease statute is not a regime unfavourable to the landlord: it is a regime with short time limits that penalises the absence of process. The three most frequent losses of value that we observe all arise from organisation and not from law: a three-month period allowed to expire on a request for renewal, a derogatory lease left to continue beyond one month after its term, a joint guarantee from the assignor lost for lack of information within the month of the first default. Conversely, gains are built long in advance: a firm term negotiated at the outset, a compliant inventory of charges and an explicit allocation of energy capex, a commercial-factors file built up as matters progress with a view to renewal.

The operational recommendation is simple. Before any acquisition or refinancing, have the lease portfolio audited not on the rent roll alone, but on the instruments themselves: effective dates, three-year break dates, waivers, charges clauses against Article R. 145-35, guarantees and their remaining term, the earlier notices and pending requests for renewal. And place under calendar alert the four time limits that cannot be recovered: the three months for replying to a request for renewal, the six months' notice for termination, the month following the end of a derogatory lease, and the month under Article L. 145-16-1.

Frequently asked questions

Can a landlord give notice at any time during a commercial lease? No. Apart from cases where the landlord can rely on a termination clause or seek judicial termination for the tenant's breach, the landlord can serve notice only for the contractual expiry date or, in the case of tacit extension, for a date respecting six months' notice and taking effect on the last day of the calendar quarter, in accordance with Article L. 145-9 of the Commercial Code. The three-year break option in Article L. 145-4 benefits in principle the tenant alone. The landlord has a three-year option only in the cases exhaustively provided for, in particular to build, rebuild or add storeys to the building.

What happens if the landlord does not reply to a request for renewal? The landlord has three months from service of the request to state its position by extrajudicial act. After that period, the landlord is deemed to have accepted the principle of renewal of the commercial lease. The landlord keeps the possibility of discussing the amount of the rent, but permanently loses the right to refuse renewal and therefore to avoid paying an eviction indemnity.

How can the rent of a commercial lease be uncapped on renewal? Lifting the cap requires either a ground relating to duration, a lease of more than nine years or an effective duration of more than twelve years through tacit extension, or a demonstration of a significant change in one of the elements of the rental value listed in Article L. 145-33 and specified in Articles R. 145-3 to R. 145-8. The burden of proof lies on the landlord and rests on a documented file, in particular for local commercial factors. Since the Pinel Act, the increase following the lifting of the cap is phased and cannot exceed 10% of the rent paid in the previous year.

What is the real cost of refusing renewal? The eviction indemnity under Article L. 145-14 corresponds to the loss suffered by the tenant: market value of the business according to the practice of the trade, or value of the leasehold right where transfer is possible without loss of customers, plus ancillary indemnities for removal, re-establishment and commercial disruption. A cost in time is added, since the tenant remains in the premises until actual payment, against an occupation indemnity. A prior valuation by an expert is essential before serving notice refusing renewal.

Does the termination clause allow a tenant in arrears to be evicted quickly? It takes effect only one month after a payment order has remained unsuccessful, mentioning that period on pain of nullity, under Article L. 145-41. The judge may then suspend the effects of the clause and grant time to pay on the basis of Article 1343-5 of the Civil Code. The landlord's speed of action after the payment order, and the quality of that order, largely determine the outcome of the procedure.

What security should be required from a tenant that is a group subsidiary? A security deposit alone is insufficient for a long-term lease. The independent on-demand guarantee in Article 2321 of the Civil Code, issued by a bank or by the parent company, offers greater protection than a surety since it cannot be met with defences arising from the lease. Its drafting must exclude any reference to the guaranteed contract that could lead to requalification as a suretyship, and its duration must cover at least the firm term.

Does the opening of collective insolvency proceedings against the tenant end the lease? No. The lease continues by operation of law and the administrator has an option to continue. Earlier claims must be filed in the debtor's liabilities, individual enforcement action being suspended by Article L. 622-21 of the Commercial Code. Termination for non-payment of rents falling after the opening judgment can be sought only on expiry of a period of three months from that judgment, under Article L. 622-14.