Commercial Leases/Business Goodwill

Under the terms of Article L. 214-1, para. 1, of the Urban Planning Code, “the municipal council may, by a reasoned resolution, delineate a perimeter for the protection of local commerce and crafts, within which the transfers for consideration of artisanal businesses, commercial businesses, or commercial leases are subject to the right of preemption established by this chapter.” According to the Council of State, the grounds for protecting security and public order are not among those provided for by the provisions relating to the right of preemption . The right of preemption only concerns transfers for consideration, which de facto excludes gratuitous transfers. However, the contribution in kind of the business or lease assimilated to a transfer must comply with the provisions of Article L. 214-1 et seq. of the Urban Planning Code. In the case of a company subject to collective proceedings, the rights of preemption cannot be exercised on the leasehold rights included in the partial or total transfer of the company .

Article L. 214-1, para. 3, of the Urban Planning Code states that “each transfer for valuable consideration is subject, on pain of nullity, to a prior declaration made by the transferor to the municipality.” This declaration must specify “the price, the activity of the prospective buyer, the number of employees of the transferor, the nature of their employment contracts, and the conditions of the transfer.” It must also include the commercial lease and specify the turnover when the transfer involves a commercial lease or an artisanal or commercial business. Since, unlike its activity, the identity of the transferee is not an essential piece of information that must appear in the declaration, the transferor is not required to file a new declaration of intent to transfer in the event of a sale to another buyer, provided that the price and conditions of the proposed transfer have not been modified .

Within two months from the receipt of the prior declaration, or the first of the acknowledgments of receipt or registration issued electronically, the holder of the preemption right must notify the transferor either of their decision to acquire at the price and conditions indicated in the prior declaration, or their offer to acquire at the price and conditions set by the judicial authority seized under the conditions provided for in Article R. 214-6, or their decision to waive the exercise of the preemption right (Article R. 214-5, para. 1, Urban Planning Code). This notification is made by registered mail with a request for acknowledgment of receipt, or by delivery against receipt at the domicile or registered office of the transferor, or electronically, in a single copy, under the conditions provided for in Articles L. 112-11 and L. 112-12 of the Code of Relations between the Public and the Administration . A copy of this notification must be communicated to the lessor when the transferor is bound by a lease agreement (Article R. 214-5, para. 3). Silence maintained by the holder of the preemption right at the end of the two-month period constitutes a waiver of the exercise of their right (Article R. 214-5, para. 3) .

If the holder of the right of preemption refuses to preempt or waives the exercise of their right, Article L. 214-1, para. 4, of the Urban Planning Code provides that “the transferor may then proceed with the sale at the price and conditions stated in their declaration.” However, when the holder of the right of preemption has decided to waive exercising their right, whether by the expiration of the two-month period or by an explicit decision made before the expiration of this period, they are divested and can no longer withdraw this decision nor, consequently, legally exercise their right of preemption .

In the event of a disagreement on the price or conditions indicated in the declaration of intent to sell, Article R. 214-6 of the Urban Planning Code allows the holder of the preemption right, who wishes to acquire, to refer, within two months from the receipt of the prior declaration, “the competent jurisdiction in matters of expropriation by registered letter with acknowledgment of receipt addressed to the secretariat of this jurisdiction, accompanied by a duplicate copy of their brief,” a copy of this referral letter and the brief being simultaneously notified to the transferor and, if applicable, to the lessor. Article L. 213-4, paragraph 1, of the Urban Planning Code requires the seized jurisdiction to set a purchase price exclusive of any ancillary compensation, and notably of the relocation compensation. In the event of a disagreement on the price, the transferor, who has expressed their intention to sell their leasehold right, may subsequently withdraw their offer. Similarly, the holder of the preemption right may waive the exercise of their right during the procedure in the absence of an agreement on the price (Article L. 213-7, para. 1, Urban Planning Code).

When the holder of the right of preemption becomes the purchaser of the lease, Article R. 214-9, para. 1, of the Urban Planning Code provides that the deed recording the transfer must be drawn up “within three months following the notification of the agreement on the price and conditions indicated in the prior declaration or of the final judicial decision setting the price and conditions of the transfer or following the date of the deed or the judgment of adjudication.” The price is paid at the time of the establishment of the transfer deed, subject, however, to the application of the provisions of Articles L. 141-12 et seq. of the Commercial Code regarding publicity (Art. R. 214-9, para. 2, Urban Planning Code).

Any transfer of the leasehold right, carried out in violation of the provisions of L. 214-1 et seq. of the Urban Planning Code, is subject to nullity (Art. L. 214-1, para. 3, Urban Planning Code), which is subject to a five-year limitation period (Article 2224 Civil Code). Article R. 214-10 specifies that the action for nullity is brought “before the Judicial Court of the location of the business or building on which the rented premises or land depend.”

Under the terms of Article L. 214-2, para. 1, of the Urban Planning Code, “the holder of the preemption right must, within two years from the effective date of the transfer for consideration, transfer the artisanal business, commercial business, commercial lease, or land to a company registered in the Trade and Companies Register or the National Register of Companies as a business in the craft and artisanal sector, with a view to exploitation intended to preserve diversity and promote the development of commercial and artisanal activity in the concerned area.” This period may be extended to three years in the case of leasing management of the commercial business or artisanal business. To this end, the deliberative body of the municipality is required to approve a specification setting the objectives to be followed before a notice of transfer is published, including a call for applications, a description of the business, lease, or land, and the proposed price (Articles R. 214-11 and R. 214-12, para. 1, Urban Planning Code). Candidates for the transfer, among whom is the future transferee, must justify their registration in the Trade and Companies Register or the National Register of Companies as a business in the craft and artisanal sector or hold an equivalent title conferring or recognizing their status as a merchant or artisan (Article R. 214-12, para. 3, Urban Planning Code). Finally, the transfer is authorized by the deliberative body of the municipality before being advertised within the month following the signing of the transfer deed (Articles R. 214-14 and R. 214-15, para. 1, Urban Planning Code).

Article L. 214-2, para. 3, however, specifies that “the retrocession of a commercial lease is subject, on pain of nullity, to the prior agreement of the lessor,” which must be included in the retrocession deed. This agreement concerns the draft deed accompanied by the specifications that have been sent to him by registered letter with acknowledgment of receipt (Article R. 214-13, para. 1, Urban Planning Code). In the event of the lessor's opposition to the transfer project, Article R. 214-13, para. 2, of the Urban Planning Code indicates that the lessor must refer, “according to the expedited procedure on the merits, to the president of the Judicial Court of the location of the building on which the leased premises depend to validate his opposition to the retrocession.” However, this text provides that in the absence of notification to the holder of the right of preemption, within two months following the receipt of the draft deed, of the reasoned referral to the court, the lessor is deemed to have given his consent to the retrocession. The period granted to the holder of the right of preemption to proceed with the retrocession is suspended from the notification of the draft deed to the lessor until obtaining his consent or, failing that, during the procedure, until a final court decision is rendered (Article R. 214-13, para. 3, Urban Planning Code).

Finally, if the retrocession has not occurred by the expiration of the two-year period from the effective date of the transfer for consideration, Article R. 214-16 of the Urban Planning Code provides that “the dispossessed purchaser, if their identity was mentioned in the prior declaration referred to in Article R. 214-4, benefits from a right of priority acquisition.”

CE, 26 April 2013, LawLex202300013873JBJ.

Art. L. 626-1, para. 5, Commercial Code for a safeguard procedure; Art. L. 642-5, para. 4, Commercial Code for a judicial liquidation procedure, and by reference, Art. L. 631-22, para. 1, Commercial Code for a judicial reorganization procedure.

Cass. 3e civ., 8 October 2008, No 07-15.935. 

Electronic notification is only possible insofar as the declaration provided for in Article R. 214-4 has been sent in the same manner (Article R. 214-5, para. 2, Urban Planning Code).

See also Article L. 214-1, para. 4, Urban Planning Code, according to which “the silence of the holder of the preemption right during the two-month period from the receipt of this declaration constitutes a waiver of the exercise of the preemption right.”

308. Conditions of Practice