Commercial Leases/Business Goodwill

The assignment of a commercial lease constitutes a transfer of contract within the meaning of Articles 1216 et seq. of the Civil Code and as such has the effect of transferring the rights and obligations of the assignor to the assignee. Article 1105 of the Civil Code, which defines the general rules applicable to contracts, specifies that they apply subject to special rules. Thus, in the case of a …

Applicable Rules

The assignment of a commercial lease constitutes a transfer of contract within the meaning of Articles 1216 et seq. of the Civil Code and as such has the effect of transferring the rights and obligations of the assignor to the assignee. Article 1105 of the Civil Code, which defines the general rules applicable to contracts, specifies that they apply subject to special rules. Thus, in the case of a commercial lease contract, the specific provisions of Article L. 145-16 of the Commercial Code must be taken into account, which deem as unwritten, "whatever their form, agreements tending to prohibit the tenant from assigning their lease or the rights they hold under this chapter to the purchaser of their business

CA Rouen, 21 March 2024, LawLex202400002754JBJ, which specifies that it is no longer necessary for the transfer to be notified to the landlord for it to be enforceable against them.

When the landlord has previously given consent to the assignment, the enforceability formalities of Article 1690 of the Civil Code, which consist of notifying the landlord of the assignment or accepting it in an authentic act, do not seem applicable insofar as, in this case, the assignment only takes effect with respect to the landlord when the assignment contract of the lease right is notified to them or when they acknowledge it (Article 1216, para. 2, Civil Code). The solution appears identical in the presence of a clause inserted in the lease prohibiting any assignment of the lease without the landlord's consent, except to the purchaser of the business or the beneficiary of the universal transfer of professional assets. When the landlord gives their authorization at the time of the assignment, no particular formality seems necessary, their sole consent being sufficient to make the assignment enforceable.

Prior agreement of the landlord

In the absence of the landlord's prior agreement, the formalities of Article 1690 of the Civil Code apply to the assignment of the leasehold right. The text requires a regular service of the assignment deed to make the assignment enforceable against the landlord . The service must be carried out by extrajudicial act, at the initiative of one of the parties to the assignment, specifying the essential conditions thereof to inform the landlord. Also, the notification of the lease assignment made to the landlord, which includes a copy of an undated, unregistered assignment deed, is not enforceable against the latter . In the case of joint ownership, the assignment of the leasehold right must be served on each of the co-owners, and the failure to serve some of them renders the assignment unenforceable against them . To be valid and enforceable against the landlord, the service of the assignment must be delivered during the lease term , even if it is carried out by way of submissions during proceedings, without requiring acceptance from the landlord . However, the Court of Cassation has admitted that the renewal request, which expressly refers to the deed containing the assignment of the leasehold right and contains sufficient statements to inform the landlord of the existence and conditions of the transfer of the assigned rights, according to the prescriptions of Article 1690 of the Civil Code, constitutes an act equivalent to service . Conversely, the mere mention in the renewal request that the lessee seeks this renewal as the assignee of the business , the initiating document of proceedings which contains the mention that the landlord is not unaware that, by private deed, the business including the leasehold right has been assigned to the assignee , the communication to the landlord, during summary proceedings, of a judgment recounting the assignment, an act to which the latter is a stranger , or the notification to the landlord of a report of findings, at the request of the assignee , do not constitute regular service.

The enforceability of the assignment may also result from its acceptance by the lessor in an authentic instrument (Art. 1690, para. 2, Civil Code), or even in a private deed, the Court of Cassation having admitted, in the context of a transfer of shares, that a written acceptance made in a private deed may, by its effects, be assimilated to an authentic instrument, pursuant to Article 1690, paragraph 2, of the Civil Code . The trial courts have even sometimes upheld, if not the tacit acceptance by the lessor, at least the waiver by the latter to invoke the irregularity of the assignment. However, the completion of one or the other of the formalities, stated in Article 1690, can only become unnecessary to render the assignment of the leasehold right enforceable against the lessor if he has not only been aware of this assignment but has also accepted it unequivocally .

The implicit and unequivocal acceptance of the assignment of the leasehold right is established when:

- the lessor informed of the transfer by a notification gave their consent by issuing the assignee a rent receipt bearing the mention “subject to all rights and actions” ;

- the lessor serves the assignee, considered in the deed as the sole tenant of the premises, with a request for rent review, and, by formal notice, invites them to disclose the name of the occupant of the first floor ;

- the lessor became aware of the assignment by a means other than that prescribed in Article 1690 of the Civil Code and accepted it without protest by giving the assignee four receipts for the rent paid by the latter ;

- the lessor received, for more than six years, without reservation, the rents paid by the assignee of the lease, whose status they could not ignore , or not only collected rents but also issued receipts in the name of the assignee, without the slightest reservation or protest, and directly demanded a rent increase from them ;

- the lessor specified, in a letter to the assignee, the conditions of the lease and set the amount of the annual rent, the assignor sent a letter to the assignee in which he acknowledges that following his request for the transfer of assets, including the leasehold right, he assumes the rights and obligations of the assignor regarding the lease, and that no document shows any disagreement from the lessor regarding the assignment of the leasehold right ;

- the lessor served the assignee with a demand to pay the rent invoking the termination clause ;

- the lessor, following the dissolution of the tenant company of which he was informed by the liquidator, sent the assignee two letters expressly referring to the written lease and informing him of a rent adjustment, regularly collected the rent and issued receipts expressly referring to the commercial rent, wrote to his insurer to inform him of a fire specifying that the lessee was the assignee and served notice to demolish and rebuild the building by notifying the latter .

On the other hand, do not demonstrate a tacit and unequivocal acceptance:

- the absence of protest by the landlord to the assignment of the leasehold right ;

- the mere knowledge, by the lessor, of the assignment of the leasehold right ;

- the mere collection by the lessor of the rents paid by the assignee ;

- the issuance of a receipt, by the lessor, to the assignee ;

- the acceptance of certain rent payments made by checks bearing the name of the assignee, without issuing a receipt in the name of the latter ;

- the collection of rents paid by the assignee and the issuance of receipts in the name of the assignor, who operated a business under a trade name likely to cause confusion with the assignee ;

- the fact that the landlord did not receive notification of the transfer, the notary having merely sent him a certificate to inform him, that he received only one monthly rent after the transfer by postal order, that the transferee never paid rent himself, and that the landlord's letters to him only mentioned a draft lease ;

- the conduct of business by the assignee, with the knowledge and awareness of the lessor ;

- the existence of a draft lease regularization, through exchanges of letters between the notaries and lawyers of the parties, while this draft was only considered during the search for a transactional solution between them, which did not succeed .

The waiver is not presumed either and must, like acceptance, result from positive, unequivocal acts, indicating a certain intention by the lessor not to invoke the committed infractions . This is the case when the lessor has accepted a check issued by the assignee as payment for a quarter's rent with a promise of receipt, subject to actual collection, and has himself requested the reiteration of the assignment by notarial act , or when the lessor's knowledge of the assignment, his reiteration to the assignee of a notice including an offer to renew the lease, his unconditional acceptance for nearly three years of the rents paid by the latter, and the existence, during the same period, of negotiations between them on the setting of the price of the renewed lease are combined . The unequivocal waiver by the lessor to invoke the irregularity of the lease assignment cannot result from his passive attitude during the rent price revision procedure, nor from his perception , nor from the opposition intended to guarantee the payment of the sums due . The Paris Court of Appeal ruled that the mere knowledge by the lessor of the assignee's presence on the premises and the receipt of rents paid by the latter are not sufficient to characterize his intention to waive the irregularity of the assignment, whereas, if the issuance to the assignee of a command referring to the resolutory clause inserted in the lease granted to the assignor can be regarded as a positive act, it presents an equivocal character and cannot alone constitute an express acknowledgment by the lessor of the assignee's status as tenant .

Cass. com., 15 July 1963, LawLex202300013724JBJ.

Cass. 1re civ., 19 January 1970, No 68-11.697.

Cass. 3e civ., 5 May 1975, LawLex202300012764JBJ; 10 May 1989, LawLex202300013810JBJ.

Cass. com., 19 July 1965, LawLex202300013809JBJ.

Cass. com., 21 June 1966, [LawLex…JBJ].

Cass. 3e civ., 24 January 1969, No 67-10.122 – [LawLex…JBJ].

Cass. 3e civ., 11 May 1982, LawLex202300013812JBJ, further adding that the lessor could not ignore the status of assignee of the lease right of the public limited company since, on the one hand, the creation of the limited liability company, the contribution of the business to this company, ending the lease-management, and the transformation of this company into a public limited company were published in a legal announcements journal, and on the other hand, the rent payments were made by the public limited company from its creation and were accepted without reservation by the lessor.

Cass. 3e civ., 14 December 1994, LawLex202200008458JBJ.

Cass. 3e civ., 6 April 2005, LawLex202200008455JBJ.

Cass. 3e civ., 13 November 2012, LawLex202300013855JBJ.

Cass. 3e civ., 10 December 2002, LawLex202300013723JBJ.

Cass. 3e civ., 14 March 1969, LawLex202300013856JBJ.

Cass. Ass. plén., 14 February 1975, LawLex202300012765JBJ; Cass. civ. 3e, 16 July 1975, LawLex202300013857JBJ.

Cass. 3e civ., 5 May 1975, LawLex202300012764JBJ, cited; 10 May 1989, LawLex202300013810JBJ, cited, which considers that the collection of rent by the lessor, who deposited it into a blocked account, does not constitute an unequivocal acceptance of the assignment of the leasehold right.

Cass. 3e civ., 10 March 1999, LawLex202300014021JBJ.

Cass. com., 11 December 1961, LawLex202300013858JBJ.

Cass. 3e civ., 17 July 1996, LawLex202200008144JBJ.

Cass. 3e civ., 1 February 2000, LawLex202300013871JBJ.

Cass. com., 19 March 1962, LawLex202300013859JBJ.

Cass. 3e civ., 19 May 2004, LawLex202300013872JBJ.

Cass. 3e civ., 1 March 1972, LawLex202300013725JBJ.

Cass. 3e civ., 6 October 1982, LawLex202300013813JBJ.

Cass. 3e civ., 31 May 1983, LawLex202200007495JBJ.

Cass. 3e civ., 30 May 2007, LawLex202100002983JBJ.

Cass. 3e civ., 5 November 1976, LawLex202300013811JBJ.

Paris, 23 June 1992, No 90/2311, which noted that all receipts were issued in the name of the assignor and that none of the five conditions set by the lessor for the approval of the assignee were met.

Cass. 3e civ., 3 February 2010, LawLex202200008461JBJ.

Cass. com., 27 June 1961, No 58-11.606 – [LawLex…JBJ].

Cass. com., 13 March 1962, LawLex202300013726JBJ.

Cass. com., 14 March 1962, LawLex202300013727JBJ.

Cass. com., 15 July 1963, LawLex202300013724JBJ, préc.

Cass. 3e civ., 2 February 1977, LawLex202200003201JBJ.

Commercial Leases/Business Goodwill

302. Applicable Rules

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302. Applicable Rules

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