Commercial Leases/Business Goodwill

The Court of Cassation established the principle that work prescribed by the administrative authority, even if it falls under the maintenance obligation , is the responsibility of the lessor, unless expressly stipulated otherwise . It follows that the parties may decide to assign this work to the lessee provided that a clear and precise clause in the commercial lease stipulates it . In the absence of such a clause, the fact that expert reports, drawn up prior to the conclusion of the lease, did not foresee the work necessary to bring the leased premises into compliance is irrelevant, and the lessee is entitled to request reimbursement of the cost of this work . Similarly, when the restoration of a building, which was not compliant with regulations before the occurrence of the damage, requires the filing of a building permit involving compliance with standards applicable to public-access establishments, the cost of the work falls on the lessor .

The public policy provisions of Article R. 145-35, 2° of the Commercial Code, stemming from Decree No 2014-1317 of 3 November 2014  and applicable to leases concluded or renewed from 5 November 2014 , prohibit the lessor from charging the lessee for expenses related to works aimed at bringing the leased property or the building in which it is located into compliance with regulations, as long as they fall under major repairs mentioned in Article 606 of the Civil Code. Apart from major repairs, the parties may agree on the lessee bearing the cost of compliance works. The clause must be drafted clearly and precisely, otherwise the lessor is obliged to bear the cost of the concerned works. This applies to clauses deemed too general, such as one stipulating that the lessee accepts the premises in their current state , without being able to demand any restoration or repair from the lessor other than weatherproofing , nor exercise any recourse against the latter, particularly for obsolescence, unsanitary conditions, or poor construction state , or one that requires the tenant to comply with current laws and regulations concerning safety, so that the lessor cannot be troubled or held accountable in this regard . It also does not emerge from the stipulations of a lease, an express derogation from the obligation incumbent on the lessor to bear the cost of works prescribed by the administrative authority, when under its terms, except for the complete repair of roofs and the consolidation and repair of exterior walls and framework, all works are the responsibility of the lessee who must maintain all specific equipment, electrical and telephone installations in accordance with current standards, and must notably comply, if applicable, with regulations relating to establishments open to the public . The Court of Cassation has been strict with the lessor by charging them with the cost of compliance works carried out by the lessee, due to the absence of an express stipulation in the lease obliging the lessee to the cost of connecting to wastewater and installing a connection to the electrical network .

The work to bring the premises into compliance with safety regulations falls to the lessee when the lease assigns to them all the work that may be necessary to bring the building into compliance with existing regulations concerning their activities , when it stipulates that the lessee may conduct any business on the premises but under their full responsibility, particularly regarding compliance of the premises with any regulations, acknowledging being fully informed of the requirements imposed by various safety commissions for the operation of the business , or when the parties agree that it is up to the lessee to comply with any regulations prescribed by the administrative authority for the exercise of their activity and to carry out at their expense the necessary work to meet applicable safety standards . Conversely, in the absence of the lease expressly providing for such an assumption of responsibility, the lessor cannot be exempted from the work to bring the premises up to safety standards .

If the work prescribed in matters of hygiene and sanitation by the administrative authority is the responsibility of the lessor when the lease simply stipulates that the lessee must strictly comply with the prescriptions of all regulations, particularly sanitary ones, and adhere to all hygiene and sanitation rules , this is not the case when the parties have agreed that the lessee must carry out, at their own expense and without any recourse against the lessor, the work that may be imposed on them by the hygiene and sanitation commission and by any competent administration or authority . Successive lessees cannot be required to carry out this work either by the operation of the lease clause, which places on the lessee the obligation to comply with sanitary, road, sanitation, and hygiene regulations so that the lessor cannot be held liable in this regard, or by the successive acts of transfer of the business, stipulating that the purchaser will personally handle the regulations relating to hygiene, sanitation, and safety .

The work prescribed by the administrative authority regarding refurbishment is likewise the responsibility of the lessor unless expressly stipulated otherwise . However, even if the lease assigns the refurbishment work of the building's facades to the lessee, this work falls to the lessor if the lease does not expressly stipulate that the lessee is responsible for the work prescribed by the Administration .

In all cases, the tenant contractually responsible for the compliance work must first seek the express and written authorization of the landlord to carry it out , unless urgency dictates otherwise .

Finally, the landlord is not required to bear the cost of work prescribed by the administrative authority that is not intended to make the premises conform to their contractual purpose and has only become necessary due to the tenant's use of the premises and its installations . Thus, safety work prescribed by the administrative authority, due to the tenant adding activities beyond those contractually provided for in the lease, is the responsibility of the tenant . When the condition of the leased premises results from a lack of maintenance and repair of the building as well as the deplorable state of common equipment, and not from normal aging or intrinsic wear of the building, due to the tenant's serious and repeated failures to fulfill their maintenance obligation , or when the administrative authority has based its closure order on the poor condition of the premises and the operator's failure to comply with good hygiene practices, the work necessary for reopening the business, which falls under mere rental repairs and is only imposed due to the tenant's use of the premises and installations , the restoration is not the landlord's responsibility. Similarly, no fault in the execution of their obligations can be attributed to the landlord when work to bring the premises up to standard, prescribed by the administrative authority, results from the constant evolution of regulations, the cost of which is equivalent to the market value of the building, and the tenants do not justify having formally requested the landlord to carry out the work as periodic inspections and unfavorable orders for continued operation occurred . If defects in exterior joinery, insulation of exterior walls, ventilation, and electrical installation, which do not affect the enclosure, do not fall under Article 606 of the Civil Code, the landlord remains, however, obliged, independently of major repairs, and notwithstanding the lease stipulations, to bring the residential part alone into compliance with the public order rules of rental decency provided by Article 2 of Decree No 2002-120 of 30 January 2002 , including regarding the electrical installation .

Paris, 12 May 2021, LawLex202200000233JBJ, which specifies that the work prescribed by the administrative authority, which falls under Article 1719 of the Civil Code, concerning the obligation to maintain the leased premises in a condition suitable for the use for which they were rented, is the responsibility of the lessor by the nature of the contract.

Cass. 3e civ., 10 May 2001, LawLex202200008303JBJ. – See, for example, Cass. 3e civ., 10 September 2020, LawLex202200008604JBJ, according to which the request of a lessee for reimbursement of expenses incurred for bringing the electrical network of the leased premises into compliance cannot be rejected without establishing the existence of an express provision in the lease placing the safety work prescribed by the administrative authority at the lessee's expense.

Cass. 3e civ., 28 January 2021, LawLex202200008419JBJ, concerning work prescribed by the territorial security committee.

Cass. 3e civ., 29 January 2002, LawLex202200008422JBJ, under the terms of the lease, the lessee also declared that obtaining the necessary authorizations for the exercise of their activity was their personal responsibility, and undertook, in order to comply with the regulations concerning them, to carry out all associated work at their own expense.

Cass. 3e civ., 11 October 2018, LawLex202100004010JBJ, for a lease which stipulated that the lessee declared to be well acquainted with the leased premises and that he took them “in the condition they are in at the time of his entry into possession without being able to demand any work of any kind or restoration from the lessor and that, being fully aware of the premises' equipment, he declares to take personal responsibility for all steps to obtain the connections of said equipment and installations of any kind necessary for the exercise of his activity.”

Cass. 3e civ., 21 March 2012, LawLex202200008616JBJ, in this case, the work carried out aimed to bring the establishment into compliance for receiving the public and constituted safety work within the meaning of the contract.

Cass. 3e civ., 15 June 2010, LawLex202200008414JBJ, for a lease which also provides that the lessee takes the premises in their condition at the time of entry into possession without being able to require the lessor to carry out any restoration or repair work, and undertakes to perform on behalf of the lessor all repairs that may be necessary in the leased premises except for major repairs as defined in Article 606 of the Civil Code, with repairs related to the compliance of electrical and gas installations being maintenance.

Cass. 3e civ., 14 October 2008, LawLex202200008430JBJ, for a lease stipulating that the lessee takes the leased premises as is, without being able to require the lessor to make any repairs or restoration other than those necessary for the enclosure and covering of the premises, which the lessee handles personally, so that the lessor is never disturbed or sought in this regard, for any claims or disputes that may arise from the lessee's activities in the leased premises, and is responsible for all transformations and repairs necessitated by the exercise of their activity, and that the lessee must comply with all municipal, police, health regulations, road, sanitation, hygiene charges, as well as those that may result from city planning schemes and other charges ordinarily borne by tenants.

Cass. 3e civ., 13 November 2012, LawLex202200008424JBJ, préc.

Cass. 3e civ., 19 June 2002, LawLex202200008614JBJ.

Cass. 3e civ., 6 November 2001, LawLex202200008426JBJ.

Cass. 3e civ., 1 December 2016, LawLex202200008611JBJ: in this case, the acts of transfer of the business also stipulated that the purchaser must comply either with any injunctions from the competent services or from the departmental directorate of veterinary services and the departmental directorate of security services, or with the injunctions of the security commission, without recourse against the seller.

Cass. 3e civ., 17 April 1996, LawLex202200008581JBJ. – See also Cass. 3e civ., 28 September 2005, LawLex202200008587JBJ, which attributes the cost of the work to the landlord only when no lease provision places the work imposed by the administrative authority on the tenant and when the co-ownership resolution regarding the building's refurbishment was not freely decided by it but was dictated by a municipal order requiring the work to be carried out under penalty of a fine.

Cass. 3e civ., 10 May 2001, LawLex202200008303JBJ.

Cass. 3e civ., 5 October 2017, LawLex202200008387JBJ.

Cass. 3e civ., 26 September 2001, LawLex202200008421JBJ.

Cass. 3e civ., 13 December 2018, LawLex202200008429JBJ, which specifies that a lessee cannot, without prior authorization from the judge, substitute themselves for the lessor, without determining whether the lessee is exempt from such authorization due to the urgency of carrying them out.

Cass. 3e civ., 20 June 1989, LawLex202200008605JBJ. – Also see Cass. 3e civ., 28 May 2003, LawLex202200008418JBJ; 19 April 1989, LawLex202200008607JBJ, regarding a lease not specifying the use given to the premises.

Cass. 3e civ., 13 June 2007, LawLex202200008610JBJ.

Cass. 3e civ., 9 July 2013, LawLex202200008609JBJ, for work required in terms of safety and sanitation of the premises considering their hotel operation, which were covered by a lease clause placing on the tenant all maintenance and repair work of the building and its dependencies, particularly those necessary for public sanitation, whether planned or unforeseen.

Cass. 3e civ., 30 October 2013, LawLex202200004026JBJ.

Cass. 3e civ., 14 June 2018, LawLex202100004009JBJ.

Decree No 2002-120 of 30 January 2002 on the characteristics of decent housing adopted for the application of Article 187 of Law No 2000-1208 of 13 December 2000 on solidarity and urban renewal.

Cass. 3e civ., 5 June 2002, LawLex202100003965JBJ.

CA Orléans, 18 April 2024, LawLex202400003291JBJ.

Cass. 3e civ., 7 March 2007, LawLex202100004582JBJ, in this case, no sanction or prohibition on operating had been issued by the competent authorities.

Cass. 3e civ., 27 March 2002, LawLex202200008416JBJ. – Also see Cass. 3e civ., 5 June 2002, LawLex202100003965JBJ, supra.

Cass. 3e civ., 12 March 1985, LawLex202200008606JBJ, concerning work ordered by the security commission.

Cass. 3e civ., 13 November 2012, LawLex202200008424JBJ.

98. Restoration or compliance work