Commercial Leases/Business Goodwill

Under the terms of Article L. 311-1 of the Tourism Code, the lessor of a building in which a hotel is operated cannot oppose, notwithstanding any contrary stipulation, the execution of equipment and improvement works that the lessee, owner of the business, carries out at their own expense and responsibility, even if these works result in a modification of the layout of the rented premises. The text exhaustively lists the various categories of works concerned, which include, among others, the distribution of water, gas, and electricity, sanitary equipment, sewage disposal, and the fitting out of kitchens and pantries. Article L. 311-4, para. 1, of the same code specifies that at the time of the lessee's departure or the possible assignee of the lease right, the rented premises are returned to the lessor in their current state, without the latter being able to demand the restoration of the premises to their previous condition.

The lessee must, before proceeding with the work, notify the lessor of their intention by registered letter with acknowledgment of receipt, to which are attached an execution plan and a descriptive and estimated quote of the proposed work (Article L. 311-2 Tourism Code). When this work affects the structural framework of the building, the lessor has a period of two months to inform the lessee of their acceptance or refusal under the same formal conditions, with silence amounting to agreement (Article L. 311-2 Tourism Code). In case of the owner's refusal, the lessee may only undertake work affecting the structural framework after a favorable opinion from commissions in which hoteliers and building lessors are equally represented (Article L. 311-1, para. 2, Tourism Code). When the lessee does not proceed, before carrying out the work, with the notification provided for in Article L. 311-2 of the Tourism Code, the omission of this substantial formality deprives them of any right to invoke the provisions of Articles L. 311-1 and following of the same code , and constitutes a fault justifying the termination of the lease . Even if the lessee has normally fulfilled their obligations by executing the work only after the expiration of the two-month response period provided for by Article L. 311-2 of the Tourism Code, the lessor is entitled to request the termination of the lease as soon as the lessee has failed to send them, by registered letter with acknowledgment of receipt, the execution plan and the descriptive and estimated quote of the proposed work .

Article L. 311-3 of the Tourism Code specifies that “during the term of the current lease and that of the renewed lease that follows it, and for a period of twelve years from the expiration of the execution period mentioned in Article L. 311-2, the owner cannot claim any rent increase due to the incorporation into the building of improvements resulting from the execution of the works mentioned in Article L. 311-1.” The Court of Cassation specified the conditions under which the lessor cannot claim any rent increase during this period . First, the date on which the maximum twelve-year period expires may determine, during the renewed lease following the one during which the works were carried out, a step increase corresponding to the incorporation of the resulting improvements. If the lease is renewed while the twelve-year period has not expired, it can only be considered, taking into account the improvements made, until the end of this period. Then, the period during which the lessor cannot benefit from the works carried out by the lessee only starts from the date on which the works are executed and not from the authorization given by the lessor.

If the absence of notification, as provided for in Article L. 311-2 of the Tourism Code, deprives the lessee of the benefit of the provisions of Article L. 311-3 , even if the work was carried out with the knowledge of the lessor who did not object , the lease clause by which the latter already authorizes the lessee to carry out work is not interpreted as exempting them from the formality of prior notification . In this case, the rental value is determined, based on Article R. 145-10 of the Commercial Code, due to the single-purpose nature of the premises , and according to the practices observed in the relevant business sector, independently of any improvements made to the leased premises by works other than those referred to in Articles L. 311-1 et seq. of the Tourism Code and to the financing of which the lessor did not contribute .

Cass. civ. 3e, 21 February 2001, LawLex202300000967JBJ. – Also see Cass. 3e civ., 3 May 2007, LawLex202300000968JBJ, according to which the lessee cannot claim any reduction for the hotel works he carried out in the leased premises during the expired lease, even if the improvements, at the time of renewal, did or did not accede to the lessor.

Cass. 3e civ., 10 July 1996, LawLex202300000969JBJ.

Cass. 3e civ., 5 May 1999, LawLex202300000970JBJ.

Cass. 3e civ., 13 November 2013, LawLex202300000972JBJ.

Cass. 3e civ., 3 May 2007, LawLex202300000968JBJ, préc.

CA Dijon, 3 November 1994, No 1739/93, which specifies that the absence of opposition from the landlord does not constitute a waiver.

CA Aix-en-Provence, 19 October 2012, No 10/08972, which recalls that the notification must be accompanied by an execution plan and the descriptive and estimated quotation of the proposed works, not annexed to the lease.

Cass. 3e civ., 12 July 2000, No LawLex202300000973JBJ.

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