Commercial Leases/Business Goodwill

If the lessee is required, under Article 1728, 2° of the Civil Code, to “pay the rent at the agreed terms,” the parties must determine the date, method, and place of payment at the time of concluding the commercial lease. They must also agree whether the payment is to be made monthly, quarterly, semi-annually, or annually, and whether it should be made in advance or in arrears.

Under Articles L.  …

Payment terms

If the lessee is required, under Article 1728, 2° of the Civil Code, to “pay the rent at the agreed terms,” the parties must determine the date, method, and place of payment at the time of concluding the commercial lease. They must also agree whether the payment is to be made monthly, quarterly, semi-annually, or annually, and whether it should be made in advance or in arrears.

Under Articles L. 112-6, I and D. 112-3 of the Monetary and Financial Code, the payment of rent cannot be made in cash if it exceeds 1,000 EUR, nor by electronic money when the amount is greater than 3,000 EUR, but must be made by crossed check or transfer, and in euro.

Article 1343-4 of the Civil Code, in its version resulting from Ordinance 2016-131  effective 1 October 2016, which enshrines the principle of portable rent payment, states that “in the absence of another designation by law, contract, or judge, the place of payment of the monetary obligation is the domicile of the creditor.” Previously, the former Article 1247 of the Civil Code established the principle of rent collectability in the absence of a contract , insofar as the payment had to be made at the domicile of the lessee. While the Court of Cassation considered that a payment order was not justified in the absence of prior presentation, at the domicile of the lessee, of a rent receipt , it eventually relaxed its case law by ruling that a lessee, to whom an order has been issued, could not argue a possible lack of prior claim by the lessor to escape their essential obligation to effectively pay the rent . It should be noted, however, that the lessee may make rent payments to an agent of the lessor, responsible for collecting the rent on their behalf.

When the lessee owes several debts to the lessor, pursuant to Article 1342-10, para. 1, of the Civil Code, they may specify, at the time of payment, “which one they intend to settle.” Failing that, para. 2 specifies that the allocation is first applied to the due debts, among which the one they have the greatest interest in settling, otherwise the oldest, and if all things are equal, the allocation is made proportionally.

Under the terms of Article 1353 of the Civil Code, if “the person who demands the performance of an obligation must prove it,” "conversely, the person who claims to be released must justify the payment or the fact that caused the extinction of their obligation." Thus, it is up to the lessee to justify that they have been released from the payment of rents , even if these are due for the temporary occupation of the leased premises . Conversely, the lessor is required to justify the existence and enforceability of the rent and charges. In this respect, Article R. 145-36 of the Commercial Code specifies that “the lessor provides the tenant, upon request, with any document justifying the amount of charges, taxes, and fees charged to them.” Also, when the commercial lease places the property tax and related charges on the lessee, it is incumbent upon the lessor to establish their claim by demonstrating the existence and amount of these charges . Furthermore, the lessor must provide proof that the lease obliges the lessee to pay the claimed charges, which cannot result from the expenses incurred by them nor be inferred from the mere silence opposed to the existence of the claim by the lessee during the procedure .

Even though the law of 6 July 1989 , which makes it mandatory to issue receipts to the tenant, does not apply to commercial leases, Law No 77-1457 of 29 December 1977  provides that “any tenant or bona fide occupant may demand the issuance of a receipt or acknowledgment upon making a payment” , which implies a presumption of payment of rent and charges, which the landlord must refute by any means of proof . Thus, a landlord cannot evade the legal obligation to issue rent receipts to the tenant  by claiming that the tenant has only made partial payments . However, the failure to issue receipts does not justify the non-payment of rent . It has nevertheless been ruled that if a landlord refrains from issuing rent receipts and annual charge statements, and cannot fully justify the delays or deficiencies in rental payments, this at least significantly facilitated them, and these should not be considered a sufficiently serious breach by the tenant of their contractual obligations to justify the termination of the lease .

Finally, before Ordinance 2016-131, when the landlord refused to accept payment, the tenant could make formal offers, and if the landlord refused to accept them, deposit the amount (former Art. 1257, para. 1, Civil Code). These formal offers followed by a deposit released the tenant and served as payment, when validly made, with the deposited amount remaining at the landlord's risk (former Art. 1257, para. 2). However, the deposit could not be considered payment unless validated by a final judgment . Since Ordinance 2016-131, Articles 1345 et seq. of the Civil Code  establish a new procedure. Now, when the landlord, at maturity and without legitimate reason, refuses to accept the payment due or prevents it by their actions, the tenant can formally demand acceptance or execution (Art. 1345, para. 1, Civil Code). If the formal demand stops the interest due by the tenant and places the risk on the landlord, except in cases of gross negligence or fraud by the tenant (Art. 1345, para. 2), it does not interrupt the statute of limitations (Art. 1345, para. 3). If the obstruction has not ended within two months of the formal demand, the tenant can deposit the amount with the Caisse des dépôts et consignations (Art. 1345-1, para. 1, Civil Code), thereby releasing the tenant from the time of notification to the landlord (Art. 1345-1, para. 3, Civil Code).

Order No 2016-131 of 10 February 2016 on the reform of contract law, the general regime, and the proof of obligations, Art. 3.

Cass. 3e civ., 12 March 2002, LawLex202200010644JBJ.

CA Aix-en-Provence, 18 March 2010, LawLex202200011415JBJ.

Cass. 3e civ., 3 April 2001, LawLex202100004620JBJ.

CA Aix-en-Provence, 18 March 2010, LawLex202200011415JBJ, prec., which specifies that accounting and tax rules require the commercial tenant to provide receipts as justification for their operating expenses, and the landlord cannot evade the necessity of providing these documents.

CA Paris, 17 January 1995, No 93/015507, concerning a residential lease.

Cass. 3e civ., 3 July 2013, LawLex202200011414JBJ.

CA Paris, 17 January 1995, No 93/015507, previously cited.

Cass. 3e civ., 2 February 2000, LawLex202200010814JBJ.

Order No 2016-131 of 10 February 2016 on the reform of contract law, the general regime, and proof of obligations, Art. 3.

Cass. 3e civ., 23 October 1979, LawLex202200010440JBJ.

Cass. 3e civ., 24 November 2004, LawLex202100004527JBJ.

Cass. 3e civ., 4 April 1990, LawLex202100004518JBJ, which quashes the appellate decision that reverses the burden of proof by holding that the landlord does not provide evidence of the tenant's failure to fulfill the obligation to pay rent; 9 March 2010, LawLex202100004528JBJ.

Cass. 3e civ., 5 February 2013, LawLex202100004640JBJ.

Cass. 3e civ., 17 September 2020, LawLex202100005586JBJ, according to which the lessor must, in order to retain, by allocating them to its reimbursement claim, the sums paid as provisions for charges and property taxes, justify the amount of expenses and, failing to do so, return to the lessee the sums paid as provisions; 9 June 2015, LawLex202200006037JBJ, which approves the condemnation of a lessor to reimburse the provisions on charges, for a given period, as long as it has not produced, during that period, any proof of water charges or waste collection taxes.

Cass. 3e civ., 10 September 2020, LawLex202200011413JBJ.

Act No 89-462 of 6 July 1989 aimed at improving rental relations and amending Act No 86-1290 of 23 December 1986, Art. 21.

Law No 77-1457 of 29 December 1977 on various provisions concerning prices, Art. 11.

Commercial Leases/Business Goodwill

112. Payment terms

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112. Payment terms

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