Commercial Leases/Business Goodwill

Article L. 145-18, para. 1, of the Commercial Code authorizes the landlord to refuse the renewal of the lease to construct or reconstruct the existing building, provided that the evicted tenant is paid eviction compensation. However, the landlord may, under para. 3, avoid paying this compensation if they offer the evicted lessee premises that meet their needs and capabilities, located in an equivalent location. It is imperative, to invoke these provisions, that the landlord is the owner of the premises; the text does not derogate from the fundamental rule prohibiting the disposal of another's property, and by allowing the owner to refuse the renewal of the lease to reconstruct the building, it necessarily implies that the owner of the land is also the owner of the constructions erected on that land . The text applies only to construction or reconstruction work, excluding repair, maintenance, transformation, or development work. It is necessary that the reconstruction be total, not merely partial, which implies the demolition of the existing building.

The lessor must have, at the date of the notice, the intention to demolish the building to rebuild it . This is not the case when it has been sold to a company of developers . However, the conditions for the application of Article L. 145-18 are met and the proof of the lessor's bad faith is not provided when the building leased to the tenant must be demolished to allow the construction of works, planned by an urban community, with the aim of ensuring the development of the industrial area, notably through the creation of a shopping center, even if the operation is entrusted to a real estate developer, who has obtained the construction permits, and in which the lessor is a managing partner .

If, under the terms of Article L. 145-18, para. 3, the landlord can avoid paying the eviction indemnity on the condition of offering the evicted tenant premises corresponding to their needs and possibilities, located in an equivalent location, it is still necessary, to be satisfactory, that this offer includes the essential elements of the business operated by the tenant . This is the case when, located in the immediate vicinity of their current store, these premises are new and integrated into a set of other shops, in a semicircle and apparently with elegance, on the new parking lot of the supermarket, and that, in addition to the interest of their modernity and comfort, they offer a larger area for the same price . To assess whether the replacement premises offered by the landlord correspond to the needs and possibilities of the evicted tenant, the judge must consider the date of the refusal to renew or the notice, and not the date of the tenant's departure .

Article L. 145-18, para. 4, provides for a temporary deprivation of enjoyment and not a temporary eviction of the tenant, thus referring to the time necessary for changing premises, as provided by para. 3, which it complements. Therefore, the owner can only avoid paying the eviction indemnity if, by the act of refusing renewal, they make another existing premises available to their tenant. This is not the case if they only offer a premises they propose to build and which may never be constructed , or when the proposed replacement premises do not exist at the time the notice is given, even if the landlord has begun constructing a new shopping mall and has provided the tenant with a plan of the premises and the offered location . Even in the case of relocation, the landlord may be required, if necessary, to pay the tenant “compensation for their temporary deprivation of enjoyment and the depreciation of their business,” the latter also being “reimbursed for their normal moving and installation expenses” (Art. L. 145-18, para. 4). The Court of Cassation considers that the tenant cannot be deprived of the relocation and moving indemnities referred to by this text on the grounds that they refused the replacement premises offered by the landlord, as long as they had quantified the indemnities they requested if the relocation offer was deemed satisfactory . However, if they can benefit from the provisions of para. 4, it is on the condition that they still physically occupy the premises, notwithstanding any judicial decision even if it has become res judicata .

Finally, the landlord, who invokes the provisions of Article L. 145-18, must, in the notice of refusal to renew or in the notice to quit, refer to the provisions of its paragraph 3 and specify the new rental conditions (Article L. 145-18, para. 4). The tenant then has a period of three months to “either communicate their acceptance by extrajudicial act or by registered letter with acknowledgment of receipt, or refer the matter to the competent court under the conditions provided for in Article L. 145-58.” The tenant's silence is deemed acceptance unless the tenant, prior to the offer of an equivalent premises from the landlord, has referred the matter to the court for a claim for eviction compensation .

Cass. com., 19 June 1961, LawLex202300012142JBJ: in this case, the constructions did not become the property of the lessor since the lease excluded any right of accession and did not provide any option allowing, at the end of the lease, either to retain the constructions or to demolish them.

Cass. 3e civ., 27 October 1993, LawLex202100003792JBJ.

Cass. com., 7 March 1962, LawLex202300012145JBJ.

Cass. 3e civ., 9 December 1975, LawLex202300012143JBJ.

Cass. 3e civ., 12 July 1995, LawLex202200006415JBJ, which quashes the appellate decision that held, to declare the notice valid, that Article L. 145-18 of the Commercial Code does not require the landlord to justify the necessity of rebuilding the property or to produce a building permit in support of this act, whereas the latter had no intention of rebuilding the property since it was sold to a developer company.

Cass. 3e civ., 14 September 2010, LawLex202200002991JBJ.

CA Paris, 31 January 2008, LawLex202300012144JBJ.

Cass. 3e civ., 7 December 1977, LawLex202200003168JBJ.

Cass. 3e civ., 6 January 1976, LawLex202200006579JBJ.

Cass. 3e civ., 14 January 2016, LawLex202200006417JBJ.

Cass. 3e civ., 13 March 2002, LawLex202200006416JBJ.

239. Construction or reconstruction