Commercial Leases/Business Goodwill

In the absence of legal or regulatory provisions, it initially fell to the case law  to define the precarious occupancy agreement, which “is characterized, regardless of its duration, by the fact that the occupancy of the premises is authorized only due to exceptional circumstances and for a duration whose end is marked by causes other than the sole will of the parties” . The “exceptional circumst …

Precarious Occupancy Agreement

In the absence of legal or regulatory provisions, it initially fell to the case law  to define the precarious occupancy agreement, which “is characterized, regardless of its duration, by the fact that the occupancy of the premises is authorized only due to exceptional circumstances and for a duration whose end is marked by causes other than the sole will of the parties” . The “exceptional circumstances” were later replaced by “particular circumstances” , with doctrine sometimes referring to “specific circumstances” . Law No 2014-626 of 18 June 2014, known as the “Pinel Law,” finally incorporated the precarious occupancy agreement into the Commercial Code by creating a new Article L. 145-5-1 . According to this text, “the precarious occupancy agreement, which is characterized, regardless of its duration, by the fact that the occupancy of the premises is authorized only due to particular circumstances independent of the sole will of the parties,” is not subject to the present chapter, noting that the legislator merely codified the solution established by the Court of Cassation, according to which such an agreement is not subject to the status of commercial leases , with the occupant not benefiting from the right to renewal or an eviction indemnity upon the expiration of the contract.

If the temporary occupancy agreement grants, like the loan for use   and the lease, the right to use a thing and return it at the end of the contract, it differs from the former, which implies gratuity, by its necessarily onerous nature, and from the latter by the absence of a guarantee of peaceful enjoyment for the occupant, which can be revoked at any time by the owner  . Since the temporary occupancy agreement is not a lease, it follows that the provisions of Articles 1708 et seq. of the Civil Code relating to the common law civil lease are inapplicable  . For the same reason, it should not be confused with the derogatory lease, which ends on the date agreed upon by the parties, whereas the temporary occupancy agreement can be terminated at any time once the reason for precariousness has been realized  . The consequences of the occupant remaining on the premises after the expiration of the agreement also differ. Indeed, in the case of a temporary occupancy agreement, the fact that an occupant remains in the rented premises beyond the initially envisaged period does not imply the application of the commercial lease status  . Conversely, if, upon the expiration of a derogatory lease, and at the latest within a one-month period, the tenant is left in possession of the rented premises, a new lease subject to the status is automatically concluded  . Finally, the temporary occupancy agreement is distinguished from the derogatory lease by the existence of a reason for precariousness  .

The precarious occupancy agreement, lacking its own legal framework, allows the parties to freely determine the terms of the agreement, whether written or verbal, as well as their respective obligations, provided that the precariousness is objectively characterized and justified by specific circumstances, as mere reference to the notion of precariousness in the agreement is insufficient . The application of Article L. 145-5-1 of the Commercial Code requires verifying that there is an objective and legitimate cause of precariousness affecting the building or premises, independent of the parties' sole desire to avoid the status of commercial leases .

However, the precarious occupation agreement must not be a means to circumvent the mandatory provisions related to the lease status, particularly Article L. 145-15 of the Commercial Code, which deems “regardless of form, clauses, stipulations, and arrangements that have the effect of defeating the right of renewal” as unwritten, as well as other provisions in the matter. Thus, the judge, who has broad sovereign discretion, does not hesitate to reclassify the disputed agreement as a commercial lease when he finds fraud aimed at evading the provisions related to the status . The judge must determine whether the conditions allowing the parties to bypass the status of commercial leases are met . Thus, an agreement entitled “precarious and revocable concession act” may be reclassified as a commercial lease when, from the outset, the lessor intended, in bad faith, to exempt this agreement from the status of commercial leases . When a disputed agreement called a precarious occupation is fraudulent because it was concluded to thwart the application of the legal status of commercial leases, the lessor is not admissible to invoke against the occupant a clause of the agreement regulating the right of assignment protected by Article L. 145-16 of the Commercial Code .

The notion of precariousness is characterized by the fragility of the occupant's right, which is reflected in the temporary nature  of the provision of the premises, the subject of the agreement, and not by its duration, which, whether more or less lengthy , has no impact on the qualification of a precarious occupancy agreement , it being specified that the stipulation of an indefinite duration in the agreement does not render it void . Such qualification being independent of the actual duration of occupancy, the permanence of the agreement depends on the occurrence of an uncertain or certain event whose date of realization is uncertain, which constitutes the reason for precariousness, justifying the temporary nature of the enjoyment of the premises . The fragility of the occupant's right also lies in the possibility of terminating the precarious occupancy agreement at any time , even though it is not prohibited for the parties to provide for a notice period in the agreement .

Precariousness may result from the limited nature of the occupant's right of enjoyment . Thus, an agreement that grants an essentially precarious right of occupation for a location within a store, of approximate area, left to the discretion of the lessor, where the occupant has no clientele other than that of the store and does not benefit from any management autonomy due to opening and closing hours determined at the lessor's discretion, does not constitute a commercial lease , nor does one concerning three locations on a private road, where the occupant was authorized to erect one or more removable stalls for conducting a commercial activity .

Precariousness can be characterized by the modesty of the fee, as well as by the absence of maintenance obligations for the premises by the occupant  or rental charges . In terms of precarious occupation agreements, the term “fee” is preferred to "rent": its amount is generally set at a lower rate , due to the precarious nature of the occupation .

Case law, like the legislator in Article L. 145-5-1 of the Commercial Code, requires that the temporary occupancy agreement be characterized by “particular circumstances independent of the sole will of the parties”  which must exist on the day of signing .

Thus, the existence, at the time of signing the agreement, of particular circumstances is not established when the objective particular circumstance justifying the precariousness of the occupation of the property results from the tenant's expressed desire to terminate the initial commercial lease they held, and their continued presence is only allowed while they find a buyer for their business , or resides in the project of transferring the tenant's business or their leasehold rights .

On the other hand, constituting a reason for precariousness, the provision of land located in a forest protection zone, and more specifically in an area intended for the construction of a dam, the fragility of the occupation being justified by these particular circumstances , the exceptional situation of the land on the outskirts of a municipality, where, in the interest of the population, it is planned to create an industrial zone intended for small and medium-sized enterprises , the provision of land located in a ZAD pending the completion of a development project , the imminent demolition project of the building by the owner , or the provision, on a precarious basis, of premises by the trustee, pending the construction of a new garage, and whose permanence of the right granted to the occupant is subject to the agreement of the mortgage creditors . Similarly, the fact that an occupant remained on the premises beyond the initially envisaged period, pending the completion of reconstruction work on a burned-down factory of which he was previously a tenant, does not imply the application of the status of commercial leases, as long as the parties have concluded an agreement in which they expressly intended to derogate from the status in order to urgently find replacement premises following the fire, and that due to these circumstances, the common intention of the parties was to enter into a precarious occupation agreement . Finally, the fact that the lessee intended to try, for a limited period, a new fast-food activity ancillary to the bar activity already conducted in an adjoining premises, was deemed a particular circumstance justifying the use of a precarious occupation agreement .

Cass. com., 22 October 1951, LawLex202200001487JBJ.

Cass. 3e civ., 19 November 2003, LawLex202100002545JBJ.

Cass. 3e civ., 2 April 2003, LawLex202100002544JBJ.

Cass. 3e civ., 15 October 2014, LawLex202100002519JBJ; Also see Cass. 3e civ., 19 November 2014, LawLex202100001324JBJ: in the absence of a reason for precariousness, an agreement following a commercial lease terminated by mutual consent before its term can only derogate from the status of commercial leases by applying the provisions of Article L. 145-5 of the Commercial Code.

Cass. 3e civ., 30 June 2010, LawLex202100002552JBJ, according to which an agreement entitled “precarious and revocable concession act” may be reclassified as a commercial lease when, from the outset, the lessor intended, in bad faith, to exclude this agreement from the status of commercial leases.

CA Bordeaux, 19 February 2024, LawLex202400001622JBJ.

Cass. 3e civ., 24 January 1996, LawLex202100001279JBJ, regarding the conclusion of forty successive leases with durations varying from seven days to one month, over a total period of more than three years, concerning commercial premises falsely qualified as locations.

Cass. 3e civ., 3 June 2004, LawLex202100004525JBJ.

Cass. 3e civ., 30 June 2010, LawLex202100002552JBJ.

Cass. 3e civ., 1 April 2009, LawLex202100002547JBJ.

On the provisional nature, See Cass. 3e civ., 25 April 1990, LawLex202100002537JBJ; Also see Cass. 3e civ., 29 April 2009, LawLex202100002548JBJ, in this case, the provisional nature is corroborated by the provision of the protocol indicating that the premises were made available to the occupant pending the construction of a new garage.

Cass. 3e civ., 9 November 2004, LawLex202100001460JBJ.

Cass. 3e civ., 29 April 2009, LawLex202100002548JBJ, previously cited, regarding a precarious occupancy agreement for a duration of three months. – Cass. 3e civ., 25 April 1990, LawLex202100002537JBJ, already cited, for a duration of twelve months. – Cass. 3e civ., 16 February 2000, LawLex202100002540JB. – See also Cass. 3e civ., 28 October 1987, LawLex202100002535JBJ, in this case, the occupancy lasted more than twenty years.

CA Caen, 14 April 2005, LawLex202200001630JBJ.

Cass. 3e civ., 13 May 1997, LawLex202100002539JBJ.

CA Caen, 14 April 2005, LawLex202200001630JBJ, previously cited, in this case, the contractual reason for precariousness was the possibility of an expropriation procedure or, in the last two agreements, a change in the use of the land, and the subsequent obligation for the occupant to vacate the land without notice or compensation.

Cass. 3e civ., 28 October 1987, LawLex202100002535JBJ, already cited, according to which the parties are bound by a precarious occupancy agreement as long as the disputed agreements have all provided for their temporary and revocable nature at any time; Also see CA Nancy, 24 October 1995, JurisData No 1995-052979, already mentioned: a precarious occupancy agreement is characterized by the owner's ability to terminate the contract at any time.

Cass. 3e civ., 21 March 1990, LawLex202100002536JBJ, prec.: in this case, an agreement referred to as a “temporary lease” concerned a building that the lessor planned to demolish shortly, and included a termination option at any time subject to a three-month notice period.

Cass. 3e civ., 25 April 1990, LawLex202100002537JBJ, previously cited, regarding a precarious occupancy agreement concerning a bungalow and a covered but unenclosed site located within a shopping center.

Cass. 3e civ., 9 February 1994, LawLex202100002538JBJ.

Cass. 3e civ., 25 May 1977, LawLex202200001629JBJ, previously cited.

CA Caen, 14 April 2005, LawLex202200001630JBJ, op. cit.

A precarious occupancy agreement “is characterized, regardless of its duration, by the fact that the occupancy of the premises is authorized only due to specific circumstances”.

CA Caen, 11 May 2000, No 98/02846: a precarious occupancy agreement does not constitute fraud to circumvent the provisions related to the status of commercial leases as long as the precarious nature of the occupancy is characterized by the extremely low annual fee paid by the occupant and the fact that the latter does not pay any charges for the occupied property.

Cass. 3e civ., 16 February 2000, LawLex202100002540JBJ, previously cited, in this case, the price consisted of a very modest fee for a plot of land with an area of nearly one hectare; See also Cass. 3e civ., 28 October 1987, LawLex202100002535JBJ, previously, regarding a nominal occupancy fee.

Cass. com., 22 October 1951, LawLex202200001487JBJ, previously mentioned.

Cass. 3e civ., 9 November 2004, LawLex202100001460JBJ, previously cited.

Cass. 3e civ., 7 July 2015, LawLex202100002558JBJ, in this case, the existence, at the time of signing the agreement, of particular circumstances independent of the sole will of the parties justifying the use of a precarious occupancy agreement was not established.

Cass. 3e civ., 7 July 2015, LawLex202100002558JBJ, previously cited.

Cass. 3e civ., 12 December 2019, LawLex202200001657JBJ.

Cass. 3e civ., 28 October 1987, LawLex202100002535JBJ, previously cited.

Cass. 3e civ., 16 February 2000, LawLex202100002540JBJ, previously cited.

CA Versailles, 13 June 2024, LawLex202400004539JBJ.

Act No 2014-626 of 18 June 2014 on Craftsmanship, Commerce, and Very Small Enterprises, Art. 4.

Cass. 3e civ., 21 March 1990, LawLex202100002536JBJ, previously mentioned.

Cass. 3e civ., 29 April 2009, LawLex202100002548JBJ, previously cited.

Cass. 3e civ., 2 April 2003, LawLex202100002544JBJ, previously cited.

Cass. 3e civ., 9 February 2017, LawLex202100002560JBJ.

Cass. 3e civ., 30 April 1969, LawLex202200001488JBJ, according to which a precarious occupancy agreement does not constitute a commercial lease; Also see Cass. 3e civ., 25 May 1977, LawLex202200001629JBJ.

Cass. 3e civ., 21 March 1990, LawLex202100002536JBJ, in this case, an agreement referred to as a “temporary lease” did not fall under the status of commercial leases since the lessor, contemplating the demolition of the building in the near future, had only granted occupancy of the premises for a limited period of twenty-one months, renewed, but with the option of termination at any time subject to a three-month notice.

Cass. 3e civ., 17 July 1996, LawLex202200001579JBJ, which applies only in relations between landlord and tenant.

CA Nancy, 24 October 1995, JurisData No 1995-052979: if a short-term lease binding the parties, concluded for twenty-three months and set to terminate automatically on the agreed date without the need for notice, escapes the protective provisions of commercial leases, it is not to be confused with a precarious occupancy agreement, which is characterized by the owner's ability to terminate the contract at any time. – However, See Cass. 3e civ., 19 November 2003, LawLex202100002545JBJ, already cited, according to which, even if they are termed precarious occupancy agreements, certain agreements constitute short-term leases under Article L. 145-5 of the Commercial Code in the absence of mention, in the disputed agreements, of the existence of exceptional circumstances marking their term.

Commercial Leases/Business Goodwill

55. Precarious Occupancy Agreement

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55. Precarious Occupancy Agreement

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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