Commercial Leases/Business Goodwill

In accordance with Article 1737 of the Civil Code, the short-term lease “automatically terminates at the expiration of the fixed term,” “without the need to give notice” . However, the parties are free to contractually provide for the inclusion of such notice, delivered in a particular form, and with a specified notice period, with the responsibility on the party giving notice to comply with the a …

Retaining of possession

In accordance with Article 1737 of the Civil Code, the short-term lease “automatically terminates at the expiration of the fixed term,” “without the need to give notice” . However, the parties are free to contractually provide for the inclusion of such notice, delivered in a particular form, and with a specified notice period, with the responsibility on the party giving notice to comply with the agreed formalities . Paragraph 2 of Article L. 145-5 of the Commercial Code provides that if, at the expiration of the short-term lease, “the lessee remains and is left in possession, a new lease is created, governed by the provisions [relating to the status of commercial leases]” . The short-term lease may be for a duration of less than three years, and the Court of Cassation clarified, in a decision dated 8 June 2017 , that “regardless of the duration of the short-term lease or the continued occupancy, if the lessee remains and is left in possession beyond the contractual term, a new lease is created, governed by Articles L. 145-1 and following of the Commercial Code” .

The continuation in possession may result from the combination of two scenarios: the absence of any indication from the lessor regarding their intention not to continue the rental relationship and the fact that the lessee continues to occupy the leased premises upon the expiration of the derogatory lease. Thus, it is up to the lessor who wishes to avoid the mechanism of Article L. 145-5 of the Commercial Code to express, before the contractual expiration date of the derogatory lease , their intention not to continue the contractual relationship with the lessee, with the burden of proof resting on them . Sending a registered letter with acknowledgment of receipt or notification by an extrajudicial act may prove useful. It should be noted that a clause in a derogatory lease, which stipulates that at its term, the tenant would be obliged to vacate the leased premises without seeking to remain there, and failing that, would be considered as occupying without right or title, is not sufficient to demonstrate the lessor's intention not to continue the rental relationship . Before the Pinel Law, case law considered the continuation in possession as acquired the day after the expiration of the derogatory lease when the lessor had not expressed any opposition . Since then, paragraph 2 of Article L. 145-5 provides a one-month period from the expiration of the lease to allow the lessor to inform the tenant of their intention to reclaim the leased premises . It is only at the end of this period that, if the lessee remains in the premises, a new lease subject to the status of commercial leases is formed.

Also characterizing the continued occupation of the premises is the regular collection of rent by the lessor after the expiration of the derogatory lease , without, however, challenging the lessor's intent when they opposed the continuation . In the event of the lessee's insolvency proceedings, the Court of Cassation has held that the lessor, who declared their claim for rent to the representative of the creditors of the lessee placed in judicial reorganization, considers the latter as their tenant, as they occupy the premises and pay the rent . The Court has been strict with the lessor in this matter by recognizing the creation of a new lease subject to the status of commercial leases, on the grounds that the lessee remained in the premises and was left in possession of the premises beyond the term set by the derogatory lease, even though it had been terminated earlier at the request of the judicial administrator .

When the tenant remains and is left in possession of the leased premises upon the expiration of the derogatory lease, the landlord, like the tenant, may invoke the formation of a new lease governed by the provisions of Articles L. 145-1 et seq. of the Commercial Code , provided, however, that they establish the reality of the tenant's continued occupancy of the premises after this date . When, at the end of a derogatory lease, a tenant remains in the premises and then subsequently gives notice, the trial court, to dismiss the landlord who invokes the benefit of the commercial lease status, must characterize the landlord's unequivocal waiver of the right to claim this status .

The lessee, who remains on the premises against the landlord's will, cannot claim the status of commercial leases and becomes an occupant without right or title at the end of the derogatory lease, especially when the landlord has clearly expressed the intention not to continue the contractual relationship by serving a formal notice to vacate the leased premises immediately and without delay, without effect . This is the case when the lessee has, as a determining clause, expressly waived the status and at the end of the lease, the landlord, by formal notice, has invoked the term and requested the return of the premises , or even when despite negotiations at the expiration of the derogatory lease, the parties could not agree on the conclusion of a new lease due to a lack of agreement on the nature of the property and the amount of rent . The same applies to a tenant whose derogatory lease granted by a lease-creditor has been terminated due to the termination of the leasing contract concluded between the latter and a lease-financier . Finally, the landlord facing a recalcitrant lessee occupying the premises without right or title has the option to request their eviction and to refer the matter to the summary judge on the basis of Article 834 of the Code of Civil Procedure, as well as the payment of an occupancy indemnity .

Cass. 3e civ., 15 March 1972, LawLex202200002078JBJ.

Cass. 3e civ., 22 January 2003, LawLex202200001921JBJ, in this case, the lessee had received notice for a date after the expiration of the derogatory lease and had been left in possession of the premises beyond that date.

Cass. 3e civ., 10 January 1990, LawLex202100002508JBJ, in this case, the lessor had reduced the rent amount after the expiration of the derogatory lease while the lessee remained in the premises; Also see Cass. 3e civ., 20 February 2007, LawLex202100002546JBJ, according to which, from the date of expiration of the derogatory lease, a lease subject to the status of commercial leases was established as the lessee remained in the premises on that date with the lessor's agreement, who continued to receive the rent.

Besançon, 24 November 1995, JurisData No 1995-052315. – For a parallel with the right to assign the lease, See Cass. civ. 3e, 30 May 2007, LawLex202100002983JBJ, according to which the fact that a landlord continues to knowingly collect, for nearly two years, the rents and charges paid directly by the assignee following the assignment of the lease right to which the landlord objected, is not sufficient to establish the landlord's unequivocal waiver of the right to invoke the irregularity of the assignment.

Cass. 3e civ., 19 July 2000, LawLex202200001978JBJ.

Cass. 3e civ., 31 May 2018, LawLex202200001979JBJ.

Cass. 3e civ., 27 April 1988, LawLex202200001980JBJ.

Cass. 3e civ., 6 April 2011, LawLex202200001981JBJ.

Cass. 3e civ., 24 November 2004, LawLex202100003008JBJ, Bull. civ. III, No 211; D. 2005, AJ 280, note ROUQUET; RDC 2005, 743, note SEUBE; JCP E 2005, 1267, note NAUDIN; JCP E 2005, No 826, § 10, note KENFACK; JCP N 2005, No 1267, study NAUDIN; JCP G 2005, IV, 1025; RJDA 2/2005, No 105, with notes; Rev. Lamy dr. aff. Feb. 2005, 34, No 4932, note VASA; Dr. et patrimoine 4/2005, 110, No 3671, note CHAUVEL; Rev. loyers 2005, 150, note DE MAILLARD; Contrats, conc. consom. 2005, comm. 38, note LEVENEUR; Administrer Jan. 2005, 32, note BARBIER.

CA Montpellier, 26 July 2000, LawLex202200001932JBJ; See also CA Bordeaux, 25 March 2008, LawLex202200001933JBJ: a lessee cannot claim the status of commercial leases when they have been ordered by the lessor to vacate the premises at the end of the lease.

Cass. 3e civ., 8 April 2021, LawLex202200001959JBJ, in this case, the lessee had become an occupant without right or title upon the expiration of the fixed term, even though the common intention of the parties was initially to enter into a short-term lease to allow the tenant to fit out the premises before the subsequent signing of a lease subject to the status of commercial leases.

Cass. 3e civ., 15 March 2000, LawLex202100002689JBJ.

Cass. 3e civ., 30 April 1997, LawLex202100001312JBJ; See also Cass. 3e civ., 8 June 2017, LawLex202100003004JBJ: when the lessee remains and is left in possession beyond the contractual term of the derogatory lease, a new lease governed by Articles L. 145-1 and following of the Commercial Code is established.

Cass. 3e civ., 14 June 2006, LawLex202100003010JBJ.

Cass. 3e civ., 15 March 2000, LawLex202100002689JBJ, op. cit.

Cass. 3e civ., 8 June 2017, LawLex202100003004JBJ, previously cited.

Cass. 3e civ., 26 March 2020, LawLex202200002113JBJ.

Cass. 3e civ., 24 November 1999, LawLex202100002510JBJ, in this case, the lessor only requested the lessee to vacate the premises nearly a year after its expiration, which resulted in the formation of a new lease subject to the regime of commercial leases.

Cass. 3e civ., 4 May 2010, LawLex202100003011JBJ, adding that no clause of the lease can have the effect of exempting the lessor from informing the lessee of their opposition to their continued occupancy during the execution of the lease; Also see Cass. 3e civ., 13 July 1999, LawLex202100002514JBJ, the lessor not providing proof that they notified the lessee of their intention for them to vacate the leased premises at the expiration of the lease. – Conversely, Cass. 3e civ., 27 June 1990, LawLex202100002509JBJ, according to which it is not up to the lessee, to benefit from the status of commercial leases, to prove that the lessor intended to allow them to remain in possession of the premises at the expiration of the derogatory lease.

Cass. 3e civ., 13 January 2015, LawLex202100002512JBJ, in this case, the landlords only objected to the tenant remaining in the leased premises after the expiration of the derogatory lease.

Cass. 3e civ., 1 June 1994, LawLex202200001958JBJ, in this case, the lessor had asked the lessee to vacate the premises only a few days after the lease expired; Also see Cass. 3e civ., 22 January 2003, LawLex202200001921JBJ, in this case, the lessor had served notice requiring the lessee to vacate the premises one month after the lease expiration date; See also Cass. 3e civ., 13 January 2015, LawLex202100002512JBJ, previously cited, in this case, the lessor only objected to the lessee's continued possession on 4 October 2006, while the lessee had remained in possession of the premises after the contractually set deadline of 31 August 2006.

Art. L. 145-5, para. 2 Commercial Code: “If, at the expiration of this period, and at the latest within one month from the due date, the lessee remains and is left in possession, a new lease is created, the effect of which is governed by the provisions of this chapter.”

Commercial Leases/Business Goodwill

60. Retaining of possession

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60. Retaining of possession

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Les décisions de justice citées dans ce paragraphe :

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