Commercial Leases/Business Goodwill

Indivision, governed by Articles 815 et seq. of the Civil Code, being devoid of legal personality , a lease concluded in its name is null and void . The same applies to a notice given in the name of an indivision, which is void for substantive irregularity . It is therefore up to the co-owners to perform acts relating to the exercise of their undivided rights , subject, in certain cases, to the intervention of the judge .

Under the terms of Article 815-3 of the Civil Code , the co-owners representing at least two-thirds of the undivided rights may “carry out acts of administration relating to undivided property” as well as “conclude and renew leases other than those concerning a building for agricultural, commercial, industrial, and artisanal use,” provided, however, that “the other co-owners are informed.” The consent of all co-owners “is required to carry out any act of disposition” other than the sale of undivided movable property to pay debts and charges of the undivided ownership. Thus, the conclusion of a commercial lease concerning undivided property, as well as its renewal, requires the agreement of all co-owners . The same applies when an undivided owner intends to refuse the right to renew a statutory lease that the lessee holds by law .

Law No 2006-728 of 23 June 2006, having amended Article 815-3 of the Civil Code , established a two-thirds majority, which replaced the rule of unanimity, for the performance of certain acts concerning undivided property, particularly acts of administration. Thus, constituting an act of administration, and now subject to the two-thirds majority, are the request for payment of rent, and more generally any action related to the non-performance of obligations arising from the lease , the request for setting the rent of the renewed lease , or even the appeal of a judgment setting the rent of a commercial lease . In terms of notice, prudence dictates obtaining the agreement of all co-owners , even if, on the one hand, a ministerial response of 30 March 2010  specified that in the matter of agricultural leases, “it seems possible for co-owners holding two-thirds of the undivided rights to perform acts of administration relating to these properties, including the notification of a notice,” and, on the other hand, the Court of Cassation has ruled that co-owners representing two-thirds of the undivided rights are admissible to bring an action for the termination of a lease that pertains to the normal operation of the undivided property .

The last paragraph of Article 815-3 of the Civil Code states that “if a co-owner takes charge of managing the undivided property, with the knowledge of the others and nevertheless without opposition from them,” they are presumed “to have received an implicit mandate, covering acts of administration but not acts of disposition nor the conclusion or renewal of leases,” for which a special mandate is required . Also, if a co-owner is deemed to have received an implicit mandate to order conservation or improvement works on the property , a special mandate is necessary for any act that does not pertain to the normal operation of the undivided property . Furthermore, a commercial lease granted by a real estate agent, without a special mandate given in writing by all the co-owners, is considered null and void .

If the commercial lease concerning an undivided property, granted by one co-owner without the consent of the others, is not null, it is nevertheless unenforceable against the other co-owners , as well as against potential purchasers , its effectiveness being subject to the outcome of the partition . The lessee, who cannot contest the validity of such a contract , may, however, claim damages from the co-owner who alone concluded the lease if the latter committed a fault by granting a lease on undivided property without a special mandate from the co-owners . As with the bare owner in the case of a dismemberment of ownership, it is always possible for the co-owners to ratify the act subsequently . Thus, a notice is valid when its nullity, which does not mention the name of each co-owner of the undivided property leased, has been remedied by the intervention of the co-owner whose name was omitted, in the summons before the court and subsequent acts .

Furthermore, Article 815-2, para. 1, of the Civil Code provides that "any co-owner may take the necessary measures for the preservation of undivided property even if they do not present an urgent character. These protective measures, which any co-owner may take alone, refer to material or legal acts intended to remove the undivided property from imminent danger without seriously compromising the rights of the co-owners . A co-owner may thus request the eviction of a tenant to whom the other co-owner has granted, alone, a commercial lease .

Articles 815-4 et seq. of the Civil Code provide, in a number of specifically enumerated cases, a control mechanism. Thus, when one of the co-owners is in a situation where they are unable to express their will, the judge may authorize a co-owner to represent them, generally or for certain specific acts, and set the conditions and scope of their power of representation . Article 815-5 allows a co-owner to be authorized by the judge to perform alone an act for which the consent of their co-owner is necessary and to make it enforceable against them, when “the refusal of the latter jeopardizes the common interest.” If the reality of the jeopardy to the common interest of the co-ownership is a condition to override such a refusal, which the judges have the sovereign authority to assess , urgency is not, however, a condition . Finally, Article 815-6, para. 1, of the Civil Code allows the president of the Judicial Court to prescribe or authorize all urgent measures necessary in the common interest of the co-owners, which the trial court judges have the sovereign authority to assess , with para. 3 granting them the ability to appoint a co-owner as a provisional administrator and define the scope of their powers and obligations.

When the joint ownership is conventional and subject to the provisions of Articles 1873-1 et seq. of the Civil Code, “the co-owners may appoint one or more managers, chosen from among them or not” . The manager, who represents the co-owners to the extent of the powers conferred upon them , “administers the joint ownership and exercises, for this purpose, the powers attributed to each spouse over the common property” . Decisions that exceed their powers, such as the conclusion or renewal of a commercial lease, must be made unanimously by the co-owners , any clause extending the manager's powers being deemed unwritten .

Cass. 3e civ., 3 November 2005, LawLex202200002423JBJ, RJDA 3/06, No 234; Gaz. Pal. 15-16 Dec. 2006, 34, note BARBIER, according to which an undivided co-ownership, because it does not have legal personality, cannot sue or be sued.

Cass. 3e civ., 16 March 2017, LawLex202100002681JBJ: since the exception of nullity can only succeed to prevent the enforcement of a legal act that has not yet been executed, the lease concluded in the name of an undivided ownership having been executed by the lessees who paid the rent to the agent of the co-owners, said lessees cannot invoke, by way of exception, the nullity of the lease.

Cass. 3e civ., 29 January 2002, LawLex202200002360JBJ.

Cass. 1re civ., 23 January 2008, LawLex202200002348JBJ, the appeal of a judgment setting the rent of a commercial lease constitutes an act of administration and not a conservatory act.

Cass. 3e civ., 8 April 1999, LawLex202200002346JBJ, decision rendered pursuant to former Article 815-3 of the Civil Code, according to which the notice given by one of the co-owners, without the agreement of all, cannot take effect.

Cass. 3e civ., 29 June 2011, No 09-70.894.

Cass. 3e civ., 12 April 1995, LawLex202200002344JBJ, regarding the conclusion of a rural lease; See also Cass. civ. 3e, 10 November 2004, LawLex202100002673JBJ, according to which a special mandate is necessary for any act that does not pertain to the normal operation of undivided property, as well as for the conclusion and renewal of leases.

Cass. 1re civ., 10 October 1995, LawLex202200002373JBJ.

Cass. 1re civ., 25 October 2005, LawLex202200002374JBJ.

Cass. 1re civ., 2 December 2015, LawLex202200002611JBJ: if the proof of the existence and scope of the real estate management mandate given to a professional can only be provided in writing, neither the apparent mandate nor the ratification of the act can override these mandatory rules.

Cass. 3e civ., 25 January 2006, LawLex202100002677JBJ.

Cass. 3e civ., 25 April 2001, LawLex202200002361JBJ.

Cass. 1re civ., 30 June 2004, LawLex202200002379JBJ; See also Cass. 3e civ., 26 January 2017, LawLex202200002345JBJ, according to which such an act is unenforceable against both the trustee and the other co-owners and potential buyers.

Cass. 1re civ., 27 October 1992, LawLex202200002380JBJ; Also see Cass. civ. 1re, 1 February 2017, LawLex202200002421JBJ.

Cass. 3e civ., 25 January 2006, LawLex202100002677JBJ, op. cit.

Cass. 3e civ., 5 May 1999, LawLex202200002419JBJ. – Conversely, Cass. 3e civ., 12 April 1995, LawLex202200002344JBJ, cited: is not entitled to claim damages from the co-owner who alone concluded the lease without a special mandate, the one who provides no evidence to establish the authority of this co-owner, who was aware of the family situation and could not ignore the situation inherent to the joint ownership with regard to the lease he relied upon.

Cass. 3e civ., 23 March 1977, LawLex202200002420JBJ; Also see Cass. 3e civ., 3 November 2005, LawLex202200002423JBJ, prec., regarding the referral to a court by each of the co-owners individually, through the introductory summons, which covers the substantive irregularity originally affecting the notice given in the name of a joint ownership.

Cass. 3e civ., 5 December 2001, LawLex202200002422JBJ.

Cass. 1re civ., 23 January 2008, LawLex202200002348JBJ, préc.

Cass. 1re civ., 1 February 2017, LawLex202200002421JBJ, préc.

Cass. 3e civ., 10 May 1983, LawLex202200002377JBJ, regarding a request for the termination of the sale of an undivided property.

Cass. 1re civ., 12 July 2001, LawLex202200002375JBJ.

Cass. 1re civ., 16 February 1988, No 86-16.489.

Amended by Law No 2006-728 of 23 June 2006 on the reform of successions and gifts, Art. 2.

Cass. 3e civ., 3 March 2009, LawLex202100002678JBJ; Also see CA Bastia, 23 October 2013, LawLex202100002623JBJ.

Cass. 3e civ., 18 April 1985, LawLex202200002610JBJ.

Act No 2006-728 of 23 June 2006 on the reform of successions and gifts, Art. 2.

Cass. 3e civ., 30 June 1999, LawLex202200002347JBJ.

67. Co-owner