Commercial Leases/Business Goodwill

Article L. 145-49, para. 1, of the Commercial Code requires the lessee, who plans to undertake a new activity, to make a request to the lessor. This request must, under penalty of nullity, include an indication of the activities intended to be undertaken. The tenant cannot merely use a general formula to describe the proposed activities. Thus, a lessee who requests from the lessor a total change o …

Procedure

Article L. 145-49, para. 1, of the Commercial Code requires the lessee, who plans to undertake a new activity, to make a request to the lessor. This request must, under penalty of nullity, include an indication of the activities intended to be undertaken. The tenant cannot merely use a general formula to describe the proposed activities. Thus, a lessee who requests from the lessor a total change of use  to be authorized to conduct an activity “all businesses, including shows”   or “all businesses excluding those causing noise and odor nuisances,” which exclusion, without further detail, does not allow for determining the nature of the activities the lessee intends to undertake and to verify if they are compatible with the destination, characteristics, and situation of the building  , does not meet the requirements of Article L. 145-49, para. 1. In an isolated decision seemingly justified by the disastrous economic situation of the initial activity, the Court of Cassation, however, approved a court of appeal for having authorized the lessee to operate all businesses on the premises except a food business  .

The text then provides that the request must be “made by extrajudicial act or by registered letter with acknowledgment of receipt and notified, in the same form, to the creditors registered on the business assets,” who “may request that the change of activity be subject to conditions designed to safeguard their interests” (Art. L. 145-49, para. 1, Commercial Code), specifying that, in accordance with Article L. 145-50, paragraph 3, of the Commercial Code, “the rights of registered creditors are exercised with their prior rank on the transformed business assets.”

Upon receipt of the request, the landlord must, within one month, notify, by extrajudicial act or by registered letter with acknowledgment of receipt, the tenants to whom they have committed, by virtue of an exclusivity clause, not to lease neighboring premises for the purpose of conducting activities similar to those mentioned in the request (Article L. 145-49, para. 2, Commercial Code). These tenants are then required to state their position, under penalty of foreclosure, within one month following the notification. While they may oppose the full despecialization granted to another tenant in the same shopping mall, allowing them to conduct an activity directly competing with their business, a tenant cannot, however, complain about the lack of notification when, under the terms of the lease, the landlord was only obligated to refrain from personally operating or having someone else operate a similar business .

Article L. 145-49, para. 3, of the Commercial Code requires the landlord, within three months of the request for change of use, to notify their refusal, acceptance, or the conditions upon which they condition their agreement. Failing such notification, they are deemed to have acquiesced to the request , which does not prevent the exercise of the rights provided for in Article L. 145-50 of the same code, allowing them to obtain damages and a modification of the rent. Before Law No 2015-990 of 6 August 2015 , the landlord was deemed to have acquiesced to the tenant's request for full change of use if they did not signify their refusal by extrajudicial act . Now, they can notify their response by extrajudicial act or by registered letter with acknowledgment of receipt. The provisions of Article R. 145-38 of the Commercial Code, stemming from Decree No 2016-296 of 11 March 2016 , specify that when, pursuant to Article L. 145-49, “a party uses a registered letter with acknowledgment of receipt, the date of notification for the sender is the date of dispatch of the letter and, for the recipient, the date of first presentation of the letter.” It has been judged that the landlord's presence at the judgment authorizing the transfer of the business and the reading of the deed of transfer of the business do not imply knowledge, by them, of the transformation projects intended to allow the activity of a music bar by the buyer, and even less authorization to carry them out .

In case of the landlord's refusal, Article L. 145-52, para. 1, of the Commercial Code provides that the Judicial Court may nevertheless authorize the total or partial transformation if this refusal is not justified by a serious and legitimate reason, such as non-compliance with the conditions listed in Article L. 145-48. Thus, the landlord's refusal is justified when opposing the operation of a musical bar not in accordance with the building's purpose, whose co-ownership regulations formally prohibit “any noise, nocturnal and diurnal disturbance of any kind, likely to disturb the tranquility of the occupants”  . The refusal may also be reasoned not only by the nuisances for the neighborhood that a food business would cause, due to the cluttering of the inner courtyard, odors and waste, the presence of insects and rodents, but also by the lack of justification for the despecialization in view of the economic situation or the organization of distribution  . The landlord may also base their refusal, in accordance with Article L. 145-53, para. 1, on the repossession of the premises at the expiration of the current three-year period, either pursuant to Articles L. 145-18 to L. 145-24, or with a view to carrying out work prescribed or authorized as part of an urban renewal or property restoration operation. If a notice must have been given for this purpose, or concurrently with their refusal, the landlord, who falsely invoked one of these reasons or who did not meet the conditions that motivated the rejection of the tenant's request, cannot oppose a new request for despecialization, except for serious and legitimate reasons, unless the failure to execute is not attributable to them. In this case, the defaulting landlord may be ordered to pay damages to the tenant for the prejudice suffered by the latter (Art. L. 145-53, para. 2, Commercial Code).

In case of the landlord's refusal, the tenant may petition the Judicial Court to authorize, if not fully, at least partially, the change of use of their activity (Art. L. 145-52, para. 1, Commercial Code). The same option is available to the landlord, who has accepted the transformation but under certain conditions, with which the tenant disagrees. Article L. 145-52, paragraph 2, of the Commercial Code specifies that when the dispute concerns only the rent price, it must be set in accordance with the regulatory provisions for setting the revised rent, that is, before the president of the Judicial Court (Art. R. 145-23, para. 1, Commercial Code), whereas in other cases, the matter must be brought before the court itself (Art. R. 145-23, para. 2, Commercial Code). If the trial court judges can authorize a change in the distribution of the leased premises and override the landlord's refusal, they cannot, however, contravene the lease stipulations that prohibit it . Pursuant to Article L. 145-55, the tenant who has requested the change of use may withdraw at any time until the expiration of a fifteen-day period from the date on which the judges' decision becomes res judicata. They must notify their withdrawal to the landlord by extrajudicial act or by registered letter with acknowledgment of receipt and bear all the costs of the proceedings.

Finally, a lessee who does not comply with the change of business activity procedure, as described in Articles L. 145-49 et seq. of the Commercial Code, risks the termination of the commercial lease or a refusal to renew it without eviction compensation, along with the payment of a certain amount as damages.

CA Besançon, 25 November 1992, No 1477/91.

CA Versailles, 30 October 2007, LawLex202300009214JBJ, according to which the lessee must specify the precise nature of the activities they intend to carry out and cannot limit themselves to using a general formula.

CA Colmar, 20 September 1989, No 3606/87.

Cass. 3e civ., 24 June 1992, LawLex202200000588JBJ: Cass. 3e civ., 24 June 1992, LawLex202200000588JBJ, Bull. civ. III, No. 221, quashing the appeal judgment authorizing a change in the layout of the premises, necessary for the planned activity of catering and preparation of fresh pasta, whereas the lease stipulates that the lessee makes a commitment not to make any changes to the layout of the leased premises, not to demolish anything, not to knock through any walls or vaults, or construction without the express written authorization of the lessor.

Cass. 3e civ., 8 June 1995, LawLex202200000581JBJ.

Cass. 3e civ., 30 June 1999, LawLex202200000619JBJ: in this case, unlike other leases granted in the same building, by which the lessor prohibited themselves from renting or transferring all or part of the building to operate a similar business, the tenants' lease only included the lessor's commitment not to “operate directly or indirectly a similar business,” and this in return for a lease provision allowing the premises to be used for all types of businesses.

CA Paris, 6 March 2013, LawLex202200000818JBJ: the lessor, who did not respond to the lessee's request to operate in the premises, instead of the business of “leather and fur clothing,” as provided in the lease, that of “ready-to-wear, textile clothing articles and accessories, leather and imitation clothing, shoes, hats, and leather goods,” within the three-month period of Article L. 145-49 of the Commercial Code, is deemed to have accepted the requested full despecialization and cannot accuse the lessee of violating the lease's use clause.

Law No 2015-990 of 6 August 2015 for growth, activity, and equal economic opportunities, OJ of 7 August 2015, Art. 207.

Cass. 3e civ., 11 June 2008, LawLex202200000618JBJ. 

Decree No 2016-296 of 11 March 2016 on the simplification of formalities in commercial law, JORF 0062 of 13 March 2016, Art. 15.

CA Toulouse, 13 April 2006, LawLex202200000887JBJ.

Commercial Leases/Business Goodwill

170. Procedure

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170. Procedure

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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