The right to renew a commercial lease: a complete guide for France

Introduction

The right to renew the commercial lease is an essential prerogative for any tenant company wishing to guarantee the sustainability of its activity in suitable premises. As an SME manager, understanding this right, its conditions, its challenges and how to exercise it is crucial to anticipate and secure your commercial establishment.

In this article, you will find a technical and educational overview on this subject, illustrated with numerous concrete examples and in-depth by recent case law and doctrine, in order to inform each of your decisions.

The right to renew a commercial lease: principles and legal framework

What is the right to renew a commercial lease?

The right to renewal allows the commercial tenant to request the continuation of his lease contract at the end of the initial period. This right is protected by article L145-10 of the Commercial Code and constitutes a public order provision. It aims to ensure the stability and continuity of commercial operations in occupied premises.

Public order and contrary clauses

Any clauses contrary to the right to renewal are deemed null and void. Thus, the lease cannot legally provide for the lessor to refuse this renewal without compensating the tenant or for the sole reason of convenience.

The conditions to benefit from the right to renewal

What are the cumulative conditions?

To exercise this right, the tenant must:

• Be the owner of the business operated on the premises.
• Have exploited in a real, effective and continuous way this fund during the 3 years preceding the end of the lease (except for legitimate reasons, e.g. temporary interruption due to exceptional circumstances).
• Be registered in the Trade and Companies Register (RCS) or in the National Business Directory (RNE).

Effects of the transfer of lease or business

In case of transfer of the lease, the assignee benefits from the right to renewal if the transfer occurred within the first 6 years of the lease. For the last 3 years, this right depends on the nature of the transfer:

• If transfer of the fund: the operating period of the transferor and the transferee may be combined.
• If transfer of the right to the lease alone: the assignee does not benefit from the right and will have to negotiate an early renewal.

The renewal procedure

How do I request renewal?

The tenant can:

• Send a formal request To the lessor Within six months prior to the expiry of the lease.
• Accept a renewal offer issued by the lessor via leave or notification.

If neither request nor leave is sent, a tacit extension may apply, but a late application after the 9th year of the lease takes effect from the following calendar quarter.

What are the formal requirements?

The request must be made by extrajudicial act (bailiff) or registered letter with acknowledgement of receipt, under penalty of nullity. It must explicitly reproduce the legal text of article L145-10 paragraph 4.

The refusal of renewal by the lessor

A possible but supervised refusal

The lessor may refuse the renewal without paying compensation in two cases:

• Legitimate and serious reason, for example:
  • Takeover to live/rent it to a relative,
  • Serious fault on the part of the tenant (non-payment of rent,...)
• Renewal offer with substantial changes rejected by the tenant (recent case law of 11 January 2024).

Eviction compensation

In case of unjustified refusal or absence of an offer, the lessor must pay a eviction benefit intended to compensate for the loss of the right to the lease. Its amount is set based on the commercial value of the fund, and may be contested.

Setting the rent at the time of renewal

Valuation according to rental value

In accordance with article L145-33 of the Commercial Code, the rent of the renewed lease must correspond to the rental value. This value takes into account the rents charged for comparable premises, the destination of the premises, and the characteristics of the lease.

Review and limits

• The rent can be revised up or down.
• In times of economic crisis, caps may be applied.
• In case of disagreement, recourse to the competent court is possible.

FAQ: Your questions about the right to renew a commercial lease

What is the right to renew the lease?

The right to renewal allows the commercial tenant to keep his lease at the end of his term in order to ensure the continuity of his activity in the same premises, under protected legal conditions.

Can a landlord refuse to renew a commercial lease?

Yes, but only for legitimate and serious reasons, otherwise he must pay eviction compensation. Refusing or substantially modifying the lease without consent is equivalent to an unlawful refusal.

Is the right to renewal a public policy?

Yes, no clause can derogate from it to the detriment of the tenant. It is an imperative protection for the benefit of the lessee.

How can a landlord refuse? What are the conditions?

By written notice of leave with justified reason, or by proposing a modified renewal offer that the tenant rejects (considered as refusal).

What are the conditions for renewing a commercial lease?

Ownership of the fund, effective and continuous operation three years before the end of the lease, registration with the RCS, and compliance with the application formalities.

What does article L145-10 of the Commercial Code provide?

This text enshrines the right to renewal, provides a framework for the procedure, the request, the deadlines and the consequences in the event of refusal.

What happens after 9 years?

Any request expressed after the 9th year of the lease takes effect only as of the following calendar quarter. The fixing of the rent is then subject to certain specific rules.

How to renew a lease in case of furnished rental?

The right to renewal mainly applies to classic commercial leases; furnished rentals may fall under other legal regimes.

The role of the bailiff in renewal

The bailiff ensures the formal service of the request or leave, guaranteeing proof of notification.

What are the lessor's rights at renewal?

He can offer renewal on his terms, refuse under conditions, or request a review of the rent.

Why consult a specialist lawyer?

Commercial real estate law is highly regulated, with numerous jurisprudential nuances. A lawyer makes it possible to anticipate, secure negotiations, and avoid costly disputes.

Educational framework: Example of a standard renewal clause

“At the expiration of this lease, the lessee benefits from a right to renewal in accordance with article L145-10 of the Commercial Code. The request must be sent to the lessor by registered letter with acknowledgement of receipt within six months prior to the end of the lease. In case of acceptance, a new lease will be concluded under the same conditions, subject to mutually agreed changes.”

Conclusion

The right to renew a commercial lease is a real guarantee of stability for SMEs that operate a business. Its implementation requires rigor and foresight in order to comply with legal and formal conditions. Note that this subject remains regulated and complex. It is strongly recommended to consult a specialized lawyer to anticipate all legal consequences, negotiate effectively and defend your interests.

Article written by Guillaume Leclerc, lawyer in commercial contracts and commercial litigation in Paris.