French Commercial Lease 2026: Renewal, Uncapping, Eviction Indemnity and Assignment

Introduction: a public-policy protective regime

The French commercial lease (bail commercial) is governed by a public-policy regime protective of the commercial or craft tenant, codified at Articles L. 145-1 to L. 145-60 of the French Commercial Code. The regime establishes a right to renewal at the end of the contract and, failing renewal, the payment of an eviction indemnity intended to compensate for the loss of the goodwill (fonds de commerce). Any clause to the contrary is deemed not written (Article L. 145-15).

For 2026, market dynamics are marked by index volatility (ILC, ILAT), continued growth of rental value in prime locations, and an increase in uncapping disputes following the Pinel Act of 18 June 2014.

This guide is intended for international landlords (REITs, family offices, institutional investors) and tenants (international retailers, brands, businesses) operating in France.

1. Conditions for the regime to apply

The benefit of the regime requires four cumulative conditions.

Existence of premises dedicated to operation. The regime applies to leases of buildings or premises in which a business is operated. Mere unconstructed locations are excluded.

Effective operation of a goodwill. The tenant must operate in the premises a fonds de commerce. Operation must be effective, personal and stable. A simulated or ceased operation for more than two years may cause the loss of the regime.

Registration with the RCS or RM. The tenant must be registered with the trade and companies register or with the trades register. Its absence may justify a refusal of renewal without eviction indemnity (Article L. 145-1). International operators should ensure their French branch or subsidiary is properly registered.

Professional, non-precarious character. Precarious occupancy agreements escape the regime. Mischaracterization may lead to retroactive recharacterization as a commercial lease.

2. Derogatory lease and precarious occupancy

The parties may conclude a derogatory lease for a maximum total duration of three years (Article L. 145-5). At expiry, the lease automatically falls under the statutory regime for nine years.

The precarious occupancy agreement (Article L. 145-5-1) requires special circumstances independent of the parties'' sole will. Case law is demanding on the justification.

3. Lease duration and triennial right to terminate

The minimum legal term is nine years (Article L. 145-4). The tenant has a triennial right to terminate at the end of each three-year period, by bailiff''s writ or by registered letter, at least six months before expiry (Article L. 145-9). This right may be excluded for single-purpose premises, exclusively office premises and storage premises.

4. The renewal mechanism

The landlord may serve notice with offer of renewal (Article L. 145-10), or the tenant may request renewal in the six months prior to expiry. The landlord''s silence for three months amounts to tacit acceptance of the principle of renewal.

Failing notice or request, the lease continues by tacit prolongation, which may trigger automatic uncapping if the effective duration exceeds twelve years (Article L. 145-34).

Refusal of renewal without eviction indemnity is admitted only in limited cases: serious and legitimate cause, insalubrity, demolition for reconstruction, recovery for housing. The burden of proof lies with the landlord.

5. Rent and triennial review

The setting of the initial rent is free. Each party may request triennial review (Article L. 145-37). The review is capped at the variation of the contractual index: ILC for commercial and craft activities, ILAT for offices and liberal professions (Article L. 145-38). The use of the former ICC index is now prohibited.

The review may be uncapped where a material change in local commercial factors has caused a variation of more than 10% in market rental value.

6. The renewed rent

The renewed rent is in principle capped at the variation of the reference index (Article L. 145-34). Uncapping is admitted in five hypotheses: notable change in characteristics of the premises, in use, in obligations of the parties, in local commercial factors, or effective duration exceeding twelve years.

The Pinel Act of 18 June 2014 introduced a smoothing mechanism: the increase cannot exceed 10% of the previous year''s rent (Article L. 145-34, paragraph 4). International investors should factor this lag into their financial models.

7. The eviction indemnity

The eviction indemnity is owed by the landlord refusing renewal without serious and legitimate cause (Article L. 145-14).

Components. Market value of the goodwill, plus moving and reinstallation costs and registration duties. Where the tenant can transfer its goodwill while keeping its clientele, the indemnity is limited to a transfer prejudice.

Procedure. The indemnity is set amicably or by the tribunal, which almost systematically appoints a judicial expert. As long as the indemnity is unpaid, the tenant may remain in the premises against an occupation indemnity (Article L. 145-28).

Right of repentir. The landlord may, within fifteen days following the final decision setting the indemnity, reverse its refusal of renewal (Article L. 145-58).

8. Assignment of the lease and joint guarantee

Any clause prohibiting assignment of the lease to the buyer of the goodwill is deemed not written (Article L. 145-16). The assignor remains jointly and severally liable for rent for three years from the assignment (Article L. 145-16-2). The landlord must inform the assignor of any non-payment within one month of due date, failing which the joint liability is forfeited.

For international groups, this guarantee is particularly relevant in intra-group restructurings and exit strategies.

9. Partial and full déspécialisation

Partial déspécialisation (adding related activities) requires a simple notification to the landlord (Article L. 145-47). Full déspécialisation (change of activity) requires the landlord''s express authorization or the tribunal''s authorization (Article L. 145-48).

10. Commercial lease litigation

Disputes fall within the jurisdiction of the tribunal judiciaire, ruling as judge of commercial rents for rent-fixing matters. Preliminary referral to the departmental conciliation commission (Article R. 145-23) is mandatory before any judicial action concerning the renewed rent.

Mastering the prescription periods is crucial: two years in commercial lease matters (Article L. 145-60).

Conclusion: anticipation and procedural rigour

The French commercial lease requires anticipation of key milestones and absolute procedural rigour. Early intervention prevents irreparable mistakes and economically optimises each party''s position. The 2026 environment makes a structured legal accompaniment more necessary than ever, particularly for international operators unfamiliar with the specific features of French commercial lease law.

---

This article presents the state of French law at the date of publication and does not constitute personalised legal advice.