What is a French commercial lease?
The French commercial lease (bail commercial) is the lease covering a building or premises in which a commercial or craft business (fonds de commerce) is operated. It is governed by a public-policy statute codified at Articles L. 145-1 to L. 145-60 of the French Commercial Code, the primary purpose of which is the protection of the commercial or craft tenant. The statute establishes a right to renewal at the end of the lease and, in case of refusal by the landlord, the payment of an eviction indemnity intended to compensate for the loss of the business.
The specific feature of the commercial lease is that the duration (minimum nine years), the rent review mechanism (capping as a principle, uncapping by exception), the assignability to the buyer of the business, and the option of déspécialisation are all closely regulated by law. Any clause to the contrary is deemed not written (Article L. 145-15), distinguishing the commercial regime from other professional leases (professional lease, precarious occupancy agreement, derogatory short-term lease).
The economic stakes are considerable. The leasehold right (droit au bail) is often the most highly valued component of the goodwill, particularly for prime locations. From the landlord's perspective, however, the statute restricts contractual freedom and may generate heavy financial liabilities upon refusal of renewal.
Conditions for the statute to apply
The benefit of the commercial lease statute is not automatic. It requires four cumulative conditions, failing which the contract is recharacterized as a common-law lease, professional lease or precarious occupancy agreement, with significant loss of protection for the tenant.
Commercial premises
Premises dedicated to operating a commercial or craft business.
Active goodwill
The tenant must actually and personally operate a business in the premises.
RCS/RM registration
Tenant registered with the trade or crafts register.
9-year duration
Lease for a minimum nine-year term, with tenant's triennial right to terminate.
Existence of premises dedicated to operation
The statute applies to leases of buildings or premises in which a business is operated. Mere unconstructed locations (kiosks, terraces not exclusively dedicated) are excluded, unless the parties agree to extend the regime. Accessory premises necessary to the operation may be included, provided they are indispensable to the functioning of the principal business.
Effective operation of a commercial or craft business
The tenant must operate in the premises a fonds de commerce, i.e., a set of tangible and intangible elements (clientele, leasehold right, sign, equipment) dedicated to a commercial activity. The operation must be effective, personal (or via an employee) and stable. A simulated, intermittent 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 (RCS) for traders, or with the trades register (RM) for craftsmen. This registration is required both at the inception of the lease and upon renewal, and its absence may justify a refusal of renewal without eviction indemnity (Article L. 145-1, I, 1°). Even temporary deregistration exposes to a contestation of the right to the regime.
Derogatory lease and precarious occupancy
The parties may conclude a derogatory lease (bail dérogatoire) for a maximum duration of three years (Article L. 145-5), allowing the tenant to test an activity or location without the regime applying. Upon expiry, absent a contrary expression of will, the lease automatically falls under the statutory regime. The precarious occupancy agreement (Article L. 145-5-1) requires special circumstances independent of the parties' sole will. Mischaracterization may lead to retroactive recharacterization as a commercial lease.
Duration and renewal
The legal minimum term is nine years (Article L. 145-4). The tenant may give notice at the end of each triennial period, by bailiff's writ or by registered letter with acknowledgment of receipt, at least six months before expiry (Article L. 145-9). This right may be contractually excluded for leases longer than nine years, single-purpose premises, exclusively office premises and storage premises.
Renewal mechanics
At the end of the lease, two paths exist. Either the landlord takes the initiative by serving notice with offer of renewal (Article L. 145-10), or the tenant takes the initiative by requesting renewal in the six months prior to expiry. The landlord's silence for three months following a renewal request amounts to tacit acceptance of the principle of renewal.
Failing notice or renewal request, the lease continues by tacit prolongation. This is risky for the landlord because it may trigger uncapping of the rent if the effective duration of the lease exceeds twelve years (Article L. 145-34). For the tenant, tacit prolongation does not create a new lease and remains precarious.
Refusal of renewal
The landlord may refuse renewal, but in principle this entails payment of an eviction indemnity. Refusal without indemnity is admitted only in cases listed by law: serious and legitimate cause against the tenant (contractual breach after formal notice, Article L. 145-17), insalubrity or ruin of the premises, demolition for reconstruction, recovery for housing. The burden of proof lies with the landlord and case law is demanding.
Rent, review and uncapping
The setting of the initial rent is free. By contrast, rent evolution during the lease and at renewal is closely regulated. This regulation is one of the main areas of contention between landlords and tenants.
Triennial review
Each party may request rent review at the end of a three-year period running from the lease's effective date or from the last review (Article L. 145-37). The review is capped at the variation of the contractual index — the commercial rents index (ILC) for commercial and craft activities, the tertiary activities rents index (ILAT) for offices and liberal professions (Article L. 145-38). The use of the former construction cost index (ICC) is now prohibited for commercial lease review and renewal.
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 since the last fixing (Article L. 145-38, paragraph 3). The burden of proof lies with the party invoking uncapping and must be substantiated.
Renewed rent
The renewed rent is in principle capped at the variation of the reference index between the date of the initial rent fixing and the effective date of the renewed lease (Article L. 145-34). Uncapping is admitted in five hypotheses: notable change in characteristics of the premises, in the use of the premises, in the parties' obligations, in local commercial factors with a favorable impact on trade, and effective duration exceeding twelve years (including tacit prolongations).
Where uncapping leads to an increase exceeding 10% of the previously paid rent, 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), staggering the economic catch-up over time.
Termination, notice and déspécialisation
Exit from the commercial lease may take several forms, all subject to strict formal conditions. A procedural error (form, deadline, motivation) may invalidate a notice or a refusal of renewal and expose the defaulting party to heavy financial consequences.
Termination for breach
The landlord may seek judicial termination in case of serious breach by the tenant (persistent non-payment, failure to operate, unauthorized change of use, prohibited subletting). The automatic termination clause (clause résolutoire, Article L. 145-41) allows accelerated termination after a one-month formal notice. The tenant may, however, request payment delays and suspension of the clause's effects from the judge.
Partial and full déspécialisation
The tenant may adapt its activity to market evolution. Partial déspécialisation (adding related or complementary activities) requires a simple notification to the landlord by bailiff's writ; the landlord has two months to contest (Article L. 145-47). Full déspécialisation (change of activity) requires the landlord's express authorization or, failing that, the tribunal's authorization (Article L. 145-48), subject to safeguarding the landlord's interests (possible indemnity, rent increase at next review).
Eviction indemnity
The eviction indemnity is the financial counterpart of the tenant's right to keep its business. It is owed by the landlord who refuses renewal without being able to invoke a serious and legitimate cause, the insalubrity of the premises or a reconstruction project (Article L. 145-14). Its amount may represent a significant portion of the value of the goodwill and constitutes one of the major financial risks for the landlord.
Components of the indemnity
The indemnity comprises the market value of the goodwill determined according to the usages of the profession (sectoral coefficients applied to turnover, rent of the goodwill method, comparables method), plus normal moving and reinstallation costs and registration duties to acquire an equivalent business. Where the tenant can transfer its business to other premises while keeping its clientele, the indemnity is limited to a transfer prejudice (moving costs, temporary loss of operation, communication costs).
Procedure and expert valuation
The indemnity is set amicably or, failing that, by the tribunal, which almost systematically appoints a court-appointed expert to value the business. The adversarial process is essential: production of turnover, balance sheets, rent paid, comparable market data. As long as the indemnity is not paid, the tenant may remain in the premises against payment of an occupation indemnity (Article L. 145-28).
Landlord's right of repentir
The landlord may, within fifteen days following the final decision setting the indemnity (and as long as the tenant has not vacated or rented other premises), reverse its refusal of renewal and offer renewal (Article L. 145-58). This right of repentir allows the landlord to avoid paying an indemnity considered too high. Once exercised, the tenant cannot oppose it and the lease is renewed on the terms of the original notice.
Assignment of the lease
Assignment of the leasehold right is a key element of the goodwill. It allows the operator to monetize its location upon transfer of the business or, where the lease so permits, independently.
Assignment to the successor in business
Assignment of the lease to the buyer of the goodwill cannot be prohibited by the lease, any contrary clause being deemed not written (Article L. 145-16). The landlord must be a party to the deed of assignment, or be served by bailiff's writ. An approval or pre-emption clause remains possible for the assignment of the leasehold right alone (without the goodwill).
Assignor's joint and several guarantee
The assignor remains jointly and severally liable for rent payment and accessories for three years from the assignment (Article L. 145-16-2). The landlord must inform the assignor of any non-payment by the assignee within one month of due date, failing which the benefit of the joint liability is forfeited. This guarantee may be contractually extended, but must be expressly stipulated and accepted.
Commercial lease litigation
Commercial lease disputes fall within the jurisdiction of the tribunal judiciaire, ruling as judge of commercial rents (special jurisdiction of the President) for rent-fixing matters. The procedure is oral and requires preliminary referral to the departmental conciliation commission (Article R. 145-23) before any judicial action concerning the renewed rent. A faulty referral may result in the inadmissibility of the action.
Main disputes concern the qualification of the lease (regime applicable, recharacterization of derogatory lease), the validity of the notice or refusal of renewal, the rent (uncapping, market value), the eviction indemnity, the application of the resolutory clause, déspécialisation, assignment and subletting. Mastering the prescription periods (two years in commercial lease matters, Article L. 145-60) is crucial as many actions are extinguished by silent passage of time.
Role of the commercial lease attorney
The attorney intervenes at every stage of the lease's life. At the initial negotiation, he drafts the contract, optimizes duration, indexation, charges allocation, and specific clauses (use, déspécialisation, assignment, subletting, guarantees). During the lease, he handles triennial reviews, déspécialisations, defense in case of resolutory clause enforcement or contestation of operation.
Upon renewal, he prepares or contests notices, secures deadlines, negotiates the renewed rent and pleads uncapping where appropriate. In case of refusal of renewal, he leads the eviction indemnity proceedings, coordinates judicial expertise and negotiates amicable settlement. For assignments, he verifies enforceability against the landlord, secures any required approval and prevents joint liability risks.
Early intervention prevents irreparable procedural mistakes (non-compliant notification, missed prescription deadline, failure to refer to the commission) and economically optimizes the represented party's position.
Why Mac Mahon Avocats
Mac Mahon Avocats handles commercial lease matters in connection with its corporate, M&A and restructuring practices. This cross-disciplinary approach allows treating the lease both as a contract (negotiation, litigation) and as an economic asset (valuation, transfer, security). The firm advises both landlords (REITs, investors, family-office property owners) and tenants (retailers, brands, businesses).
Each matter is handled by a partner, ensuring continuity, confidentiality and full procedural mastery. The firm intervenes both in advisory and litigation, with particular attention to deadline preservation and amicable resolution opportunities. The team works fluently in English with international landlords and tenants.