Commercial lease renewal – Part.1 (1/2)

Commercial leases are usually for a minimum of nine years.

But to guarantee the tenant a certain stability in his commercial activity, he benefits from a right to renewal. It’s a right of public order.

This right to lease renewal entitles the tenant, on expiry of the lease, i.e. at the end of the nine-year term, to benefit either from renewal of the lease or payment of an eviction indemnity.

However, renewal is not automatic. In other words, if neither the lessee nor the lessor applies to renew the lease. This will continue by tacit extension, which could ultimately be detrimental to both lessee and lessor.

The advantage of requesting renewal of a commercial lease is twofold: the main purpose is to protect the lessee, since if the lease is tacitly extended for more than 12 years, the lessor will be able to impose an unfixed rent, which can be very dangerous.

For the lessor, the advantage of requesting lease renewal is that it gives him the opportunity to increase the rent. In particular, if significant changes have taken place during the course of the lease. At the same time, of course, the tenant can also request a reduction in the rent.

To apply for renewal of a commercial lease, the tenant must submit a request by registered letter or bailiff’s deed within six months of the expiry of the lease, or at any time in the event of tacit extension.

The landlord has three months to notify the tenant of his decision by bailiff’s deed. Either he accepts the renewal, or he refuses it, in which case he will pay the tenant an eviction indemnity. If he says nothing, he is deemed to have accepted the principle of lease renewal.

Important note: Only tenants who have effectively and continuously operated the business for three years can apply to renew their lease.

In the event of a business transfer, the transferee, i.e. the new tenant, will be able to take advantage of the rights acquired by the transferor to complete the duration of its operation and be entitled to the renewal of its lease. In general, there are no difficulties with the sale of a business.

However, because this will not be the case for a simple transfer of leasehold rights, the transferee will not be able to take advantage of acquired rights. Landlords will only be able to give their tenants notice of termination with renewal offers by bailiff within six months of the expiry of the lease, or six months in advance and by the last day of the calendar quarter in the case of tacit extension.