What happens at the end of a commercial lease?
Duration of a commercial lease
A commercial lease lasts nine years, the contract being divided into three three-year periods under which notice can be given. (articles L.145-1 et seq. of the Commercial Code). At the end of the nine years, several situations are possible.
The lessor can cancel or renew the rental contract
In the first case, the lessor takes the initiative: he can either give notice or propose the renewal of the contract. In both situations, he must notify the tenant of a leave of absence following deadlines and a precise procedure. Termination of the lease by the owner can only be given under certain reasons. Among other things, there may be a question of recovery:
- to construct or demolish and rebuild the building,
- for property restoration work in remarkable heritage sites,
- of a residential premises rented incidentally to the commercial premises and which is not occupied.
The tenant submits a renewal request
In the second case, due to lack of news from the landlord, the tenant takes the initiative. He can directly submit a renewal request to the lessor.
Tacit renewal of the lease
Third situation: both parties, lessor and lessee, remain silent. In this case, the lease continues tacitly. As part of this tacit extension, the lessor or lessee may terminate the contract at any time with six months’ notice.
Does the commercial lease renew automatically?
Yes, the commercial lease can be renewed automatically. This is the third situation mentioned previously: that of the tacit extension of the contract. The lease continues under the same conditions as the initial lease with the difference that notice may be given outside the three-year periods (article L. 145-9 of the Commercial Code).
What is the procedure to follow by the owner to renew the commercial lease?
When the lease expires, it can be renewed by the lessor by sending the tenant a notice with an offer to renew the lease. This notice must be sent at least six months before expiry to the lessee and notified by act of a court commissioner. This is a very formalistic act which contains a certain number of obligatory information.
Can the landlord increase the rent as part of the lease renewal?
Rent increase
As part of the leave with renewal offer, the lessor can offer a new rent. The parties are then free to agree or not on this issue.
Calculation of the new rent
The amount of the new rent must be calculated based on:
- The variation of indices such as that of commercial rents (ILC) or the tertiary rent index (ILAT)
- Rental value. We then speak of uncapping.
How to apply for lease renewal when you are a tenant?
When the tenant has not received news from the lessor, he can send him a renewal request (article L.145-10 of the Commercial Code). This request must meet three conditions.
Send a registered letter with acknowledgment of receipt
First, it must be sent by registered letter with acknowledgment of receipt or by deed of a justice commissioner. Second, the request must be made within six months before the deadline.
Mandatory mention
Finally, it must include a specific mention provided for by article L 145-10 paragraph 4 of the Commercial Code reproduced below:
“ Within 3 months of notification of the renewal request, the lessor must, by bailiff’s deed, notify the applicant if he refuses the renewal, specifying the reasons for this refusal. Failing to have made his intentions known within this period, the lessor is deemed to have accepted the principle of renewal of the previous lease “.
How to claim the right to renew the lease?
You should know that the commercial lease regime protects the lessee to the extent that the premises allow him to carry out his activity. Also, we are talking about the right to renew the commercial lease (article L. 145-8 of the Commercial Code). To qualify and request renewal, the tenant must respect three conditions:
- Own the business
- Certify registration in the RCS (trade and companies register) or RNE (national business register) for a craftsman.
- Operate the business in the premises concerned during the previous three years.
Can the owner refuse the renewal of a commercial lease?
Eviction compensation in case of refusal
The owner can refuse the renewal of the commercial lease but must respect certain conditions (article L. 145-22 of the Commercial Code). Generally, the lessor will have to pay eviction compensation to the tenant in order to compensate him for the loss of his right to the lease.
Reasons for non-renewal of the lease
First of all, the lessor must specify the reasons for his refusal by act of a court commissioner. This act must specify by special mention that the tenant can contest the refusal of renewal or the amount of the eviction compensation before the judicial court, within a period of two years.
The lessor who has a serious and legitimate reason to refuse the renewal of the lease (non-payment of rent and charges, lack of repair/maintenance or lack of effective operation in the premises) will be exempt from paying eviction compensation.
How much does it cost to renew a commercial lease?
The commercial code provides for the tariff for court commissioners for the issuance of notices in matters of commercial leases (articles A 444-10 et seq.). Usually, it takes a few hundred euros, depending on the diligence undertaken by the professional.
What is the difference between extension and renewal of the commercial lease?
The extension of the lease is done under the same conditions as the initial lease. The contract can be terminated during the year by one of the parties (and no longer only at three-yearly deadlines) subject to respecting the six-month notice period. The leave date must also coincide with the last day of a calendar quarter. If the extension of the lease lasts more than twelve years, the rent may be uncapped (therefore increased).
The renewal of the lease can also be done under the same conditions as the initial lease but it is often the occasion for a change, generally a revision of the rent. It follows the general regime: leave cannot be given outside three-year periods.
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