For many retailers, leasing commercial premises is a key stage in the development of their business. Whether you’re launching your first store, changing address or looking to secure your business, it’s essential to understand the commercial lease: its advantages, constraints and pitfalls to avoid.
Summary and contents of the page
What is a commercial lease?
A commercial lease is a long-term rental contract (usually 9 years) between the owner of a premises (the lessor) and a merchant, industrialist or craftsman (the lessee). This contract sets out the rights and obligations of both parties, and in particular protects the lessee who carries out a commercial, industrial or craft activity on the premises.
Who can benefit from a commercial lease?
The commercial lease covers :
- Traders registered in the Trade and Companies Register (RCS)
- Craftsmen registered in the Trades Register
To qualify, the premises must be used for a commercial, industrial or craft activity. In certain cases, certain liberal professions may also benefit from the commercial lease system.
Why choose a commercial lease?
A commercial lease offers invaluable stability for the retailer’s business: it protects against abusive termination of the contract and gives the right to renew the lease. This enables the business owner to invest in fitting out his premises or build up a loyal clientele without fear of sudden eviction.
The main features of a commercial lease
Term: the famous “3-6-9” lease
The classic commercial lease is for 9 years, but can be terminated by the tenant every 3 years (hence the name “3-6-9 lease”). The tenant can give notice at the end of each three-year period, subject to 6 months’ notice, generally by bailiff’s deed or registered letter with acknowledgement of receipt.
The owner, on the other hand, can only terminate the lease before 9 years in very limited cases (unpaid bills, serious offences…), unless an amicable agreement has been reached.
Rent: setting and review
The rent is set freely at the time of signing. However, it can be revised every 3 years (triennial revision), according to the commercial rent index (ILC). This revision must respect certain rules to avoid excessive increases.
At the time of signing, the owner may also ask for a security deposit, often equivalent to 1 to 3 months’ rent.
Expenses, work and repairs
The commercial lease must specify which charges are to be borne by the lessee and which by the lessor (taxes, maintenance, major repairs, etc.). The breakdown must be clearly set out in writing: failing this, the law lays down minimum rules to protect the tenant.
Since 2014 (Pinel law), certain heavy charges (e.g. major structural work) can no longer be imposed on the tenant.
Assignment and sublease
A retailer can assign his lease (transfer the contract to a buyer, often at the time of the sale of the business), subject to certain conditions. In general, the lessor must give his consent or be informed, and the lease cannot completely prohibit the transfer of the lease with the business.
Subletting (lending or renting the premises to a third party) is prohibited unless the lessor expressly agrees.
The right to renewal
This is one of the pillars of the commercial lease: at the end of the 9-year term, the lessee has the right to renew. The lessor can only refuse renewal on very specific grounds (e.g.: taking over the premises to live in or set up his own business) and, barring exceptions, he will have to pay the lessee an eviction indemnity.
Steps for signing a commercial lease
- Negotiation: Agreement on rent, distribution of charges, duration, special clauses (authorized activity, work, etc.).
- Signing the contract: Draw up a detailed written lease that complies with legislation. Verbal leases are strongly discouraged.
- Declaration of activity: Registration of the business with the RCS or the trade register.
- Moving in: Obligatory inventory of fixtures, security deposit, insurance coverage.
The tenant’s obligations
- Paying rent and utilities
- Use the premises in accordance with the purpose specified in the lease
- Routine maintenance and repairs for tenants
- Take out insurance to cover business risks
The lessor’s obligations
- Ensuring peaceful enjoyment of the premises
- Take charge of certain work (structural work, obsolescence, etc.)
- Respecting the tenant’s right to lease renewal
Points to watch before signing
- Check the purpose of the premises (what activities are authorized?)
- Control the distribution of expenses and work
- Give priority to a detailed inventory of fixtures on entry
- If necessary, enlist the help of a lawyer or an expert to review the lease.
Consequences in the event of termination or dispute
In the event of a dispute (unpaid bills, disagreement over service charges, refusal to renew, etc.), the procedure generally goes through a negotiation phase and then, if necessary, to court.
Good to know: Commercial lease disputes are common. To avoid unpleasant surprises, it’s best to plan ahead and put everything in writing.
In a nutshell:
A commercial lease is a powerful stability tool for retailers, but it also implies long-term commitments. Good preparation and an understanding of the rights and obligations of each party are essential if you are to build a secure, long-term business. A final word of advice: consult the official service-public.fr fact sheet on commercial leases, or enlist the help of a professional.
