Eviction penalty paid by landlord after termination of French commercial lease

Grégory HANSON — Wed, 05 Dec 2012 14:35:25 +0000

Under French law, a landlord must rent a commercial premise (a shop, a factory, a restaurant), under a commercial lease (“BAIL COMMERCIAL”); for a minimum mandatory duration of 9 year.

When the lease reaches this 9 year term, the tenant is entitled to continue the contract.

If the landlord wishes to repossess the property an eviction penalty must be paid to the tenant (unless the tenant is in serious breach of contract for repeatedly not having paid the rent for instance).

This eviction penalty is supposed to compensate the loss of turnover by the tenant induced by this repossession.

Payment of this penalty is a statutory requirement of French Commercial Code (“CODE DE COMMERCE”). Consequently, it does not have to be stipulated in the lease contract to be enforceable.

The statutory provisions on eviction penalty are mandatory, they cannot be excluded by the terms of the lease contract.

Nevertheless, under certain conditions, the tenant can renounce to benefit of the eviction penalty but only after termination of contract.

In case of dispute, a party can challenge the validity of such a renouncement before a Judge.

If the parties cannot agree on the value of the penalty, it will be decided by a Judge and is usually equivalent to two years turnover of the tenant.

It is advisable to seek the advice of a lawyer before considering termination of a commercial lease.

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Eviction penalty paid by landlord after termination of French commercial lease