Support in negotiating the commercial lease

The “destination clause”

The “destination clause” specifies the activities that may be carried out in the commercial premises.

It is necessary to pay particular attention to the wording of this clause by drafting it as broadly as possible, in order to leave the lessee the possibility of developing the activity exploited.

Failing this, it will be necessary to obtain the lessor’s agreement to the new activity provided for in the lease, unless it is related or complementary to that provided for in the purpose of the lease.

Duration

The duration of the commercial lease agreement may not be less than 9 years.

However it is quite possible to provide for a term longer than 9 years. Nevertheless, providing for a term longer than 9 years will have certain consequences for the lessee, particularly regarding the rent of the renewed lease, which will not be capped.

It is also possible to sign a derogatory lease for a 3-years maximum period, but in this case the lessee will not benefit from the status of commercial leases.

The financial conditions of the commercial lease and the terms of payment

The amount of the rent is freely determined by the parties. It will generally be set according to the rental value of the commercial premises, i.e. in relation to the market value, and deserves the lessee’s full attention during negotiations. Indeed, paying too much rent may have a significant impact on the profitability of a business…

Particular attention shall be paid to the amount of the rent and the way it is calculated: is it fixed, or is it a revenue clause? Is there a floor rent and/or a threshold? Does it appear to be in line with market prices?

It is quite possible to negotiate the amount of the security deposit.

Lastly, particular attention shall be paid to the payment terms: shall the deadlines be paid in arrears or in advance?

Rent review and indexation

1. The commercial lease statute provides for the possibility of requesting a review of the rent at each three-yearly expiry date (i.e. every three years) or at any time if at least three years have elapsed since the previous rent was fixed.

The increase or decrease in rent following a three-yearly review is capped and may not exceed the variation in the quarterly index of commercial rents or the quarterly index of rents for tertiary activities, which has occurred since the last amicable or judicial fixing of the rent, except in the case of a material change in the local commercial factors which has in itself led to a variation of more than 10% in the rental value.

It is also possible to include a sliding scale clause in the lease which allows the rent to change periodically on the basis of a reference index.

While it is not possible to derogate from the principles of the triennial revision, it is possible to negotiate the sliding scale clause.

Charges

The Commercial Code provides for a list of charges that the lease may not impute to the lessee. These are, for example, the following charges:

• expenditure relating to major repairs within the meaning of Article 606 of the Civil Code, affecting walls, vaults, beams, roofs, retaining walls or fences, and those affecting the general structure of the building and its general solidity, as well as fees relating to the execution of such work,
• expenditure relating to work to bring the premises into conformity, or to remedy dilapidation – provided that they relate to major repairs within the meaning of Article 606 of the Civil Code.

It is therefore important to check that the lease does not make you responsible for expenses that are the responsibility of the lessor and that the other charges relate to expenses linked to your premises. You should not hesitate to negotiate that the lessor will pay the property tax and/or the household waste collection tax.

Transfer of the lease

The commercial lease statute provides that it cannot be prohibited to transfer the lease to the purchaser of the business.

Our advice: go further and try to negotiate the possibility of assigning the lease to any person approved by the lessor.

The lessor will certainly wish to provide that in the event of the transfer of the commercial lease, the lessee-transferor remains jointly and severally liable with the lessee-transferee for the payment of rent and charges. In this case, be sure to limit this guarantee clause to 3 years as provided for in the commercial lease regulations.

Sub-lease

The sub-lease of all or part of the premises is only possible if it is provided for in the lease or with the agreement of the lessor.

Our advice: if you plan to sub-lease all or part of the premises, negotiate this from the outset and include a clause to this effect in the commercial lease.