A notice with an offer to renew a commercial lease does not necessarily constitute an offer to renew.
In 1999, a community of communes in the Charente Maritime region leased commercial premises used as a restaurant. Seventeen years later, the lessor delivered a notice with an offer to renew, subject to a change in the size of the leased premises and to the lessee’s maintenance obligations.
After returning the premises despite the fact that they had been offered renewal, the lessees sued the lessor for payment of eviction compensation.
At first instance, the Court considered the notice to be valid, but qualified it as a “congé-refus” (notice of refusal), giving full satisfaction to the lessees.
However, following an appeal by the lessor, the Court of Appeal ruled that the notice was null and void due to the proposed change in lease conditions. The voluntary departure of the lessees from the premises without prior objection deprived them of their right to eviction compensation.
However, the lessees were right not to give up. The French Supreme Court (Cour de cassation) analyzed the notice not as null and void, but as a “congé-refus” (notice of refusal) in view of the modification of the lease, and drew the consequences of this characterization by quashing and annulling the decision of the Court of Appeal on the basis of articles L. 145-8 and L. 145-9 of the French Commercial Code concerning lease renewal.
The result of this heavy-handed review was a genuine requalification in favor of the lessees, who were entitled to the eviction indemnity claimed.
The judges at the Quai de l’Horloge seem to have taken a very strict view of lease renewal, pointing out that it “takes place under the terms and conditions of the expired lease, with the exception of the judge’s power to set the price”.
The modifications mentioned in the context of her notice with renewal were therefore to be analyzed as a pure and simple refusal by the lessor, without taking into account his real intention to renew the lease. Clearly, this was a cruel penalty for the lessor, who had not foreseen the payment of this eviction indemnity.
This ruling has been the subject of much comment in the academic world, as it represents a highly protective position for lessees, while changes imposed by lessors on lease conditions at the time of renewal are common practice.
It should also be noted that in this area, the Cour de cassation has once again hammered home the limits of judicial intervention to the sole domain of rent setting, which is not without displeasure for certain commentators in favor of allowing the judge to interpret the contract, notably in legitimate cases of changes to lease conditions.
While the scope of this ruling remains to be seen, since the consequences of void notice are clearly to be distinguished from a notice of refusal, the fact remains that in practice lessees now have a body of case law in their favor, which they can use in lease renewal negotiations.
