The French "tenant management agreement"
Within the framework of a management agreement, the owner of a business will entrust the lease and the management of this business to a third party, called the tenant-manager.
The tenant-manager then takes the reins of the establishment and will ensure its daily management. He will also have to pay rent to the owner of the business.
The tenant-manager is directly responsible for the operation of the business and acts in his own name and for his own account.
However, the tenant-manager is not an employee and the owner of the business must not act as an employer in this respect.
Contractual flexibility
The advantage of the tenant-management lease lies in the contractual flexibility of this contract:
- The lease may cover the entire business or only a part of it;
- The duration of these contracts is freely determined by the parties: a management lease can thus be granted for a given period, or for an indefinite period;
- The financial terms of the rent are also freely determined by the parties.
Formalities resulting from the tenant-management lease
The tenant-management lease must be published in a legal journal within 15 days of its signature.
Until this publication, the owner of the business is jointly and severally liable with the tenant-manager for the debts and taxes relating to the business.
The termination of the management lease contract must also be published.
The owner of the business should also check whether the commercial lease authorizes him to lease the business, and if not, he should obtain the prior written agreement of the lessor to this effect.
The possibility of providing for a purchase option
The parties also have the possibility of including a purchase option in the management lease, allowing the manager to acquire the business at a determined or determinable price.
In this case, the tenant-manager has the opportunity to “test” the operation of his future business, and has a period of time in which to make the personal contribution necessary to finance the purchase of the business.