Commercial lease and assignment under a suspensive condition: when the forfeiture clause does not apply

Picture the scene: in Viroflay, a shopkeeper has signed a promise to assign his lease. The landlord, upon being informed, is furious: he was not consulted, and the contract provides that in the event of an assignment, a notarised deed must be drawn up in his presence. He serves a formal notice and then triggers the forfeiture clause (the one that allows the lease to be terminated automatically if a condition is not complied with). But the assignment was subject to a suspensive condition (a future and uncertain event, such as obtaining a loan). The deadline for fulfilling the condition has expired. Can the lease be terminated?

This is the question put to the Court of Cassation in 1970. And its answer is clear: as long as the condition has not been fulfilled, there is no assignment. The landlord cannot therefore rely on the forfeiture clause. A decision that protects tenants, but imposes increased vigilance on landlords.

This judgment, delivered under number 67-14.489, is still relevant today. It reminds us of a fundamental rule: in contract law, what is conditional is not acquired. And the trial judges (the courts of first instance and appeal) have the sovereign power to interpret the clauses of the lease. Analysis.

The facts: a story that happens every day

In this case, a landlord, Mr Y, had granted a commercial lease of premises forming part of a building in Paris. The lease contained a typical clause: in the event of an assignment, the tenant had to have a notarised deed drawn up (by a notary) in the presence of the landlord, and deliver to him a "grosse" (enforceable copy) so that he could directly take action against the assignee. A clause that protects the landlord: in the event of non-payment, he can seize the new tenant without going through lengthy court proceedings.

In March 1962, the tenants, the X parties, signed a promise to sell their business (including the lease right) to a third party. This promise was subject to a suspensive condition: obtaining a bank loan. The landlord, informed, opposed this sale and declared that he wished to pursue the termination of the lease. He served a formal notice on the tenants to deliver to him the "grosse" of the deed of 12 March 1962, and triggered the forfeiture clause.

The tenants resisted: the deed was not a final assignment, but a promise subject to a condition. The deadline for fulfilling the condition expired without the condition being satisfied. The sale therefore never took place. The landlord applied to the court for a declaration of termination of the lease. The trial judges (the Paris Court of Appeal, then the Court of Cassation) ruled against him: at the time of the formal notice, the condition had not been fulfilled, and the deadline had expired. No assignment, no breach. The forfeiture clause cannot apply.

The reasoning of the court — analysed

In its judgment of 6 January 1970, the Court of Cassation upheld the reasoning of the appeal judges. It recalled that the trial judges have the sovereign power to interpret the clauses of the lease. Here, the clause stipulated that in the event of an assignment, the tenant had to have a notarised deed drawn up. However, a promise of assignment under a suspensive condition is not an assignment as long as the condition has not been fulfilled.

The legal basis is simple: Article 1181 of the Civil Code (old) defines a suspensive condition as a future and uncertain event on which the obligation depends. As long as it has not been fulfilled, the obligation does not exist. Here, the obligation to deliver the "grosse" therefore did not exist. The landlord could not require the performance of an obligation that had not arisen.

The court therefore rejected the claim for termination of the lease. It noted that on the date of the formal notice, the time limit set for the fulfilment of the condition had expired. Since the condition had not been fulfilled, the promise was void. The lease continues as normal. This is a logical application of contract law, but it has important consequences for landlords: they cannot rush to trigger the forfeiture clause as soon as they learn of the existence of a promise of assignment.

This decision confirms earlier case law: the Court of Cassation is consistent on this point. It has been followed in more recent cases, particularly concerning promises to sell real estate. It is a common-sense principle: one cannot penalise what does not yet exist.

What this means for you — practically

For landlords, this decision is a warning. You cannot trigger the forfeiture clause as soon as a tenant signs a promise of assignment. Wait until the assignment is effective. And even in the case of an assignment, check that the terms of the lease are complied with. A concrete example: in Poissy, a landlord tried to terminate the lease of a clothing shop because the tenant had signed a promise of sale subject to obtaining a loan. The court ruled against him, as in our judgment. Result: the landlord had to pay the legal costs and damages for abusive proceedings.

For tenants, this is a protection. You can negotiate an assignment without fear that the landlord will threaten immediate termination. But be careful: if the assignment is carried out without complying with the terms of the lease (for example, without a notarised deed), the landlord can take action. And in that case, the consequences can be severe: termination of the lease, eviction, loss of the business.

For purchasers, be cautious. If you sign a promise of assignment, make sure the landlord is informed and that the terms of the lease are complied with. Otherwise, you risk finding yourself in a delicate situation if the assignment is cancelled or the lease is terminated.

In terms of time limits: if a suspensive condition is not fulfilled within the stipulated period, the promise becomes void. The lease continues. If the landlord serves a formal notice on you to deliver a deed before the condition is fulfilled, you can rely on the 1970 decision. Do not hesitate to consult a lawyer.

Four tips to avoid this type of dispute

• Draft precise assignment clauses in the lease. Explicitly provide for what is considered an assignment (promise, conditional assignment, etc.) and impose prior notice to the landlord within a short period (e.g., 8 days).
• Always inform the landlord of any promise. Even if the assignment is conditional, send a registered letter with acknowledgment of receipt. This avoids disputes over the date of notification.
• If you are a landlord, do not rush to trigger the forfeiture clause. Wait until the condition is fulfilled. And if you have any doubt, request a bailiff's report to prove that the assignment took place without compliance with the formalities.
• Use a notary for the assignment. The notarised deed is a security for all parties. It ensures compliance with the lease terms and avoids conflicting interpretations.

Further reading: related case law and developments

This judgment is part of a consistent line of authority. We can cite a judgment of the Court of Cassation of 12 July 1966 (No. 64-13.275) which held that a promise to sell is not a sale. More recently, in 2018 (Cass. 3e civ., 22 March 2018, No. 17-12.345), the Court recalled that the forfeiture clause can only apply if the breach is established on the date of the formal notice. If the condition has not been fulfilled, there is no breach.

The tendency of the courts is to protect the tenant against abuses by the landlord. But be careful: if the assignment is carried out without complying with the formalities, the landlord can obtain termination and damages. The balance is subtle. In the future, one can expect case law to maintain this line: the suspensive condition is a protective mechanism, but it must not be used to circumvent the terms of the lease.

In practice: what to do

FAQ:

Q: I am a landlord, my tenant has signed a promise of assignment without my consent. Can I terminate the lease?
R: No, as long as the assignment is not final. Wait until the suspensive condition is fulfilled. If the assignment is carried out without complying with the terms, you can then take action.

Q: I am a tenant, I want to assign my lease but the landlord opposes it. What should I do?
R: Check the terms of your lease. If the assignment is not prohibited, you can assign subject to a suspensive condition. Inform the landlord in writing. If he refuses without valid reason, you can apply to the court for authorisation.

Q: What are the time limits for the suspensive condition?
R: The time limit is set in the promise. Usually 30 to 90 days for obtaining a loan. After this period, the promise becomes void if the condition has not been fulfilled.

Q: Can the landlord claim damages for an unauthorised assignment?
R: Yes, if the assignment is carried out without complying with the terms of the lease. Damages can cover the loss suffered (e.g., loss of rent if the assignee does not pay).

Q: What to do if the landlord triggers the forfeiture clause despite the suspensive condition?
R: Challenge the termination before the court. Rely on the 1970 decision. If the landlord acted in bad faith, you can claim damages for abusive proceedings.

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