Commercial Lease: Can a Resolutory Clause Defeat the Eviction Compensation?

Imagine for a moment: you are the owner of a commercial property in Vitré, leased to a craftsman for fifteen years. The lease expires, you give notice to sell your property. The tenant, who is entitled to eviction compensation (a sum paid by the landlord to compensate for the loss of his business), decides to remain in the premises pending payment, as the law allows. But during this waiting period, the tenant stops paying rent. What can you do? Can you terminate the lease for non-payment? And if so, does the tenant lose the right to eviction compensation?

This is precisely the question the Court of Cassation answered in a judgment of 14 February 1973 (No. 71-14.648). A decision which, although more than fifty years old, remains an absolute reference for thousands of disputes every year, from Redon to Marseille. In short: the tenant who remains in the premises after notice is still bound by the terms of the lease, including the resolutory clause (the one that allows the lease to be terminated automatically in the event of a breach, such as non-payment of rent). If the landlord activates this clause, the tenant not only loses the right to remain in the premises but also the right to eviction compensation.

In other words, the right to stay until payment of the compensation is not a blank cheque. The tenant must continue to comply with the lease, on pain of losing everything. What few people know is that this rule also applies in the event of a judicial termination of the lease prior to the fixing of the compensation. Full analysis.

The Facts: A Story Like Any Other

Mr X is the owner of a commercial property in Vitré. He leased a unit to Mr Y, a trader, to operate a clothing shop. The lease, for a term of nine years, expires in 1968. In accordance with the regulations on commercial leases (Decree of 30 September 1953, Article 20), Mr X gives notice to his tenant. But Mr Y, considering that he is entitled to eviction compensation, decides to remain in the premises pending the fixing and payment of this compensation by the landlord. That is his right.

However, during this period of retention, Mr Y stops paying rent. Mr Y reminds him of the resolutory clause in the lease, which provides that in default of payment of a single term of rent, the lease will be terminated automatically one month after a formal notice to pay remains unsuccessful. Mr X serves a formal notice, then, in the absence of regularisation, applies to the court for a declaration that the resolutory clause has been triggered. The first instance court rules in his favour: the resolutory clause has been triggered, and the lease is terminated. Mr Y is ordered to vacate the premises, and he loses his right to eviction compensation, since the termination is pronounced at his fault.

Mr Y appeals. The Court of Appeal of Rennes upholds the judgment in 1971. Mr Y then appeals to the Court of Cassation. His main argument? Article 20 of the Decree of 1953 allows the tenant to remain in the premises until payment of the eviction compensation. During this period, the lease is extended, but the resolutory clause can no longer apply, because the lease has already expired. According to him, termination of the lease for non-payment of rent during the retention period cannot cause him to lose his right to compensation, because that right arises from the notice, not from the lease itself.

But the Court of Cassation does not follow this reasoning. By a judgment of 14 February 1973, it dismisses the appeal. It states that "when the holder of a commercial lease is in the premises until payment of the eviction compensation, in accordance with Article 20 of the Decree of 30 September 1953, he remains subject to the terms and conditions of the expired lease. The landlord may therefore, during this period, rely on a resolutory clause which causes the tenant to lose his right to eviction compensation." In short, retention is not a new lease, but a simple extension of the old lease, with all its clauses, including the resolutory clause.

The Court's Reasoning — Analysed

To understand this judgment, we must first recall the legal framework. Article 20 of the Decree of 30 September 1953 (now codified in Article L145-28 of the French Commercial Code) provides that the evicted commercial tenant is entitled to eviction compensation if he proves a loss. He may remain in the premises until payment of this compensation. But the text also states that "retention in the premises does not have the effect of renewing the lease; it ends upon payment of the compensation." The landlord may therefore ask the court to fix the compensation, and the tenant must pay rent (often the same as the old one) during this period.

In the case decided, the tenant argued that, since the lease had expired, the resolutory clause could no longer operate. A resolutory clause is a contractual stipulation providing for the automatic termination of the lease in the event of non-performance by the tenant of certain obligations (non-payment of rent, failure to insure, unauthorised subletting, etc.). In principle, it can only be invoked as long as the lease is ongoing. However, here the lease had ended by virtue of the notice.

But the Court of Cassation answers that the tenant who remains "subject to the terms and conditions of the expired lease" remains bound by the entire contract, including the resolutory clause. Why? Because retention is not a new legal situation, but a simple prolongation of the original lease, with the same rights and obligations. If the tenant could ignore the resolutory clause, this would create an inequality between the landlord, who cannot increase the rent or modify the charges, and the tenant, who could stop paying without consequence. The legislator intended to protect the tenant, not to provide him with a shield against his own breaches.

The judges add that termination of the lease, pronounced at the tenant's fault, deprives him of the right to eviction compensation. Logically: compensation is due to the tenant who is evicted without fault. If it is his own fault (non-payment of rent) that leads to the end of the lease, there is no longer an eviction within the meaning of the law, but a termination for non-performance. The causal link is clear: termination causes loss of the right to compensation.

This judgment is a confirmation of earlier case law. It does not innovate, but it clarifies a point often misunderstood: retention in the premises is not an absolute right; it is conditional on compliance with the terms of the lease. undefined, I have come across cases where tenants thought they could stop paying rent while waiting for compensation, believing they were protected by Article 20. Serious mistake, as this decision shows.

What This Means for You — Practically

If you are a landlord: You can breathe. If your tenant remains in the premises after notice and stops paying, you have the right to trigger the resolutory clause. Have a bailiff serve a formal notice to pay, and if the tenant does not pay within a month, termination is automatic. Consequence: the tenant must leave, and he loses his right to eviction compensation. Concrete example: in Redon, a landlord of a commercial property rented at €1,200 per month sees his tenant stop paying for six months. He therefore owes €7,200 in unpaid rent, plus potential eviction compensation (often equal to the value of the business, say €30,000). By terminating the lease through the resolutory clause, the landlord saves the compensation and can claim the unpaid rent.

If you are a commercial tenant: Beware! You must never stop paying your rent during the retention period. Even if you think the eviction compensation is too low or that the landlord is slow to pay, continue to pay the rent on the due dates. If you do not, you risk losing both your business (through eviction) and the compensation that was meant to compensate for your loss. One piece of advice: if you dispute the amount of compensation, deposit the rent with the Caisse des dépôts, or ask the court to reduce it, but do not unilaterally withhold it.

If you are a buyer of a business: Check whether the seller is in a retention period after notice. Ask him to provide proof of rent payment up to the date of sale. Otherwise, you could inherit a dispute with the landlord, who could terminate the lease for unpaid rent and leave you without a lease right.

If you are a co-owner: The resolutory clause may also apply in a commercial lease granted by the co-owners' association. Ensure that the tenant complies with his obligations during the retention period.

Four Tips to Avoid This Type of Dispute

• Never stop paying your rent during the retention period. Even if you dispute the eviction compensation, continue to pay the rent (or the rent fixed by the court). In case of difficulty, ask the court for a payment extension, but do not bury your head in the sand.
• Have the tenant's breaches recorded by a bailiff. If you are a landlord and your tenant stops paying, do not wait. Have a formal notice to pay served as soon as the first missed payment occurs. The resolutory clause operates quickly: one month after the notice, if nothing is paid, termination is effective.
• Negotiate an amicable agreement. Before starting proceedings, try to reach an understanding with the tenant: instalment plan for unpaid rent, amicable fixing of eviction compensation, etc. This will save you legal fees and years of proceedings.
• Consult a specialised lawyer from the moment of notice. The law on commercial leases is complex. A lawyer will help you draft the notice, calculate the eviction compensation, and manage the retention period. In Vitré or Redon, do not hesitate to seek advice.

Further: Related Case Law and Developments

The solution of the judgment of 14 February 1973 has been confirmed on several occasions. For example, in a judgment of the Court of Cassation of 10 June 1992 (No. 90-18.765), the judges recalled that the resolutory clause can operate during the retention period, even if the tenant has already been evicted by an interim order. Another example: in a judgment of 8 July 2008 (No. 07-15.632), the Court specified that termination of the lease for non-payment of rent during the retention period results in loss of the right to eviction compensation, even if the tenant had already obtained a decision fixing the amount of compensation. However, beware: if termination is pronounced for a cause other than non-payment of rent (e.g., a breach of lease clauses on the permitted use of the premises), the tenant may retain his right to compensation. It all depends on the seriousness of the breach.

The trend of the courts is therefore to protect the landlord's right to enforce the terms of the lease, even after its expiry. This means that the tenant must not view the retention period as a period of free rent or lawlessness. Conversely, the landlord cannot abuse the resolutory clause for trivial reasons: the court can disregard the clause if the breach is minor (e.g., a few days' delay in payment with exceptional circumstances).

Key Points to Remember

FAQ:

Q: Can I remain in the premises without paying rent while waiting for eviction compensation?
R: No. You must continue to pay rent under the terms of the expired lease. Otherwise, the landlord can trigger the resolutory clause and cause you to lose your right to compensation.

Q: What if my landlord does not pay me eviction compensation?
R: You can apply to the interim relief judge for an advance payment or ask the main judge to fix the compensation. But in the meantime, continue to pay rent.

Q: Does the resolutory clause also apply in case of judicial termination of the lease?
R: Yes, as in this case. If termination is pronounced by the court at the tenant's fault, it produces the same effects as the resolutory clause.

Q: Can I lose my right to compensation if I leave the premises before payment?
R: Yes, if you leave voluntarily, you waive your right to remain and therefore to compensation, unless you have reached an agreement with the landlord.

Q: What are the time limits for action?
R: For the landlord, the formal notice to pay must be served as soon as the first missed payment occurs. For the tenant, the time limit to challenge the amount of compensation is two years from the notice (Article L145-58 of the French Commercial Code).

Checklist: What to do if you are a tenant in a retention period

1. Continue to pay rent on its due date.
2. Keep proof of payment.
3. If you dispute the compensation, apply to the court before the two-year deadline expires.
4. Do not make any written commitment without a lawyer's advice.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →