Commercial Lease: Registration with the Register of Commerce and Companies must be maintained until the eviction compensation is fixed

Picture the scene: in Mehun-sur-Yèvre, the owner of a commercial premises in the town centre gives notice to the tenant to recover the premises. The tenant, who has run a clothing shop for years, requests renewal of the lease. But in the meantime, he has struck off his registration with the Register of Commerce and Companies (RCS) for tax reasons. The result? The Bourges Court of Appeal denies him the right to eviction compensation (compensation paid by the landlord to the tenant who must vacate the premises without having been able to renew the lease). The tenant contests: 'I was registered at the time of the notice, why should I lose my compensation?' The question every landlord or tenant asks: until when must one be registered to benefit from the status of commercial leases?

This decision of the Court of Cassation of 27 March 2002 (No. 00-21.685) provides a clear answer: the conditions for applying the status of commercial leases, and in particular registration with the RCS, must be fulfilled at the date of service of the notice or the renewal request, and throughout the renewal or eviction compensation fixing procedure. In other words, the tenant cannot 'drop' his registration mid-way without risking losing his right to compensation.

But there is a notable exception: if the tenant waives the right to remain in the premises provided for by Article L. 145-28 of the Commercial Code (former Article 20 of the Decree of 30 September 1953) and returns the premises, he then frees himself from all contractual or statutory obligations. In short, if he leaves voluntarily, no registration condition applies. But if he wants to stay or obtain compensation, he must remain registered until the end.

The facts: an everyday story

Mr X, a landlord in Vierzon, had granted a commercial lease to a company, SCCD, which operated a hardware store. In 1995, Mr X gives notice to SCCD for 31 December 1995, with refusal of renewal. SCCD, however, continues to operate and requests payment of eviction compensation. But in the meantime, SCCD is absorbed by another company, Bricorama France. The latter ends up in the proceedings and claims eviction compensation.

The problem? Bricorama France was not registered with the RCS in its own name for the operation of this business. Indeed, registration with the RCS is personal: each operator must be registered on their own account. However, Bricorama France had not completed this formality before the notice or during the proceedings. The Bourges Court of Appeal therefore denied it the benefit of eviction compensation.

Bricorama France appeals to the Court of Cassation, arguing that the right to eviction compensation arose in favour of SCCD, and that the absorption did not modify this right. It argues that registration with the RCS is required only at the time of the renewal request, and not throughout the proceedings. The Court of Cassation rejects this reasoning: the right to eviction compensation is not definitively acquired at the time of notice; it is conditional on maintaining the statutory conditions until the compensation is fixed. Since Bricorama France was not registered, it could not claim compensation.

The court's reasoning — dissected

The Court of Cassation relies on Article L. 145-1 of the Commercial Code (which defines the scope of application of the status of commercial leases) and on Article R. 145-2 (which requires registration with the RCS). The reasoning is as follows: the status of commercial leases protects the business operated by a registered trader. If the tenant is no longer registered, he is no longer a trader, and therefore the lease is no longer subject to the protective status. Consequently, the right to renewal or eviction compensation disappears.

The decision specifies that this condition must be fulfilled 'at the date of service of the notice or the renewal request, and throughout the renewal or eviction compensation fixing procedure'. This is a continuous requirement. Why? Because the tenant who requests renewal or eviction compensation must prove his status as a trader at each stage of the proceedings. If this status disappears, the business is no longer protected, and the landlord can recover the premises without compensation.

However, note: the Court of Cassation confirms previous case law, but it adds an important nuance. It reminds that the tenant can escape this requirement if he waives the right to remain in the premises and returns the premises. In that case, he releases the landlord from all contractual or statutory obligations. But if he persists in his claim for compensation, he must remain registered until the final judgment.

What few people know is that this decision is part of a logic of protecting the landlord. Indeed, the landlord who must pay eviction compensation (often very high, potentially reaching the value of the business) needs guarantees. Registration with the RCS is proof that the tenant is indeed a trader operating a business. If this proof disappears, the landlord no longer has to compensate a business that no longer legally exists.

What this means for you — concretely

For landlords: this decision is a defensive weapon. If your tenant strikes off from the RCS during proceedings, you can contest his right to eviction compensation. Example: in Vierzon, a landlord gives notice to his tenant, a baker. The tenant requests renewal. During the proceedings, he ceases his activity and strikes off from the RCS. The landlord can then refuse to pay eviction compensation, because the tenant is no longer a trader. This could represent savings of several tens of thousands of euros.

For commercial tenants: be vigilant! Do not strike off your registration with the RCS until the renewal or compensation fixing procedure is definitively concluded. Even if you have already obtained a first instance decision, an appeal can call the compensation into question. undefined, I have encountered cases where a tenant, to save costs, struck off his RCS after the first instance judgment, thinking the case was won. The Court of Appeal considered that he was no longer registered and withdrew his compensation. Result: loss of several years of proceedings and zero compensation.

For buyers of businesses: if you buy a business whose lease is under renewal, ensure that the seller remains registered until the outcome of the proceedings. Otherwise, you could inherit a lease without a right to renewal. In practice, require a recent registration certificate at the time of signing.

Example with figures: a tenant in Mehun-sur-Yèvre operates a bar-tobacco shop. The value of the business is estimated at €150,000. The eviction compensation would be €150,000. If he strikes off from the RCS during proceedings, he loses all right to this compensation. The landlord saves €150,000. The difference is huge.

Four tips to avoid this type of dispute

• Check registration with the RCS from the first step: when you give notice or request renewal, ask the tenant for a Kbis extract (registration certificate) dated less than 3 months. Keep it in your file.
• Require a registration certificate at each key stage: when serving the notice, when requesting renewal, and before any hearing. The tenant must prove he is still registered.
• If you are a tenant, never strike off the RCS before the definitive end of the proceedings: even after a favourable judgment, wait for the expiry of appeal deadlines or a written agreement with the landlord. Premature striking off can cause everything to be lost.
• In case of transfer of the business, register the transferee before the transfer: the new tenant must be registered to continue the ongoing proceedings. Otherwise, the landlord can contest the right to renewal.

Further reading: related case law and developments

This 2002 decision confirms consistent case law of the Court of Cassation, already expressed in a judgment of 15 May 1991 (No. 89-19.222). In that case, the Court held that the tenant must be registered on the day of the renewal request. The 2002 decision goes further by requiring maintenance of registration throughout the proceedings. Since then, several decisions have clarified that striking off after notice but before the renewal request results in loss of the right to renewal (Civ. 3e, 10 March 2004, No. 02-19.654).

The trend is therefore towards stricter formal requirements. Courts are increasingly strict on the condition of registration, considered as proof of the existence of a business. For the future, it is likely that this condition will be maintained, or even extended to other formalities (registration with the trade register for craftsmen, for example).

However, case law admits an exception in case of waiver of the right to remain in the premises. This exception was confirmed by a judgment of 8 June 2017 (No. 16-15.822): the tenant who voluntarily leaves the premises before the end of the proceedings may escape the requirement of continuous registration, but he then loses all right to eviction compensation.

Checklist before acting

1. Do I have an up-to-date Kbis extract of the tenant? Check that it is less than 3 months old. If not, request a new one.
2. Is the tenant still registered with the RCS? Check the infogreffe.fr website to verify the registration in real time.
3. If I am a tenant, have I mistakenly struck off my RCS? If so, contact a lawyer immediately to see if you can still regularise (in some cases, re-registration may save the right to compensation, but it is risky).
4. Is the procedure concluded? Wait for the expiry of appeal deadlines or a final agreement before any striking off.
5. In case of transfer, is the transferee registered? Require a Kbis extract before signing the transfer deed.

FAQ:

• Can I lose my eviction compensation if I strike off from the RCS after obtaining a favourable first instance judgment? Yes, if the landlord appeals, the Court of Appeal may consider that you are no longer a trader and cancel the compensation.
• What if my tenant has struck off from the RCS during proceedings? You can raise the inadmissibility of his claim for eviction compensation. Consult a lawyer to act quickly.
• Does the registration condition also apply to craftsmen? Yes, but for craftsmen, registration with the trade register is required. The same principle applies.
• Can I waive the right to remain in the premises to avoid the registration requirement? Yes, but you will then lose all right to eviction compensation. This is a strategic choice to discuss with your lawyer.

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