Commercial Lease: Staff Accommodation Approved in 1973

Imagine: you own a small building in Vénissieux, in the Lyon suburbs. You lease the ground floor to a company for its business, and the upper floors to tenants. One day, your commercial tenant asks to use one of the apartments to house its staff. You hesitate: is this legal? Does urban planning law not restrict the use of residential premises?

This is precisely the question that arose in a case decided by the Court of Cassation in 1973, and which remains relevant today. At the time, a company had entered into a commercial lease that included a clause allowing it to use residential premises to house its employees. The administration considered this a breach of Article 340 of the Urban Planning Code, which prohibits changing the use of premises without authorisation. But what did the highest court think?

The Court of Cassation ruled: a clause in a commercial lease that grants the right to use premises intended for residential purposes for staff accommodation does not constitute an infringement of Article 340 of the Urban Planning Code. In other words, simply providing in a contract for the possibility of housing employees in existing dwellings is not illegal per se. But beware: this decision does not mean everything is permitted. Let us analyse this case and its practical implications for you, landlords, tenants or property professionals.

The facts: a story that happens every day

Let us go back to 1968. A company, Établissements Cunow, operates a business in Bron, near Lyon. It is a tenant under a commercial lease granted by a landlord, Mr X. This lease contains a special clause: the company has the right to use part of the premises, originally intended for residential use, to house its staff. Nothing exceptional at a time when companies sought to retain employees by offering them a roof.

But the administration, through the Prefect of the Rhône, considers that this clause violates Article 340 of the Urban Planning Code. This article, in force at the time, prohibited changing the use of a building or part of a building without prior authorisation. According to the administration, by allowing staff accommodation in residential premises, the use of the premises was being modified, which required a permit. The landlord and the company were therefore prosecuted for the offence.

The Lyon Criminal Court, seized at first instance, convicted them. But they appealed. The Lyon Court of Appeal overturned the judgment: it acquitted the defendants, holding that the clause did not constitute an offence. The administration appealed to the Court of Cassation. The Court of Cassation, in its judgment of 23 May 1973, dismissed the appeal and confirmed the acquittal. It reasoned that the contested clause merely provided for a possibility of use, without effecting an actual change of use within the meaning of Article 340. In other words, the contract itself was not an offence; only material acts of transformation could be.

The reasoning of the court — broken down

To understand this decision, we must first grasp the text at issue. Article 340 of the Urban Planning Code (now repealed and replaced by similar provisions in the current Urban Planning Code, notably Article L. 421-1) prohibited changing the use of a building without authorisation. Use refers to the purpose for which the building is designated: residential, commercial, office, etc. Changing use means, for example, converting a dwelling into commercial premises, or vice versa.

But in this case, the question was: does providing in a lease that residential premises may be used for staff accommodation constitute a change of use? The Court of Cassation answered no. Why? Because the contract merely permits a use that remains within the scope of residential use. Housing employees is still residential use. It is not a change of use, but a simple mode of occupation. The judges specified that the offence would only be committed if works or alterations effectively changed the nature of the premises.

This reasoning follows a strict interpretation of criminal law: one cannot punish someone for a contract that merely provides for an option, without any material act. It confirms previous case law, which requires a material element to constitute an offence. The administration's arguments, which saw the clause as an offence from its signature, were rejected. The Court held that the subsequent agreement (an addendum) merely extended the modalities of exercising an existing right, without creating a new offence.

This decision is important because it reminds us that urban planning law governs concrete acts, not contractual intentions. But beware: if the clause allows subsequent transformations, those must comply with urban planning rules. The contract is not a blank cheque.

What this means for you — practically

So, in practice, what should you remember? For landlords, this decision is reassuring: you can include a clause in a commercial lease allowing staff accommodation in residential premises without fear of immediate criminal prosecution. But this does not exempt you from ensuring that the premises comply with safety and habitability standards (minimum floor area, electrical installation, etc.). For example, if you lease a 30 m² apartment in Bron to house two employees, make sure that the local sanitary regulations do not set a minimum floor area per person.

For commercial tenants, the clause offers valuable flexibility. You can house your employees on site, which can be an asset for recruitment or retention. But remember that the use must remain consistent with the designated use of the premises. If you convert a dwelling into a dormitory with partitions, you risk falling under the regulations on change of use (Article L. 631-7 of the Construction and Housing Code for Paris and certain communes, but note, in the Rhône, similar rules may apply).

For purchasers of a leased building, be vigilant: if the current lease contains such a clause, it is binding on you. You must comply with it, unless you negotiate a modification. For example, if you buy a building in Vénissieux with a commercial lease authorising staff accommodation, you cannot unilaterally disregard it. Remember to request a copy of the lease before signing the sale deed.

Finally, for co-owners, note that this clause may affect charges and insurance. If employees live in the building, it may increase the risk of fire or damage. Check that the co-ownership regulations do not prohibit commercial use or staff accommodation. In Bron, a managing agent had to handle a recent conflict on this subject: some co-owners complained about the comings and goings of employees housed in the attic. The solution was to recall that the lease clause prevailed, but that excessive use could be sanctioned.

Four tips to avoid this type of dispute

• 1. Draft a precise clause in the lease: Do not settle for a vague mention. Indicate the maximum number of persons to be housed, the rooms concerned, and any usage restrictions. For example: "The tenant may house up to two employees in the apartment on the first floor." This will avoid any interpretation.
• 2. Check local urban planning rules: Some municipalities require authorisations for change of use, even for staff accommodation. Inquire at the town hall of Bron or Vénissieux before signing. The urban planning department can tell you whether simple staff accommodation is considered a change of use.
• 3. Inform your insurer: Occupation by employees may change the risk. Declare this clause to your multi-risk building insurance (for the landlord) or your liability insurance (for the tenant). In the event of a claim, an omission could lead to exclusion of cover.
• 4. Anticipate neighbourhood conflicts: If the building is in co-ownership, notify the managing agent and other co-owners. A clause in the lease does not bind them. A friendly agreement or a modification of the co-ownership regulations may be necessary. For example, in Bron, a landlord had to call a general meeting to obtain acceptance for housing two employees in his apartment leased to a company.

Further reading: related case law and developments

This 1973 decision is part of a consistent line of case law. As early as 1966, the Court of Cassation had ruled that simply leasing a dwelling to a company to house its staff does not constitute a change of use (Civ. 3e, 15 June 1966). More recently, the Criminal Chamber reiterated that the offence of change of use requires a material act of transformation, not merely the conclusion of a lease (Crim., 12 January 2000, No. 99-80.123).

However, regulations have evolved. Today, Article L. 631-7 of the Construction and Housing Code requires authorisation for the change of use of residential premises in municipalities with more than 200,000 inhabitants (and certain others). The ALUR law of 2014 strengthened controls. Thus, if the lease clause allows staff accommodation, but the premises are located in Lyon (a municipality subject to authorisation), a prior declaration may be required if the use actually changes (for example, if the apartment becomes an exclusive staff flat).

The courts' tendency is therefore to distinguish the contractual clause (lawful) from acts of execution (which may be unlawful). Caution is still advised: if you convert a dwelling into a guest house or tourist accommodation for your employees, urban planning rules apply. The 1973 decision only protects you if you remain within the scope of normal residential use.

Summary and next steps

FAQ:

• Can I include a staff accommodation clause in my commercial lease? Yes, this clause is lawful according to the Court of Cassation. But it does not exempt you from complying with urban planning rules for any subsequent transformations.
• What if my tenant transforms the dwelling without authorisation? You can ask them to restore the premises to their original state, and report the offence to the town hall. The tenant risks a fine and an obligation to regularise.
• What are the risks for the landlord? If you authorise non-compliant use (e.g., tourist accommodation), you could be prosecuted for complicity in an offence. It is better to draft a precise addendum.
• Does this decision still apply today? Yes, the principle remains valid, but the texts have changed. Always check local regulations.

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