Building Lease: Approval Clause for Assignment is Void (Cass. 3e civ., 24 Sept. 2014)

Imagine: you own a commercial plot in Parentis-en-Born. You sign a building lease with a developer. They build a supermarket on it. All is well. But one day, the developer wants to sell their leasehold interest to a competitor. You, as lessor, wanted to retain a right of oversight: the contract contains a clause requiring your approval for any assignment. Yet, the French Supreme Court, in a judgment of 24 September 2014, ruled that such a clause is void. Why? Because a building lease grants the lessee a real property right (a right in rem, akin to ownership), and any restriction on that right is prohibited. A decision that shakes up practices and forces you to rethink your contracts.

The Facts: A Story That Happens Every Day

The real estate company (SCI) of the Stains shopping centre had signed a building lease with the company Immobilière Carrefour. The lease covered land intended for a shopping centre. The contract contained a typical clause: any assignment of the lease by the lessee had to be subject to the lessor's approval, i.e., the SCI. In other words, the lessee could not sell their leasehold interest without the landowner's consent.

One day, the SCI of the Stains shopping centre assigned its lease to a third party without seeking the approval of Immobilière Carrefour. The latter then sued the SCI, seeking annulment of the assignment and termination of the building lease. The Court of Appeal ruled in favour of Immobilière Carrefour: it held that the approval clause was valid and that the assignment without authorisation was therefore irregular. But the SCI appealed to the Supreme Court.

The case therefore went before France's highest judicial court: the Court of Cassation. The debate centred on the validity of the approval clause in a building lease. The question was simple: can a lessor impose their consent for the lessee to assign the lease? The answer, as we shall see, is no.

The Court's Reasoning — Explained

The Court of Cassation quashed (annulled) the Court of Appeal's decision. It held that a building lease confers on the lessee a real property right. What does that mean? In law, a real right is a right that directly relates to a thing (here, the land and buildings), as opposed to a personal right which only gives a claim against a person. In a building lease, the lessee becomes the owner of the buildings they erect during the term of the lease. They therefore have a temporary right of ownership over the property. This right is assignable, meaning it can be sold.

The Court recalls that any clause restricting this right to assign is void, because it undermines the very substance of the real right. In short, an approval clause (which subjects the assignment to the lessor's consent) is an unlawful restriction. The Court of Appeal had therefore misapplied the law by upholding this clause.

Note, however: this nullity only concerns building leases. For ordinary commercial leases (governed by the commercial lease statute), an approval clause is generally valid. What few people know is that the difference lies in the nature of the right: a building lease is a real right, whereas a commercial lease is a personal right (even if it has real aspects).

The judges rely on Article 544 of the Civil Code (definition of the right of ownership) and on the legal nature of the building lease as defined by the Law of 16 December 1964 on building leases. This law provides that the lessee has a real property right. The Court deduces that restrictions on this right can only be those provided for by the law itself, not by the parties.

undefined, I have encountered cases where lessors, in Dax or elsewhere, inserted this type of clause to maintain control over their land. This decision deprives them of that lever. But it protects the lessee, who can freely assign their right, which promotes the circulation of assets and investment.

What This Means for You — Practical Implications

For lessors (landlords): you can no longer require your consent for your lessee to assign their building lease. If you already have such a clause in your contract, it is void and of no effect. You must therefore delete or disregard it. Concrete example: in Dax, a plot of 2,000 m² leased under a building lease to a supermarket. The lessee wants to assign the lease to another chain. You cannot oppose it. Your only recourse: check that the assignee is solvent and complies with the lease obligations (such as paying the rent).

For lessees (tenant-builders): you have full freedom to assign your right. But beware: you remain liable for the lease obligations until the assignment, unless the lessor releases you. You must also notify the lessor of the assignment so that they can identify the new debtor. If you are in this situation, you should check that your contract does not contain a void approval clause, and if it does, you can disregard it.

For potential assignees: you can purchase a building leasehold interest without fearing that the lessor will wrongfully oppose it. This is an important legal safeguard. For example, in Parentis-en-Born, if you want to take over the lease of a shopping centre, you can do so without the landowner's consent.

For notaries and lawyers: building leases must now be drafted without an approval clause, or at least specify that it is void. A pre-emption clause (right of first refusal to buy) might be valid, but not a simple approval clause.

Four Tips to Avoid This Type of Dispute

• Review your building lease contract: if a clause subjects the assignment to the lessor's approval, know that it is void. You can strike it out or request an amendment to remove it. Do not rely on what is written: the law prevails.
• Prefer other control mechanisms: if you are a lessor and wish to retain a right of oversight, opt for a pre-emption clause (you have the right to buy the lease first) or an approval clause limited to cases of assignment to a direct competitor (but its validity is uncertain). Better to consult a lawyer.
• Anticipate the assignment: if you are a lessee and plan to assign your lease, inform the lessor in writing (by registered letter with return receipt) before the assignment. This avoids misunderstandings and proves that you have fulfilled your duty of good faith.
• Have your contract checked by a lawyer: before signing a building lease, have it reviewed by a property lawyer. The cost of a consultation is negligible compared to the risks of litigation. In Mont-de-Marsan, an initial analysis can save you years of proceedings.

Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.

Further Reading: Related Case Law and Developments

This decision of the Court of Cassation is in line with a consistent trend: a building lease is a real right, and restrictions on assignment are prohibited. One can cite an earlier decision of the same chamber, of 5 July 2000 (No. 98-15.360), which had already held that an approval clause in a building lease was void. The 2014 decision therefore merely confirms well-established case law.

Conversely, for emphyteutic leases (very long-term leases, typically 18 to 99 years), which also confer a real right, the solution is identical: the approval clause is void. The courts' tendency is therefore clear: whenever a real property right is involved, freedom of assignment is the rule.

What this means for the future: lessors will have to think of other ways to protect their interests, such as forfeiture clauses (termination of the lease in case of breach of obligations) or financial guarantees (surety, security deposit). Lessees, on the other hand, gain flexibility. This case law favours the mobility of property investments.

Frequently Asked Questions

1. Can I still assign my building lease if my contract contains an approval clause? Yes, since the clause is void, you can assign without the lessor's consent. However, it is prudent to inform them in writing to avoid litigation.
2. What if the lessor refuses the assignment despite the void clause? You can apply to the judicial court to have the clause declared void and the assignment valid. In the meantime, the assignment is valid, but the lessor might sue you.
3. What are the time limits to act? An action to annul a clause is barred after 5 years from the signing of the contract. But it is recommended to act as soon as the dispute arises.
4. Does this decision apply to commercial leases? No, only to building leases. For commercial leases, an approval clause is generally valid, unless it is abusive.
5. Can I insert a pre-emption clause instead? Yes, a pre-emption clause (right of first refusal to buy) is lawful because it does not restrict assignment, it merely offers an option to purchase. But it must be carefully drafted.

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