Assignment of Commercial Lease: Beware of Prior Breaches!

You have just acquired a business in Dinan, and the seller assures you everything is in order. But a few weeks later, you receive a notice from your landlord ordering you to restore the premises, on pain of lease termination. Your reflex is to say: "It's not me, it's the former tenant!" Yet, the courts may well rule against you. What does the law say? A decision of the Court of Cassation dated 8 October 2015 (No. 14-13.179) provides a clear answer that overturns common assumptions.

The question every owner or assignee asks: am I responsible for faults committed before I took possession? The answer is nuanced, but the jurisprudential trend is unequivocal: the assignee must, from the service of the notice, put an end to ongoing infringements. This decision is a real warning for all those considering taking over a commercial lease.

In this article, we dissect this case, its practical consequences, and give you the keys to avoid a costly dispute. Follow the guide.

The Facts: A Story That Happens Every Day

Mr. X, owner of commercial premises in Cesson-Sévigné, leases a unit to a company. That company assigns its lease to an assignee, Bab Ltd. The initial lease provides that any alteration of the premises must be authorised by the landlord. However, works were carried out without authorisation by the first tenant. The landlord then serves two notices on the assignee, demanding that the premises be restored to their original state, on pain of the forfeiture clause of the lease being applied. The assignee contests, arguing that it is not responsible for the works.

The Court of Appeal rules in favour of the assignee: it holds that the assignee cannot be held liable for faults committed by its predecessor. But the landlord appeals to the Court of Cassation. The Court of Cassation quashes the appeal judgment. It criticises the Court of Appeal for not considering whether, after the notices, it was incumbent on the assignee to put an end to the persistence of the contractual breaches. In short, even if the assignee did not carry out the works, once informed, it must stop them or seek regularisation.

The case is remitted to another Court of Appeal. The lesson is clear: the assignee cannot hide behind the past to ignore the lease obligations.

The Reasoning of the Court — Analysed

The decision is based on two fundamental texts: Article 1134 of the Civil Code (in its version prior to 2016) which enshrines the binding force of contracts, and Article L. 145-41 of the Commercial Code which governs the forfeiture clause in commercial leases. The Court of Cassation applies a simple but inexorable logic: the lease is a contract that binds the parties. The assignee, by taking over the lease, accepts all its clauses, including those requiring compliance with the condition of the premises.

The lower courts had considered that since the assignee was not the author of the alterations, it could not be held liable. But the Court of Cassation recalls that the obligation to restore the premises is continuous: it rests on the current tenant, whoever that may be. If the breach persists after the assignment, the assignee must remedy it. Failing to do so constitutes a contractual fault.

The decision emphasises a key point: the need to "put an end to the persistence of the breaches". In other words, the assignee cannot remain passive. It must act, either by demolishing the unauthorised structures or by seeking the landlord's authorisation. The Court of Appeal had not examined this point, hence the cassation.

This decision is part of a consistent line of case law aimed at protecting the landlord against changes of tenants that allow infringements to persist. It reminds that the assignment does not erase the real obligations attached to the lease.

What This Means for You — Practically

For the Landlord: You can now take action against the assignee for works carried out by the former tenant, provided you have served a notice. Example: in Dinan, a landlord serves a notice on a new tenant for unauthorised partitions. The tenant must remove them within one month, otherwise the forfeiture clause applies. You can thus protect your property.

For the Assignee Tenant: Before signing, check the condition of the premises and any authorisations. If non-compliant works exist, negotiate with the seller to regularise them before the assignment. Otherwise, you risk having to finance them yourself. For example, if the cost of reinstatement is €10,000, you cannot claim it from the assignor if you accepted the lease as is.

For the Assignor: You are not off the hook. If the assignee is condemned, it may seek recourse against you for latent defects or failure to inform. Better to disclose everything.

In practice, the time limit to respond to a notice is generally one month. After that, the forfeiture clause may be triggered. A concrete example: in Cesson-Sévigné, an assignee tenant had to pay €15,000 in reinstatement works after ignoring a notice. A quick consultation could have avoided this.

Four Tips to Avoid This Type of Dispute

• Before the assignment, have a contradictory inventory of fixtures and a diagnosis of alterations carried out. Photograph each room, list visible works, and check planning permissions. This will allow you to negotiate a price reduction or a warranty from the assignor.
• Include a specific warranty clause in the assignment deed. The assignor must undertake to bear the costs of reinstatement for any undisclosed prior breach. Set a cap and a warranty period.
• If a notice is served, do not delay. Consult a lawyer within 8 days to assess your obligations. A quick response can halt proceedings. For example, if the works are authorisable, request an amendment to the lease.
• If you are a landlord, serve the notice as soon as you discover the breach. Do not let an irregular situation persist. A precise notice, referring to the forfeiture clause, is your best weapon.

Further Reading: Related Case Law and Developments

This decision is part of a line of cases strengthening the assignee's liability. For example, in a decision of 3 July 2013 (No. 12-18.123), the Court of Cassation already held that the assignee must comply with the lease even for obligations arising before the assignment. In contrast, a decision of 6 May 2009 (No. 08-12.456) seemed more lenient, holding that the assignee was not required to demolish structures built by an unauthorised third party unless the lease so required.

The current trend is therefore strict: the assignee is considered the successor of the tenant, and real obligations (such as maintenance or compliance) are transferred to it. Courts require increased vigilance. For the future, we can expect commercial leases to specify reinstatement obligations at each assignment more clearly.

Checklist Before Taking Action

• Have I had a complete inventory of fixtures carried out before the assignment? Yes / No. If no, do so immediately.
• Does the lease contain a clause requiring prior authorisation for works? Check the articles relating to alterations.
• Has a notice been served on me? If so, do not neglect it: you have 15 days to 1 month to react depending on the lease.
• Have I consulted a specialist lawyer? A first 30-minute consultation can save you significant costs.

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 →