Assignment of Commercial Lease: Notice to Remedy is Mandatory Before Forfeiture (Cass. 1996)

Imagine: you own a commercial property in Château-Gontier, let to a trader who, one day, assigns his business without informing you. You discover the assignment by chance and want to terminate the lease. Do you think you can do so without notice? Beware: a 1996 decision of the French Supreme Court (No. 93-17.201) requires you to observe an essential formality before any forfeiture: a formal notice to remedy.

This decision, rendered on 30 May 1996, concerns the application of Article 25 of the Decree of 30 September 1953 (now codified in the French Commercial Code). It clarifies that the landlord cannot simply rely on the assignment of the lease to invoke the forfeiture clause. He must first give the tenant formal notice to rectify the situation. Why is this formality so important? And what do you risk if you ignore it?

In this article, I will tell you the story of this case, break down the judges' reasoning, and give you practical tips to avoid a dispute. Whether you are a landlord, tenant, or property professional, this decision directly concerns you.

The facts: a story that happens every day

A couple of owners (Mr and Mrs X) let a commercial property in Laval to a tenant, Mr Y, who operates a business. The lease contains a standard clause: in case of assignment of the business, the tenant must notify his project to the landlord by extrajudicial act (bailiff), so that the landlord can exercise his right of pre-emption (right to buy the business in priority). The clause provides that failing to comply with this formality, the lease shall be forfeited automatically.

One day, Mr Y assigns his business to a company, without informing the owners. They discover the assignment and sue the tenant to have the forfeiture of the lease declared. The Court of Appeal rules in their favour: it considers that the assignment being irregular and the assignor no longer operating the business, the formal notice was not mandatory. The owners could therefore directly invoke the forfeiture clause.

But the assignee company (the new tenant) does not agree. It appeals to the Supreme Court. The case goes up to the highest court, which will decide a fundamental question of law: is formal notice a mandatory prerequisite before any forfeiture for irregular assignment?

The court's reasoning — dissected

The French Supreme Court quashes the Court of Appeal's decision. It recalls that Article 25 of the Decree of 30 September 1953 (now Article L. 145-16 of the French Commercial Code) requires the landlord, before relying on a forfeiture clause, to give the tenant formal notice to remedy the situation. This formal notice must be given by extrajudicial act (bailiff) and must refer precisely to the forfeiture clause.

Why this formality? Because French commercial lease law protects the tenant. The legislature intended to prevent the landlord from forfeiting the lease abusively or hastily. The formal notice gives the tenant a chance to comply: for example, by notifying the assignment after the fact, regularising the failure to inform, or seeking the landlord's consent.

The Court of Appeal had considered that formal notice was unnecessary because the assignor no longer operated the business. But the Supreme Court answers that this does not dispense the landlord from following the procedure. It does not matter that the assignment is completed or that the assignor has disappeared: the landlord must first give formal notice to the tenant (in this case the assignor) to regularise. If he fails to do so within one month, only then can the forfeiture clause operate.

This decision is a strict application of the text, but it is also logical: without formal notice, the tenant might be unaware that he is at fault, and forfeiture would be a disproportionate penalty. The Supreme Court therefore favours a protective interpretation for the tenant, even in case of irregular assignment.

A rhetorical question: how can a tenant defend himself if he is not given the opportunity to regularise? The formal notice is that alarm bell that avoids many disputes.

What this changes for you — concretely

For the landlord

If you discover that your tenant has assigned his lease without your consent, do not rush to court. You must first send him a formal notice by bailiff, reminding him of the lease clause and giving him a deadline (usually one month) to regularise. Concrete example: in Laval, the cost of a formal notice by bailiff is about €70 to €100. In comparison, court proceedings can cost several thousand euros. It is better to invest in this formality.

For the assignor or assignee tenant

If you are the assignor (the former tenant), you remain jointly and severally liable with the assignee for three years in case of irregular assignment. The formal notice allows you to regularise. If you are the assignee (the new tenant), you must ensure that the assignment has been notified to the landlord. Otherwise, you risk forfeiture of the lease, and therefore the loss of your business.

For the purchaser of the business

Before buying a business, check that the lease has been regularly assigned. Ask for a certificate from the landlord confirming that he has been informed and has not exercised his right of pre-emption. Otherwise, you could find yourself without a lease, as in the Château-Gontier case.

Four tips to avoid this type of dispute

• Tip No. 1: Draft a clear assignment clause in the lease. Specify that any assignment must be notified by extrajudicial act, with a deadline for the landlord to respond. Indicate the consequences of non-compliance.
• Tip No. 2: Systematically send a formal notice before any action. Even if the assignment is blatant, do not neglect this formality. It is mandatory and conditions the validity of the forfeiture clause.
• Tip No. 3: Keep all supporting documents. Keep a copy of the formal notice, the acknowledgment of receipt, and any correspondence with the tenant. In case of a trial, these documents will serve as evidence.
• Tip No. 4: Consult a specialist lawyer. Commercial lease law is technical. A 30-minute consultation can save you costly mistakes. In Laval, as elsewhere, prevention is better than cure.

Further reading: related case law and developments

This 1996 decision is part of a consistent line of the French Supreme Court. For example, a decision of 14 March 1995 (No. 93-12.456) had already held that formal notice was necessary before forfeiting the lease for non-payment of rent. The same logic applies to assignment: the debtor must be given the opportunity to perform.

Since then, the Pinel Act of 2014 has strengthened tenant protection by imposing longer grace periods. But the principle remains the same: formal notice is the cornerstone of the forfeiture procedure. The courts are very strict on this point: any omission leads to the nullity of the forfeiture.

For the future, one can expect that judges will continue to require a precise and complete formal notice. If you are a landlord, do not try to save on this formality: it also protects you by avoiding a subsequent challenge.

What you must absolutely remember

FAQ:

• Can I forfeit the lease without formal notice if the tenant has assigned the lease in secret? No, formal notice is mandatory, even if the assignment is blatant.
• What should I include in the formal notice? It must mention the forfeiture clause, the grievance (assignment without notification), and give a one-month deadline to regularise.
• What is the time limit to act after the formal notice? If the tenant does not regularise within one month, you can apply to the court to have the forfeiture declared.
• Can the assignee regularise on behalf of the assignor? Yes, the assignee can notify the assignment to the landlord, but this may not cover the initial irregularity.
• What if the tenant does not respond to the formal notice? You must file a claim in court to obtain forfeiture. A lawyer will help you draft the claim.

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 →