Assignment of Right to Commercial Lease: Beware of Duration of Operation

Imagine: you are the owner of commercial premises in Beaune, let for ten years to a craftsman. He assigns his right to the lease to a new trader without consulting you. The new tenant demands renewal of the lease after only one year of operation, adding the assignor's years. Is this legal? The question divides and affects thousands of leases.

This decision of the Court of Cassation of 23 February 1983 (No. 81-16.378) provides a clear answer: the right to renewal of a commercial lease can only be invoked by the owner of the business which has been actually operated during the three years preceding the expiry of the lease. In the case of an assignment of the right to the lease alone, the assignee cannot aggregate their period of operation with that of the assignor.

For the uninitiated, this means that if you buy only the lease (without the business), you must start from scratch to prove continuous operation. A crucial rule to avoid nasty surprises.

The Facts: A Story Like Many Others

In 1964, an owner in Beaune granted a nine-year commercial lease on premises used for commercial and residential purposes. The lease allowed any trade to be carried on. In 1973, the original tenant assigned his right to the lease to an assignee, who created a new business on the premises. The owner consented to the assignment, but did not renew the lease.

At the expiry of the lease in 1973, the assignee applied for renewal. The owner refused, arguing that the assignee had not personally operated the business for three years before the lease expired – a condition set out in the Decree of 30 September 1953. The assignee retorted that he could add the assignor's years of operation (1964 to 1973) to his own (1973 to 1976).

The case went to the Court of Cassation. At first instance, the court ruled in favour of the assignee, holding that the assignment of the right to the lease allowed aggregation of durations. But the Court of Cassation quashed this decision: it recalled that the right to renewal is attached to the personal operation of the business by the person claiming it. However, the assignee had only created his own business at the date of the assignment. He could not therefore rely on the assignor's prior operation.

The Reasoning of the Court — Analysed

The Court of Cassation relied on Article 4 of the Decree of 30 September 1953 (now codified in Articles L. 145-1 et seq. of the Commercial Code). This text requires that, to benefit from renewal, the tenant must have actually operated the business for the three years preceding the expiry of the lease. This is a substantive condition.

The judges distinguished two situations: on the one hand, the assignment of the business (with goodwill, trade name, etc.) where the assignee takes over the operation and can aggregate durations; on the other hand, the assignment of the right to the lease alone (without the business), where the assignee creates a new business. In the latter case, the assignor's prior operation cannot be attributed to the assignee, as they are two distinct businesses.

The decision confirms consistent case law: the right to renewal is personal and linked to the operation of the business by the person operating it. The assignee's arguments – invoking continuity of activity – were rejected. The Court recalled that the owner of the business (in the sense of the operator) must be the same throughout the three-year period, unless the business itself is assigned.

What This Means for You — Practically

For landlords: you can refuse renewal if the tenant has not personally operated for three years. Caution: if you accept the assignment of the right to the lease without reservation, you may be compelled to renew if the assignee has operated for three years at the time of expiry. Example: a landlord in Talant rents a unit to a baker for 5 years. The baker assigns his right to the lease to a caterer after 4 years. The caterer can only apply for renewal after 3 years of personal operation, i.e., at the end of a new 9-year lease.

For tenant-assignees: do not rely on the assignor's period of operation. You must start from scratch. If you buy only the right to the lease, include a clause in the assignment deed guaranteeing that the lease will be renewed at its term, or negotiate a new lease directly with the landlord.

For buyers of a business: if you buy the business (goodwill, name, etc.), you can aggregate durations. But caution: the assignment of the business must be genuine and not fictitious. Courts check that the goodwill is transferred.

Four Tips to Avoid This Type of Dispute

• Check the nature of the assignment: clearly distinguish in the deed whether it is an assignment of the right to the lease alone or an assignment of the business. Use a solicitor to draft the deed.
• Negotiate a new lease: when acquiring a right to a lease, ask the landlord to sign a new 9-year lease, rather than merely accepting the assignment. This guarantees you the status of commercial leases.
• Require a certificate of operation: before buying a right to a lease, ask the assignor for a statutory declaration of the actual duration of operation. Cross-check it with rent receipts and tax returns.
• Anticipate the expiry: if you are an assignee, start building your renewal file from the 5th year of operation, gathering evidence of continuous operation (invoices, leases, trade register).

Further Reading: Related Case Law and Developments

This decision is part of a consistent line. In a judgment of 10 June 1981 (No. 79-16.234), the Court of Cassation had already held that the assignee of a right to a lease cannot rely on the assignor's operation to benefit from renewal. The 1983 decision confirms this position.

Since then, the Pinel Law of 2014 strengthened tenants' rights regarding renewal, but did not change this rule. Courts continue to strictly apply the requirement of personal operation. For example, in a 2020 judgment of the Dijon Court of Appeal, an assignee who had abandoned the business for six months lost his right to renewal.

In the future, the issue may arise for seasonal activities or furnished lettings. For now, the rule remains continuous and personal operation.

Key Points to Remember

FAQ:

• Can I aggregate my period of operation with that of my predecessor if I bought his right to the lease? No, because you created a new business. Only the assignment of the business (including goodwill) allows aggregation.
• What if the landlord refuses renewal after an assignment of the right to the lease? You can claim an eviction indemnity if you have operated for three years. Otherwise, you are a mere occupant without a right to renewal.
• Can I assign my right to the lease if my lease expires in less than three years? Yes, but the assignee cannot immediately apply for renewal. He must wait for three years of personal operation.
• What documents prove actual operation? Purchase and sale invoices, VAT returns, Kbis extracts, leases, rent receipts, etc.
• Is the rule the same for all businesses? Yes, regardless of the activity, personal operation for three years is required, except for legal exceptions (craftsmen, seasonal activities).

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