Forfeiture clause in a commercial lease: beware of the obligations referred to

You are the owner of commercial premises in Saint-Vincent-de-Tyrosse. You discover that your tenant is using an adjoining room that he has not rented – a small warehouse, a store room. The temptation is great to serve him a formal notice (demand letter) referring to the forfeiture clause in the lease, in order to have him evicted quickly. But be careful: the Court of Cassation, in a judgment of 15 September 2010 (No. 09-10.339), reminds that automatic termination of a commercial lease by application of the forfeiture clause is only possible if the breach concerns an obligation expressly referred to in the lease. In other words, if your contract does not state that the tenant must occupy strictly the leased premises, you cannot invoke the forfeiture clause for excessive occupation. This decision, handed down more than ten years ago, remains a reference for all property law practitioners, and it has concrete consequences for both landlords and tenants.

The facts: an everyday story

Imagine a landlord, Mr. Dupont, owner of a commercial building in Capbreton. He leases to a company, "Les Sables d'Or", premises on the first and second floors, intended for a restaurant business. The contract is signed, everything goes well for a few years. But one day, Mr. Dupont notices that the tenant is also using part of the ground floor – a storage area – which is not included in the lease. He then serves a formal notice (a summons) to cease this occupation, referring to the forfeiture clause in the lease. The forfeiture clause is the provision that stipulates that in the event of a breach of certain obligations, the lease is automatically terminated, without going before a judge. The tenant does not cease the occupation within one month (the legal period provided for by bail commercial et liquidation judiciaire">Article L. 145-41 of the Commercial Code). Mr. Dupont then applies to the court for a declaration of automatic termination. The Court of Appeal rules in his favour: it finds that the breach (occupation of premises not leased) persists, and that the forfeiture clause has taken effect. But the tenant appeals to the Court of Cassation, which quashes the Court of Appeal's decision. Why? Because automatic termination can only operate if the breach concerns an obligation expressly provided for in the lease. However, the lease did not specify that the tenant must confine himself to the leased premises only. The occupation of the ground floor was therefore not a breach of a contractual obligation referred to in the clause.

The reasoning of the court – analysed

The Court of Cassation relies on two texts: Bail commercial : engagement solidaire des copreneurs">Article 1134 of the Civil Code (now Articles 1103 and 1104) which sets out the principle of the binding force of contracts, and Article L. 145-41 of the Commercial Code which governs forfeiture clauses in commercial leases. In short, the forfeiture clause is a severe sanction: it allows the lease to be terminated without judicial intervention, simply because the tenant has not complied with an obligation within the prescribed period. But this severity has a counterpart: the clause must be precise. It can only sanction obligations clearly enumerated in the lease. The Court's reasoning is as follows: if the lease does not mention the obligation to occupy only the leased premises, the fact of occupying additional rooms is not a breach of a contractual obligation. It may be a fault (an abuse), but it is not a violation of a clause of the lease. However, the forfeiture clause can only operate for the obligations it refers to. The Court of Appeal therefore violated the law by declaring the termination. This reasoning is not a reversal: the Court of Cassation has always required a strict interpretation of forfeiture clauses (see for example Civ. 3e, 4 June 2003, No. 01-17.085). But it forcefully reminds that the judge cannot extend the scope of the clause to obligations not included therein.

What this means for you – in practice

For landlords: this decision requires you to draft your leases with extreme precision. Each obligation that you wish to be sanctioned by the forfeiture clause must be mentioned in black and white. For example, if you want to be able to terminate the lease in the event of occupation of other parts of the building, you must write it down. undefined, I have come across cases where the landlord included a clause "the tenant undertakes not to exceed the leased area", which allowed the forfeiture clause to be triggered. But without this, you can only claim damages, or bring an action for judicial termination (longer and more costly). For tenants: you are protected. If your landlord summons you to cease an activity that is not prohibited by the lease, you can challenge it. Do not panic: check the terms of your contract. For purchasers of a business: carefully examine the forfeiture clauses of the assigned lease. If they are vague, you may be exposed to abusive formal notices. Concrete example: a tenant in Capbreton operated a convenience store. The lease prohibited "any change of activity without consent". The tenant added a range of organic products, which the landlord considered a change. But the forfeiture clause only referred to "subletting and assignment", not change of activity. The court refused termination. However, be careful: the forfeiture clause can be drafted very broadly, for example "any breach of the clauses and conditions of this lease". In that case, it covers all obligations, even those not listed. But case law requires that the obligation be determined or determinable. A clause that is too general may be deemed unwritten.

Four tips to avoid this type of dispute

• Draft precise forfeiture clauses: list the obligations sanctioned (payment of rent, use of premises, insurance, etc.). Avoid vague formulas like "any breach of the lease".
• Before sending a formal notice, check that the obligation breached is indeed covered by the clause: a mistake can cause you to lose the benefit of the termination and expose you to damages.
• If in doubt, consult a lawyer lawyer: an unfounded formal notice may be annulled, and the landlord may be ordered to pay damages for abusive proceedings.
• For tenants, keep a copy of your lease and read it: if you receive a formal notice, do not delay in responding. You have one month to remedy or challenge.

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Further reading: related case law and developments

The Court of Cassation has handed down several similar decisions. For example, in a judgment of 4 February 2009 (No. 08-10.297), it held that a forfeiture clause could not sanction a failure to operate if the lease did not provide for it. Conversely, if the lease contains a clause "the tenant must personally operate the business", termination is possible. The trend is therefore towards strict control of forfeiture clauses, to protect the tenant who is often the weaker party. Since the Pinel Law of 2014, commercial leases must contain standard clauses, but contractual freedom remains broad. What to remember: the forfeiture clause is a formidable weapon, but to be used with caution. It must be drafted carefully and can only be used for obligations it expressly covers.

In practice: what to do

FAQ: frequently asked questions

Can I terminate the lease if my tenant sublets without authorisation, even though the forfeiture clause only refers to non-payment? No, unauthorised subletting is not covered by the clause, so no automatic termination. You must bring legal proceedings.

What should I do if I receive a formal notice referring to an obligation not provided for in the lease? Challenge it promptly by registered letter with acknowledgement of receipt, and apply to the court for a declaration that the formal notice is void.

What is the time limit for acting after a formal notice? You have one month to remedy (if the obligation is covered) or challenge. After this period, the clause may be triggered.

Can I include a "any breach" clause in my lease? Yes, but it must be precise and not abusive. Judges may reduce it if it is too general.

Checklist for the landlord before sending a formal notice

1. Identify the obligation breached and check that it is expressly covered by the forfeiture clause.
2. Draft the formal notice referring to the clause and the one-month period.
3. Keep evidence of the breach (photos, bailiff's report).
4. If the tenant does not remedy, apply to the court for a declaration of termination.

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