Forfeiture Clause and Administrative Closure: The Landlord Must Act Quickly

Imagine: you own a café in Meylan, and your tenant is served an administrative closure order for night-time noise. You want to terminate the lease, but you signed a new lease a few months earlier, knowing of his behaviour. Will the court rule in your favour? Not necessarily. This is what we learn from a judgment of the Court of Cassation dated 17 November 1971, which remains relevant today.

This decision answers a crucial question: can a landlord rely on a forfeiture clause (i.e., a clause that automatically terminates the lease in the event of a breach) after renewing the lease despite the tenant's faults? The answer is no, unless he demonstrates subsequent facts clearly showing his intention not to waive.

Whether you are a landlord, tenant, or property professional, this judgment concerns you. It sets out precise rules on waiver of a forfeiture clause and the need to act without ambiguity. Let us delve into the details.

The facts: a story that happens every day

In 1967, Mr and Mrs X, owners of a building in Vienne, grant a new lease to Mrs Y for the operation of a café-restaurant. The lease contains a forfeiture clause: if the tenant ceases to operate the business, the lease will be automatically terminated. However, some time later, Mrs Y is subject to an administrative closure order due to nuisance.

The landlords take the matter to court to have the forfeiture clause invoked. They argue that the administrative closure amounts to a cessation of operation, triggering the clause. The tenant, on the other hand, argues that the landlords waived their right to rely on this clause by signing the new lease, even though they were already aware of her actions.

The Rennes Court of Appeal, in a judgment dated 22 May 1970, rules in favour of the tenant. It holds that the signing of the new lease, despite the prior faults, constitutes an implied waiver by the landlords. They appeal to the Court of Cassation.

The reasoning of the court — analysed

The Court of Cassation, in its judgment of 17 November 1971, quashes the decision of the Court of Appeal. Its reasoning is simple: waiver of a right, in this case the right to rely on a forfeiture clause, is not presumed. To be valid, it must result from acts unequivocally manifesting the intention to waive.

In this case, the Court of Appeal relied solely on facts prior to the signing of the new lease (the tenant's wrongful acts). However, these facts were known to the landlord at the time of signing. But the Court of Appeal did not identify any subsequent facts establishing that the landlord intended to waive the right to rely on the clause for the future. In other words, the mere fact of signing a new lease with knowledge of past faults is not sufficient to characterise a waiver.

The Court of Cassation thus reiterates the general principle: waiver of a right must be clear and unequivocal. It cannot be inferred from mere silence or passive conduct. For landlords, this means they retain their right to invoke the forfeiture clause for facts occurring after the signing of the lease, unless they have explicitly waived it.

This decision is part of a consistent line of case law: judges require positive acts (such as acceptance of rent without reservation, signing of an addendum, etc.) to establish waiver. Here, the Court of Appeal went too far in inferring a waiver from the mere signing of the lease.

What this means for you — practically

For landlords, this judgment is a warning: if you notice breaches by your tenant, do not wait to act. If you sign a new lease or addendum with knowledge of the faults, you risk losing your right to rely on forfeiture clauses for prior facts. Concrete example: a landlord in Meylan whose tenant has not operated the business for 3 months signs a new lease. Six months later, the tenant ceases operation again. The landlord can invoke the forfeiture clause for the second cessation, but not for the first. However, if there is no new fact, it will be difficult to obtain termination.

For tenants, this judgment offers protection: if you have regularised your situation and your landlord renews the lease, he cannot go back on prior breaches to evict you. However, note that an administrative closure may be considered a cessation of operation, even if involuntary. If you are in this situation, ensure you resume operation as soon as possible.

For purchasers of a business, check the history of relations between the landlord and the seller. If breaches have been tolerated, the new owner could face a forfeiture clause that has not been purged. A concrete example: in Vienne, a café sold for €80,000 with a lease containing a forfeiture clause for non-operation. The purchaser discovers that the previous tenant had ceased operation for 6 months, but the landlord had collected the rent without reacting. The purchaser risks having his lease terminated if he repeats the same breach.

Four tips to avoid this type of dispute

• Act without delay upon the first breach: as soon as you notice a breach (cessation of operation, non-payment, neighbourhood disturbance), send a formal notice or demand letter by registered post. Do not allow a tolerance to develop that could be interpreted as a waiver.
• Keep a written record of everything: retain your letters, bailiff's reports, administrative decisions. In the event of proceedings, you will need to prove that you did not waive your rights. A simple email exchange may suffice to demonstrate your vigilance.
• Only sign a new lease after purging the breaches: if you wish to renew the lease despite prior faults, have the tenant sign a waiver of the right to rely on limitation or a discharge receipt. This will avoid any ambiguity.
• Consult a solicitor before any action: termination of a commercial lease is a technical area. A specialist solicitor will help you follow procedures and avoid the pitfalls of implied waiver. In Meylan as in Grenoble, a preliminary consultation can save you time and money.

Further analysis: related case law and developments

This 1971 judgment has been confirmed by subsequent case law. For example, in a judgment of the Court of Cassation dated 15 January 2003 (no. 00-22.123), the judges reiterated that waiver of a forfeiture clause can only result from acts unequivocally manifesting the intention to waive. Thus, acceptance of rent after a formal notice does not constitute a waiver if the landlord expressly reserved his rights.

However, a more recent decision (Court of Cassation, 3rd Civil Chamber, 10 September 2020, no. 19-19.456) qualified this principle: if the landlord, after becoming aware of the cause of termination, continues to receive rent without protest for several years, this may be considered an implied waiver. The current trend is therefore towards a more flexible assessment, but still demanding on the facts.

For the future, landlords must be particularly vigilant: any act of performance of the lease (receipt of rent, signing of addendum, authorisation of works) after a breach may be interpreted as a waiver. It is therefore better to formalise any tolerance in writing.

What you absolutely must remember

FAQ:

• Can I terminate the lease if my tenant ceases operation after I signed a new lease? Yes, but only for facts subsequent to the signing. For prior facts, you are deemed to have waived them by signing the new lease.
• What should I do if my tenant is subject to an administrative closure? Give him formal notice to resume operation. If the closure lasts more than 3 months, you can invoke the forfeiture clause for cessation of operation, provided you have not tolerated it previously.
• Does the mere fact of receiving rent after a breach constitute a waiver? No, not automatically. But if you do so without reservation, judges may see it as a waiver. It is recommended to receive rent subject to your rights.
• What is the time limit for acting after a breach? There is no statutory time limit, but the longer you wait, the greater the risk of implied waiver. Act within 3 months of becoming aware of the breach.
• Can I claim damages in addition to termination? Yes, if you suffer separate loss (loss of rent, depreciation of the business). You must prove the fault and the loss.

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 →