Notice served after consent to assignee: Court of Cassation validates late service

Imagine: you are the owner of a commercial property in Sin-le-Noble, let to a craftsman. He tells you he wishes to contribute his lease to a company he has just set up. You agree, delighted to see the business continue. Then, for personal reasons, you decide to serve notice on the original tenant. The question arises: to whom should this notice be served? To the original tenant, or to the new company which is already operating the premises? And above all, can you do so after giving your consent, even though the company is not yet officially the assignee? This question, which may seem technical, has very concrete consequences: if you get the addressee wrong or you delay, the notice could be void, and you would be forced to renew the lease for three, six or nine years. In a decision of 9 November 2011, the Court of Cassation gives a clear answer: the landlord may validly serve notice on the assignee company, even after delivering the deed to the original tenant, provided he had given his consent to the assignment before the notice. A solution that gives landlords security, but requires increased vigilance.

The facts: a story that happens every day

The case begins in Denain, in the Nord. A real estate company (SCI) owns a commercial property which it leases to a couple, operators of a business. In July 2000, the couple decide to contribute their leasehold interest to a company they are setting up. The landlord gives consent to this transaction. Then, on 26 October 2007, the SCI serves a notice on the couple alone, without serving it on the company benefiting from the contribution. The couple challenge this: according to them, the notice should have been notified to the company, which had become the leaseholder. The SCI retorts that it did serve notice on the original tenants, and that the company was not yet registered at the time of service. The High Court (Tribunal de Grande Instance) rules in favour of the tenants: the notice is void for failure to serve on the company. The Court of Appeal affirms. The SCI appeals to the Court of Cassation.

The reasoning of the court — analysed

The Court of Cassation quashes the appeal judgment. Its reasoning has two points. First, it recalls that a contribution of a lease to a company, when consented to by the landlord, transfers the lease to the company. Second, it states that a notice served on the original tenant may validly be served on the company after that deed, so as to be enforceable against it. In other words, the landlord is not required to serve notice on the company at the same time as serving it on the original tenant. He may do so later, provided the company was consented to before the notice. The Court relies on Article 1690 of the Civil Code (concerning service of assignments of receivables) by analogy, and on the principle that the enforceability of a deed against a third party is not subject to any time limit. In practice, this means that the landlord in Denain should, after serving notice on the couple, have served that notice on the company so that it would be enforceable against it. But he could do so after 26 October 2007. The Court of Appeal had ruled otherwise, considering that service had to be simultaneous. The Court of Cassation censures it: enforceability is assessed as of the effective date of the notice, not as of the date of service. This is a confirmation of case law: lower courts had already admitted late service in similar cases. The solution is therefore settled.

What this means for you — concretely

For the landlord: You may serve notice on the original tenant, then serve that notice on the consented assignee at a later time. Caution: if you consent to the assignment after serving the notice, the solution is reversed: the notice must be served on the assignee as soon as it is identified. Example figure in Denain: a commercial property rented at €800 per month. A void notice forces you to renew the lease for 9 years, i.e. a loss of €86,400 in rent if you wanted to recover the premises. Better to follow the chronology correctly. For the assigning tenant: If you have assigned your lease with the landlord's consent, you are no longer liable for rent after the assignment, but a notice served in your name may be regularised by service on the assignee. Check that the landlord has served the assignee before the effective date. For the assignee: You must ensure that the notice has been served on you, even if late. If not, the notice is not enforceable against you and you may require renewal of the lease.

Four tips to avoid this type of dispute

• Consent to the assignment in writing, before any notice. A registered letter with acknowledgement of receipt is sufficient. Keep a copy. This establishes the certain date of your consent.
• If you want to serve notice, do it in two stages: first to the original tenant, then to the consented assignee. Do not delay too long: if the notice takes effect in six months, service on the assignee must occur before that date.
• Check the company's registration. If the company is not yet registered with the Commercial and Companies Register (RCS), the notice may be served on its legal representative (the manager). If in doubt, enquire at the commercial court registry.
• Consult a solicitor as soon as you consider an assignment or a notice. A professional will avoid nullities. The cost of a consultation (€45 with Maître Zakine) is trivial compared to the stakes.

Further reading: related case law and developments

The Court of Cassation had already ruled on similar issues. In a decision of 10 March 2010 (No. 08-21.675), it held that a notice served on the assignor alone, without service on the assignee, was unenforceable against the assignee. The 2011 decision goes further: it admits late service, but requires that the consent be given before the notice. The jurisprudential trend is therefore towards securing transactions, provided the landlord has clearly manifested his consent. No recent legislative developments have occurred. Courts continue to apply this solution. In the future, the Court may one day specify the maximum time limit for service, but for now it leaves some flexibility.

Summary and next steps

What to do if you are a landlord and wish to serve notice after a consented assignment:

1. Check that you have consented to the assignment in writing before the notice.
2. Have the notice served on the original tenant by a bailiff.
3. Within days or weeks, have that notice served on the assignee (or its representative).
4. Keep both deeds and proof of service.

FAQ:

• Can I serve notice on the assignee without having done so on the assignor? Yes, if the assignee is the sole leaseholder. But to avoid any risk, address the notice to both.
• What if the assignee refuses service? The bailiff may deposit the deed at the office. Service is deemed to have been made in person.
• What is the time limit for serving the assignee? No legal time limit, but it is prudent to do so before the effective date of the notice.
• Is the notice void if I serve only the assignor? Yes, if the assignee has been consented to. But it can be regularised by subsequent service.

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 →