Unpaid Rents: The Lessor Can Terminate the Lease Even After a Renewal Offer

Imagine: you own a commercial property in Pamiers, let to a thriving fast-food chain. For six months, the rent has not been paid. You send letters, then a formal demand for payment (bailiff's official notice). The lessee pays part, then defaults again. You finally decide to give notice (termination of the lease) with an offer of renewal. The lessee continues not to pay. You bring an action for termination of the lease. But your solicitor warns: "Be careful, by offering renewal, you may have waived the right to rely on earlier arrears."

This crucial question for thousands of lessors has been decided by the Court of Cassation on 14 January 1971. And the answer is clear: no, the renewal offer does not erase previous payment defaults. The lessor can still seek termination of the lease if the lessee persists in not paying, even after the offer.

What exactly does the judgment say? What are the rules for a lessor or lessee in Toulouse or elsewhere? Let's decipher.

The Facts: A Story Like Many Others

In this case, the company "Salons de la République" was a commercial lessee of premises in Toulouse. The lease was coming to an end. The lessors had served a notice (an act by which the lessor notifies the lessee of his intention not to renew the lease) on 23 June 1966, but they had attached an offer of renewal. This notice was actually void because it did not comply with legal formalities. The parties therefore remained bound by the original lease.

Meanwhile, the lessee accumulated rent arrears. The lessors sent several formal demands for payment, including after the renewal offer. In court, the lessors sought termination of the lease (cancellation of the rental contract) for non-payment of rent. The lessee argued that the renewal offer constituted a waiver of the right to rely on prior breaches. In short, according to the lessee, the lessors could no longer rely on pre-offer arrears to seek termination.

The Court of Appeal ruled in favour of the lessors: it ordered the termination of the lease. The lessee appealed to the Court of Cassation.

The Court's Reasoning — Analysed

The Court of Cassation dismissed the lessee's appeal and upheld the Court of Appeal's decision. Its reasoning is brief but of considerable scope.

First, the Court recalls a fundamental principle: the payment of rent is an imperative obligation of the lessee. The lessor may at any time seek termination of the lease if the lessee commits repeated and inexcusable breaches of this obligation. In other words, non-payment of rent is not mere negligence: it is a serious breach justifying the end of the lease.

Next, the Court rejects the lessee's argument that the renewal offer amounts to a waiver of the right to rely on prior arrears. It holds that since formal demands for payment were served on the lessee after the renewal offer, the judges do not need to consider whether that offer entails a waiver of prior breaches. Why? Because a formal demand for payment is an act demonstrating that the lessor has not forgiven the arrears. On the contrary, it recalls them and demands payment. The renewal offer, in itself, is not a forgiveness of past debts.

This solution is logical: a lessor may want to give the lessee a chance by offering a new lease, but if the lessee continues not to pay, the lessor is not obliged to suffer indefinitely. He can enforce a forfeiture clause (a clause in the lease providing for automatic termination in case of non-payment) or apply to the court for judicial termination.

The decision is consistent with settled case law: payment of rent is the lessee's essential obligation. Even in commercial leases, where the lessee benefits from a right to renewal (business goodwill), non-payment of rent remains a serious and legitimate ground for termination.

What This Means for You — Practically

If you are a lessor, this decision gives you security. You can, without fear, offer a lease renewal to a lessee who has been in arrears, while reserving your rights. But beware: to be able to rely on prior arrears, you must have served formal demands for payment after the renewal offer. Simply having offered renewal does not prevent you from acting, but it is prudent to formalise your payment demands in writing.

Take a concrete example. You own a commercial property in Toulouse, let at €2,500 per month. The lessee has not paid for three months. You serve a formal demand for payment on 1 March. He pays the first two months but not the third. You decide to offer a lease renewal on 1 April. He still does not pay for March. On 1 May, you serve a new formal demand for payment for March (still unpaid) and for April (now due). You can then, based on these demands made after the offer, apply to court for termination of the lease. The judge will find repeated breaches and order termination.

For the lessee, the lesson is clear: even if the lessor offers to renew the lease, you are not discharged from past arrears. You must pay the rent due. If you do not, the lessor can obtain termination of the lease and you will be evicted.

For a purchaser of a let building, be vigilant: if the seller has made a renewal offer to a defaulting lessee, you can still rely on arrears arising after the offer to seek termination. Check the payment history and the existence of formal demands.

Four Tips to Avoid This Type of Dispute

• Serve formal demands for payment systematically: as soon as the first default occurs, have a bailiff serve a formal demand for payment. This creates written evidence and interrupts the limitation period (the time limit after which you can no longer act). Do not let several months pass without action.
• Do not offer renewal if arrears persist: wait until the lessee is up to date with rent before offering a new lease. Otherwise, you risk strengthening his position, even if you can still act.
• Keep all evidence of reminders: registered letters, emails, formal demands. In case of dispute, these are your best assets. Case law requires "repeated and inexcusable" breaches: show that you tried to regularise the situation.
• Consult a specialist solicitor before any action: termination of a commercial lease is complex. A solicitor will help you choose the right procedure (forfeiture clause, judicial termination) and meet deadlines. In Toulouse, many colleagues are competent.

Further Reading: Related Case Law and Developments

This 1971 decision remains relevant. It has been confirmed by later judgments. For example, the Court of Cassation held (Civ. 3e, 28 March 1990, No. 88-18.457) that serving a notice with a renewal offer does not constitute a waiver of the right to rely on prior breaches, provided that the lessor has made reservations or served a formal demand for payment afterwards.

However, beware: if the lessor accepts payment of rent without reservation after the renewal offer, he may be deemed to have waived the right to rely on prior arrears. The key is therefore the manifestation of an intention not to forgive. The formal demand for payment is the best evidence.

The tendency of the courts is to protect property rights and contractual good faith. The lessee must pay rent, which is the essential counterpart of the enjoyment of the premises. Judges are therefore generally favourable to lessors who act quickly and in good faith.

Frequently Asked Questions

Can I terminate the lease if the lessee pays late but eventually pays?
Yes, if the delays are repeated and inexcusable. Case law considers that late payment, even if regularised, can justify termination if the lessor has suffered prejudice and the lessee has no valid excuse.

What if the lessee claims that the renewal offer cancels the arrears?
Show him this judgment! And above all, prove that you served formal demands for payment after the offer. Without this, a judge might consider that you have tacitly waived.

What is the time limit to act after a default?
In commercial leases, the action for payment of rent is subject to a 5-year limitation period (Article 2224 of the Civil Code). But to seek termination, it is better to act quickly, as soon as the first defaults occur, to demonstrate the repeated and inexcusable nature.

Can I include a forfeiture clause in my lease?
Yes, it is even strongly recommended. A forfeiture clause provides that the lease is automatically terminated if the lessee does not pay the rent within a certain period after a formal demand for payment. This avoids a long court case.

Does the judgment apply to residential leases?
Yes, the principle is the same: payment of rent is an essential obligation. But beware, the law of 6 July 1989 (law on residential leases) provides specific protections for the lessee (e.g., payment deadlines). Consult a solicitor.

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 →