Nullity of the clause requiring membership of a traders' association: the tenant may withdraw and cease paying contributions

Imagine: you own a commercial property in Saint-Gaudens, and you lease it to a trader. The lease contains a clause requiring the tenant to join the town centre traders' association and to pay its contributions. So far, everything seems normal. But what happens if the tenant decides to leave the association? Does he have to continue paying? And can you, as landlord, require compliance with this clause?

The Court of Cassation resolved this question in a judgment of 11 October 2018 (No. 17-23.211). The answer is clear: the clause imposing membership of an association is void. The tenant may withdraw and stop paying contributions. A decision that overturns many certainties, for both landlords and tenants.

But beware: this nullity is said to be 'absolute', meaning it can be invoked by the tenant without any time limit. And it does not give rise to damages for the landlord. Let us delve into the details.

The facts: a story that happens every day

Mr X runs a clothing business in Saint-Gaudens, in premises belonging to company Y. The commercial lease, signed in 1996, contains a clause (Article 12 of Schedule II) which states: 'The tenant undertakes to join the town centre traders' association and to pay the annual contributions, failing which the lease may be terminated.' For years, Mr X pays without complaint. But in 2014, tired of contributing to an association he considers ineffective, he decides to withdraw and stops paying.

Company Y then demands payment of the unpaid contributions, together with damages for breach of contract. Mr X refuses, arguing that the clause is contrary to freedom of association (guaranteed by Article 11 of the European Convention on Human Rights). The Commercial Court of Toulouse finds in his favour at first instance, but the Court of Appeal of Toulouse partially reverses the judgment in 2017: it declares the clause void but orders Mr X to pay damages for wrongful termination of his contractual undertaking.

Mr X appeals to the Court of Cassation. The Court of Cassation quashes the appeal judgment and holds that the absolute nullity of the clause precludes any award of damages against the tenant. The judicial saga ends after four years of proceedings.

The reasoning of the court — dissected

The Court of Cassation applies Article 12 of Schedule II of the lease, but above all the general principles of contract law and freedom of association. The reasoning is as follows:

1. The clause is unlawful because it infringes freedom of association, a fundamental principle recognised by the laws of the Republic (Constitutional Council, 1971) and by Article 11 of the ECHR. A contract cannot impose an obligation contrary to public policy.

2. The nullity is absolute: it may be invoked by any person with a legitimate interest (the tenant) and is not subject to limitation (except for the five-year limitation period for actions to declare nullity, but here the clause has been performed since 1996). In this case, the nullity was established by the Court of Appeal, meaning the clause is deemed never to have existed.

3. Consequence: the tenant no longer has to perform the clause. He may withdraw from the association and stop paying contributions. But above all, he cannot be ordered to pay damages for non-performance, since the obligation was void.

The Court of Appeal had nevertheless considered that Mr X had committed a fault by unilaterally withdrawing, but the Court of Cassation overrules it: 'Whereas in so ruling, even though it had found the absolute nullity of the clause requiring membership of the association, from which it followed that this clause was deemed never to have existed and could therefore not found an action for contractual liability, the Court of Appeal violated the above-mentioned texts.'

In short, a void clause can produce no effect whatsoever, not even to claim compensation.

What this changes for you — concretely

If you are a tenant of commercial premises and your lease requires you to join a traders' association, you can now withdraw and stop paying contributions, without fear of legal repercussions. However, note: if the association has already provided you with services (advertising, events), you could be sued for unjust enrichment, but that is a different matter.

If you are a landlord, this decision reminds you that any clause restricting freedom of association is risky. In Castelnaudary, a landlord included a similar clause; after this judgment, he had to refund contributions collected since 2015, approximately €3,000. It is better to remove this type of clause when drafting the lease.

For purchasers of business assets, check the clauses of the existing lease: if it is void, you will not have to join the association. This could be a negotiating point on the price.

Finally, for traders' associations, beware: no longer rely on leases to guarantee your contributions. You will have to persuade traders to join voluntarily.

Four tips to avoid this type of dispute

• Remove any clause imposing membership of an association from your commercial leases. Prefer an incentive clause (e.g., rent reduction if the tenant joins), which respects freedom of association.
• If you are a tenant and wish to withdraw, send a letter by recorded delivery with acknowledgement of receipt to your landlord and to the association, invoking the nullity of the clause. Keep a copy.
• In the event of a dispute, do not give in to threats. Absolute nullity protects you, but have a solicitor specialised in property law assist you in drafting your letters and anticipating any proceedings.
• For landlords, have your contracts reviewed by a solicitor. A void clause can lead to refunds of contributions over several years. Prevention is better than cure.

Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.

Further reading: related case law and developments

This judgment is part of a trend protecting individual freedoms against abusive contractual clauses. Already, in a judgment of 4 July 2012 (No. 11-19.588), the Court of Cassation had annulled a clause requiring the tenant to join a traders' association, but without ruling on absolute nullity. The 2018 judgment clarifies this point.

However, the Court of Cassation refused to apply the ECHR directly to commercial leases (it applies it to freedom of association in general). This means that other clauses restricting fundamental freedoms could be annulled on the same basis.

undefined, I have encountered cases where similar clauses required the tenant to contribute to an association defending commercial interests. Since 2018, the courts systematically annul them. In future, lease drafters will have to be more careful.

Summary and next steps

FAQ:

1. Can I withdraw from the association without giving a reason? Yes, if the clause is void. You do not even need to justify your withdrawal.
2. Can the landlord terminate my lease if I stop paying contributions? No, because the clause is void and deemed unwritten. Termination would be wrongful.
3. Can I claim a refund of contributions already paid? Yes, if the nullity has been judicially declared. Beware of the five-year limitation period: you can only go back 5 years.
4. What if my lease contains this clause? Consult a solicitor. You can apply to the judicial court for a declaration of nullity and obtain a refund.
5. Can the landlord sue me for unjust enrichment? In theory yes, if the association provided you with services. But in practice, this is rare and difficult to prove.

In a similar situation? A 30-minute initial consultation with Maître Zakine (€45) could save you months of proceedings — and often much more. Book an appointment →