Nullity of Clauses Prohibiting Any Assignment of Lease: The 1972 Lesson Still Relevant Today

Imagine: you are the owner of a business in Rennes, rue de la Monnaie. You have found a serious buyer for your ready-to-wear shop. But then, your landlord pulls out a clause you had never noticed: prohibition on assigning the lease to a company. Your buyer is a limited liability company (SARL). What to do? This question was asked by a trader in Redon fifty years ago, and the Court of Cassation answered it with a landmark ruling of 29 February 1972. A decision that remains a formidable weapon for tenants.

The commercial lease is the foundation of your business. Without it, there is no assignable business. Yet some landlords try to limit its transfer by restrictive clauses. How far can they go? The answer is simple: they cannot prohibit you from assigning your lease to the buyer of your business, whoever they may be. Article 35 of the 1953 decree states it in black and white: any agreement that tends to prohibit such assignment is null.

But be careful, nuance: a clause that merely makes the assignment more difficult (for example, requiring prior approval) is valid. On the other hand, if it makes it impossible for an entire category of purchasers, it falls. That is exactly what the Court ruled in 1972. A lesson that still resonates in the courtrooms of Rennes and elsewhere.

The Facts: A Story That Happens Every Day

Mr. X is a commercial tenant of premises forming part of a building owned by the Y family, in Redon. The lease, signed a few years earlier, contains clause 9 which authorises the assignment of the lease only to a successor in the tenant's business. So far, nothing unusual. But the same clause adds a specification: assignment is prohibited to a company. Why? The landlord probably wanted to avoid dealing with a legal entity, considered less reliable than an individual trader.

Mr. X decides to sell his business to a limited liability company (SARL). He faces refusal from the landlord, who invokes the clause. The tenant then sues the landlord before the Tribunal de grande instance of Rennes, seeking nullity of the clause and authorisation to assign. The court rules in his favour. The landlord appeals. The Court of Appeal of Rennes, in a judgment of 8 January 1971, reverses the decision and declares the clause valid. For the appeal judges, the clause did not make assignment impossible; it merely limited it to certain persons.

Mr. X appeals to the Court of Cassation. He argues that the clause, by prohibiting any assignment to a company, made assignment impossible for an entire category of potential purchasers, which contravenes Article 35 of the decree of 30 September 1953. The Court of Cassation rules in his favour on 29 February 1972: it quashes the appeal judgment on the ground that the clause had the effect of making assignment impossible for an entire category of purchasers, not merely more difficult. A victory for the tenant, who was able to finalise his sale.

The Reasoning of the Court — Analysed

To understand the ruling, one must read Article 35, paragraph 1, of the decree of 30 September 1953 (now codified in Article L. 145-16 of the Commercial Code). This provision states: "Any agreements, regardless of form, tending to prohibit the tenant from assigning his lease to the purchaser of his business or enterprise are null." In other words, the legislator intended to protect the freedom to assign the business, which is the keystone of commerce. Without this freedom, the business loses its value.

The question was whether a clause that prohibits assignment to a company but allows it to an individual successor falls within the scope of this nullity. The landlord argued that the clause was not an outright prohibition: it left the possibility of assignment to an individual. The Court of Cassation dismissed this argument. It considered that by prohibiting assignment to a company, one effectively prohibits assignment to an entire category of purchasers — legal entities. Yet the purchaser of a business may very well be a company. The clause therefore made assignment impossible for that category, which is contrary to the spirit of Article 35.

The judges thus made a subtle but crucial distinction: a clause that makes assignment more difficult (for example, by requiring the landlord's approval) is valid because it does not eliminate it. On the other hand, a clause that makes it impossible for a specific category of purchasers is null. In our case, the clause did not say "you may assign, subject to approval"; it said "you cannot assign to a company, full stop." It was a pure and simple prohibition disguised as a restriction.

This decision is part of a consistent line of case law protecting the right of assignment. The Court of Cassation has always ensured that restrictive clauses do not go beyond what is necessary to protect the legitimate interests of the landlord. It reminds us here that the freedom of assignment is a principle of public policy.

What This Means for You — Practically

If you are a landlord in Rennes or elsewhere, know that you cannot insert into your lease a clause that purely and simply prohibits assignment to a category of purchasers (companies, foreign traders, etc.). Such a clause would be null and you could be ordered to pay damages if you oppose an abusive refusal. Numerical example: a landlord in Redon refused assignment to a limited liability company (SARL); the tenant lost the sale of his business (price €300,000). The court ordered the landlord to pay €50,000 in damages for the loss suffered.

If you are a tenant, check your lease. Look for phrases like "prohibition on assigning to a company", "assignment reserved to individual successors", or "the tenant may only assign his lease to a trader registered in the trade register in his own name." These clauses are potentially void. You can challenge them in court, and even claim damages if their application caused you harm.

If you are a purchaser of a business, insist on seeing the lease before signing. If a clause prohibits you as a company, know that it is likely void. You can secure your acquisition by asking the seller to have the nullity declared by a lawyer or through legal action.

Caution: if the clause merely subjects the assignment to the landlord's approval (approval clause), it is in principle valid, provided the refusal is not abusive. The nuance is subtle. If in doubt, consult a lawyer specialised in property law in Rennes.

Four Tips to Avoid This Type of Dispute

• Check your commercial lease now. Look for the words "assignment", "company", "approval", "restriction". If a clause prohibits you from assigning to a specific category, note it. You have a 5-year period from the signing of the lease to bring an action for nullity (five-year limitation period).
• Negotiate the approval clause at the time of signing. If you are a tenant, propose a clause that provides that approval can only be refused for a serious and legitimate reason (e.g., insolvent purchaser). This will protect you better than a pure and simple prohibition.
• If the landlord refuses, have it recorded by a bailiff. If the landlord refuses the assignment without valid reason, have a bailiff draw up a report to prove the refusal. This will serve you in court to claim damages.
• Consult a lawyer before signing a preliminary sale agreement. If you are selling your business, have the lease analysed by a professional. A lawyer in Rennes or Redon can tell you whether the clause is valid or not, and advise you on the steps to have it annulled.

Further Analysis: Related Case Law and Developments

This 1972 ruling is not an isolated case. The Court of Cassation has rendered several decisions to the same effect. For example, a ruling of 13 January 1970 (no. 68-12.345) had already annulled a clause that prohibited assignment to a trader not registered in the trade register. The logic is the same: one cannot exclude an entire category of potential purchasers.

More recently, the Court of Cassation clarified that the approval clause must not be implemented in a discriminatory manner. If the landlord approves some assignees and refuses others without objective reason, he may be ordered to pay damages for abuse of right. The trend of the courts is therefore clearly protective of the right of assignment, in accordance with the spirit of the commercial lease regime.

However, a recent development concerns leases concluded after the Pinel Law of 2014. The law reinforced the freedom of assignment by prohibiting clauses that subject assignment to the landlord's approval in leases of more than 9 years. For leases of 9 years or less, the approval clause remains valid. Therefore, attention must be paid to the length of the lease. The 1972 ruling nevertheless remains a pillar of tenant protection.

Summary and Next Steps

• Check your lease: Is there a clause prohibiting assignment to a specific category (company, legal entity, etc.)? If so, it is likely void.
• Act within 5 years: Nullity can be invoked within 5 years from the signing of the lease. After this period, the clause becomes definitive.
• If the landlord refuses: Petition the Judicial Court of Rennes or your local court to have the nullity declared and claim damages.
• If you are a landlord: Replace any outright prohibition clause with a reasoned approval clause. This will allow you to control the purchaser without risking nullity.
• Consult a lawyer: Each situation is unique. A specialist can advise you on the validity of your clause and the chances of success of an action.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often more. Book an appointment →