Termination of a real estate lease-purchase: land registration is not mandatory

Picture yourself in Gravelines, along the sea wall, with commercial premises that you have let under a lease-purchase to an entrepreneur. The rents are unpaid, you decide to go to court to have the lease terminated. Your solicitor mentions "land registration": do you need to have your application recorded with the land registration office? An error at this stage could render your claim unenforceable against third parties. It is a question every owner asks, and to which the Court of Cassation gave a clear answer on 21 February 1996.

In that case, the company Credimurs had granted a real estate lease-purchase to the SCI Cornélien. The lease having been terminated by the Toulouse Court of Appeal, the question arose as to whether the application for termination had to be registered. The Court of Cassation, in its judgment No. 94-13.836, ruled that a termination which brings the contract to an end only for the future does not appear on the list of claims subject to registration. Only claims for rescission, revocation, annulment or avoidance, which retroactively invalidate the deed, must be registered.

What does this mean in practice for you, whether you are an owner in Bray-Dunes or elsewhere? You may pursue a termination without having to register your application first. This ruling, handed down nearly thirty years ago, remains an absolute authority on the matter. It is still important to understand the judges' reasoning and its practical implications. That is what we will now unpack together.

The facts: a story like so many others

In the early 1990s, Credimurs, a company specialising in property financing, granted the SCI Cornélien a lease-purchase contract over a building. A real estate lease-purchase, it should be recalled, is a long-term lease coupled with a promise to sell in favour of the tenant. The SCI Cornélien moved in, but difficulties soon arose. The rents were no longer paid, and the lessor turned to the courts.

The court was seised, and the Toulouse Court of Appeal, ruling in interim proceedings (i.e., as a matter of urgency), ordered the termination of the lease on 31 January 1994. The SCI Cornélien, unhappy, appealed to the Court of Cassation. Its argument: the application for termination should have been registered with the land registration office, in accordance with Article 28.4° c of the Decree of 4 January 1955. Failing registration, it argued, the termination could not be relied upon against it. A technical question? Not only. It affected the very validity of the judgment.

In reality, behind this legal nicety lies a major issue. Land registration serves to inform third parties (purchasers, creditors, other tenants) of rights burdening a property. If a court application is not registered, a good-faith third party might be unaware of the dispute. But the termination of a lease, unlike an annulment, does not call the contract into question from its origin: it only takes effect for the future. The Court of Cassation therefore had to determine whether the legislature intended to impose registration for all court actions or only for those with retroactive effect.

The reasoning of the court — explained

The judges of the Court of Cassation relied on the wording of Article 28.4° c of the Decree of 4 January 1955. This provision requires the registration of claims "recording the rescission, revocation, annulment or avoidance of an agreement relating to rights subject to registration". Termination is not mentioned. Why this distinction? Because rescission, revocation, annulment and avoidance share a common feature: they retroactively invalidate the deed, as if it had never existed. Termination, on the other hand, merely brings the contract to an end for the future, without erasing the past.

The Court of Cassation took a strict interpretation of this provision. It refused to include termination, on the ground that it is not listed. This position is logical in view of the purpose of land registration: protecting third parties against sudden challenges to rights they could legitimately have believed to be final. Since termination is not retroactive, earlier acts remain valid. Third parties therefore cannot be taken by surprise in the same way.

This judgment confirms already well-established case law. It is neither a reversal nor an innovation, but a constant application of the principle of strict interpretation of exceptions. It may be noted that the Toulouse Court of Appeal had already ruled in this direction, and the Court of Cassation dismissed the SCI's appeal. The judges therefore considered that registration was reserved for actions that challenge the very existence of a right, not for those that only bring its effects to an end for the future.

What this changes for you — practically

For an owner-lessor based in Bray-Dunes or elsewhere, the lesson is simple: you can apply to court for the termination of a lease-purchase without having to register your application with the land registration office. This saves you an additional formality and costs, as well as a delay in the proceedings. In concrete terms, registering a court application costs on average €200 to €400 depending on the jurisdiction, and requires providing a certain number of documents. Requiring it for a termination would therefore have been an unnecessary burden.

The tenant, for its part, must understand that a termination ordered by the judge is enforceable against it, even if the application was not registered. If it challenges the decision, it cannot rely on the lack of registration as a ground of nullity. It will have to defend the case on the merits: was the lease genuinely terminated? Were the grounds valid? Note that if the tenant has itself granted subleases or real rights, it must inform the subtenants, as the termination will also be enforceable against them.

For a purchaser of a building subject to a lease-purchase, this is an additional point to watch. If you buy a property that is the subject of a lease-purchase, you must check whether the lease is still in force or has been terminated. The termination will not necessarily appear in the land registry. In the Dunkirk jurisdiction, where the commercial property market is buoyant, imagine you buy a commercial property in Gravelines: without thorough checks, you could find yourself with a lease-purchaser who still claims to be a tenant. Hence the importance of asking the seller for all documents and consulting a local solicitor.

Four tips for avoiding this type of dispute

• Before commencing court proceedings, ask your solicitor whether your application must be registered with the land registration office. This systematic check avoids nasty surprises, especially if you are seeking annulment or rescission of the contract.
• If you are faced with a consensual termination of a lease-purchase, have it recorded in a notarized deed (authentic instrument) and register it, even if it is not mandatory. This preventive step secures your position vis-à-vis third parties, particularly if the property is later resold.
• When purchasing real estate, do not rely solely on the planning certificate or the technical survey. Require the seller to provide an exhaustive list of current leases, including lease-purchase agreements. A check with the town hall of Bray-Dunes or Gravelines may also reveal clues, such as the actual occupation of the premises.
• In the event of a dispute, carefully preserve all evidence of payments, formal notices and correspondence. Termination may be ordered without registration, but it must be based on established breaches. The judges, particularly at the Dunkirk judicial court, are demanding when it comes to proof of non-payment or contractual breach.

Further reading: related case law and developments

This judgment of the Court of Cassation of 21 February 1996 forms part of a long line of decisions strictly interpreting Article 28 of the 1955 Decree. Already, a judgment of 13 October 1993 (No. 91-19.610) had held that a claim for rescission of a real estate sale for non-payment of the price had to be registered, because it sought the retroactive nullification of the sale. By contrast, a claim for termination of a lease could not be equated. The case law has thus remained constant on this fundamental distinction.

More recently, the Law of 6 August 2015 modernised land registration but did not amend Article 28.4° c. The courts' approach therefore remains the same: the list of claims subject to registration is exhaustive. Some commentators have proposed extending registration to judicial terminations, to better inform third parties, but this proposal has never been taken up by the legislature. In the meantime, the 1996 solution still carries authority, and practitioners from the north and south of France apply it daily.

In practice: what to do

If you are the owner of a property let under a lease-purchase and wish to obtain its termination, here is a checklist to follow:

1. Check the lease-purchase contract: is there a forfeiture clause? If so, it may allow termination as of right after a formal notice remains unsuccessful.
2. Serve a formal notice on the lease-purchaser to pay the sums due, allowing a reasonable period (often 30 days).
3. Apply to the court (judicial court, or commercial court depending on the status of the parties) to have the termination recorded.
4. For the hearing, gather all supporting documents: contract, formal notices, statements of unpaid rent, etc.
5. After the judgment, if you wish to sell the property, mention the termination in the sale documents, even if it was not registered.

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 →