Oral commercial lease: who pays the property tax? The answer of the French Court of Cassation

Imagine: you own a commercial property in Bayeux, rented for years without a written contract. One day, you receive the property tax bill and the amount is hefty. Who bears this charge? You thought it was the tenant, but nothing is in black and white. This is exactly the type of dispute that can escalate into legal proceedings. And what if the answer lies in a simple practice, an established custom?

This is the question that the French Court of Cassation considered in a case opposing the company Ocean to the company Prestor. The judges had to decide: in an oral commercial lease, can the transfer of the property tax to the tenant result from a tacit, unwritten agreement? The answer is yes, but subject to certain conditions.

In this article, we will analyse this decision of 28 May 2020 (No. 19-10.056) and, above all, give you the keys to avoid finding yourself in a similar situation. Whether you are a landlord, tenant or property professional in Caen or elsewhere, these principles concern you.

The facts: a story that happens every day

The case begins with an oral commercial lease between the company Ocean (landlord) and the company Prestor (tenant). No written contract, but occupation of the premises for several years. In 2014, a judgment ordered the assignment of the lease to the company Prestor. But a troublesome detail arises: who must pay the property tax?

The company Ocean considered that the charge fell on it, but the company Prestor refused to pay. Yet, throughout the term of the lease, it was the tenant who had paid the property tax. A well-established practice, but without any writing. The Commercial Court of Caen, then the Court of Appeal, ruled in favour of the landlord: the parties' agreement on the transfer of the charge was demonstrated by the tenant's repeated payment.

The company Prestor then appealed to the Court of Cassation. Its argument: in the absence of a written lease, no clause can transfer the property tax to the tenant. Yet, the Court of Cassation rejected this reasoning. It confirmed that the trial judges had sovereignly found the existence of a tacit agreement, based on the parties' conduct.

The reasoning of the court — analysed

The Court of Cassation relies on the principle of contractual freedom, but also on Article 1103 of the Civil Code (legally formed contracts stand as law for those who have made them). In commercial lease matters, the law does not provide for any particular formality for the transfer of property tax. Therefore, everything depends on the will of the parties.

In this case, the trial judges noted that the company Prestor had paid the property tax for several years without protest. This conduct manifested a tacit agreement on the transfer of this charge. The Court of Cassation validates this reasoning: it is a question of fact, left to the sovereign appreciation of the trial judges. It cannot challenge their finding.

This is neither an evolution nor a reversal of case law: the Court confirms a classic solution. But it reminds us of an essential point: in the absence of a written contract, it is the acts of the parties that are evidence. If the tenant pays the property tax without reservation, they create a precedent that may engage their liability.

The arguments of the company Prestor (absence of a written clause, need for an express agreement) were not convincing. For the Court, a tacit agreement is sufficient, provided it is proven. And this proof can result from simple repeated payments.

What this changes for you — concretely

For landlord owners: if you have an oral lease and you want the tenant to pay the property tax, you must imperatively establish a consistent practice. Example in Caen: a landlord rents a commercial property to a craftsman. For 3 years, the tenant pays the property tax without dispute. If a dispute arises, this practice can be invoked. But be careful: if the tenant has never paid, it will be difficult to impose it afterwards.

For tenants: you must be vigilant. If you pay the property tax without contestation, you risk creating a tacit agreement that will oblige you to continue. A concrete example: the company Prestor had to repay several years of property tax arrears, i.e., several thousand euros. If you are in this situation, you must contest in writing as soon as you receive the first bill.

For purchasers of a business: when assigning the lease, check the practices in force. If the assignor paid the property tax, you will be required to continue. Do not hesitate to request a written clause in the assignment deed.

Four tips to avoid this type of dispute

• Put everything in writing: from the conclusion of the lease, draft a written contract clearly stating who bears the property tax. Even an oral lease can be confirmed by an exchange of emails or a registered letter.
• Keep payment records: if you are a tenant and you pay the property tax, keep the receipts. If you are a landlord and the tenant pays, archive the tax assessments.
• Contest any undue payment immediately: if you receive a property tax bill that you believe you do not owe, write to the landlord within 30 days to contest. A failure to react may be interpreted as agreement.
• Make an inventory of charges: upon taking possession of the premises, list the recoverable charges and their allocation. Sign a document, even a simple one, with the landlord.

Further analysis: related case law and developments

This decision is in line with a consistent line of authority. Already in 2015, the Court of Cassation held that the unreserved payment of property tax by the tenant constituted a tacit agreement (Civ. 3e, 10 June 2015, No. 14-16.784). More recently, in 2022, it specified that this agreement may result from a mention in the tenant's annual accounts (Civ. 3e, 9 March 2022, No. 21-10.456).

The trend is therefore clear: courts favour the search for the true intention of the parties, beyond formalism. This means that in the absence of a written contract, conduct is scrutinised. For property professionals, this is a strong signal: documentary evidence must not be neglected.

For the future, we can expect that judges will continue to interpret silences and acts as manifestations of will. Hence the importance of formalising agreements, even for oral leases.

In practice: what to do

Checklist for owners of a commercial property let orally:

1. Gather all evidence of payment of the property tax by the tenant.
2. Send a registered letter to the tenant to confirm the practice and request a written document.
3. If the tenant refuses to sign, initiate proceedings to determine the charges before the judicial court.
4. In case of dispute, consult a lawyer specialising in property law.

FAQ:

• Can I claim reimbursement of a property tax I paid by mistake? Yes, if you prove that the oral lease did not provide for this transfer. But be careful, the limitation period is 5 years.
• What to do if the tenant no longer pays the property tax? You can sue them for payment before the judicial court. The decision here will be favourable to you if the practice is established.
• Is an oral lease valid in commercial law? Yes, a commercial lease can be oral, but it is strongly discouraged as it creates uncertainties.

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