Successive short-term leases: caution reclassification as commercial lease

You are the owner of commercial premises in Sophia-Antipolis. An entrepreneur offers to rent your former video store to set up an office. To avoid the constraints of the commercial lease regime — in particular the 9-year term and the right to renewal — you sign a short-term lease for 23 months. At the end, you renew the operation for another activity. But after a few years, your tenant suddenly claims the status of commercial lease. What is the risk? Many landlords are unaware that the multiplication of successive short-term leases can cost them dearly. The Court of Cassation, in a decision of 31 May 2012 (No. 11-15.580), clarified the rules of the game: even if the activity changes between leases, the last contract may be reclassified as a commercial lease. Analysis.

The facts: a story like many others

Mr. X, owner of commercial premises in Sophia-Antipolis, had leased premises for "video store, rental-sale" to Mr. Y. The lease was a short-term lease (i.e., a short-term lease, less than 24 months, which escapes the protective regime of commercial leases). At the expiry of this first lease, the parties entered into a second, also short-term, but this time for a different activity: "offices, tertiary activities". Mr. Y had thus occupied the premises for several years under successive short-term leases. When the landlord sought to give notice to Mr. Y, the latter applied to the court to have the existence of a commercial lease subject to the commercial lease regime recognised (Articles L. 145-1 et seq. of the Commercial Code). The landlord argued that the change of activity prevented any reclassification, since the successive short-term leases related to different uses. The Court of Appeal ruled in favour of the tenant, and the Court of Cassation confirmed: it does not matter that the activity changes, provided the leases are concluded between the same parties and relate to the same premises, the last short-term lease is reclassified as a commercial lease.

The reasoning of the court — analysed

The Court of Cassation relies on Article L. 145-5 of the Commercial Code, which governs short-term leases. This text allows a short-term lease (no more than 24 months) to be concluded without applying the commercial lease regime. But beware: if, at the end of this lease, the tenant remains in the premises under a new short-term lease, case law considers that the second lease is in fact a commercial lease, because the succession of short-term leases reflects an intention to circumvent the protective regime. In short, the Court of Cassation says that Article L. 145-5 does not require that the activity carried out in the premises be identical between successive leases. In other words, even if the first lease was for a "video store" and the second for "offices", the second lease is subject to the commercial lease regime as soon as it is concluded between the same parties and on the same premises. The judges thus reject the landlord's argument that sought to justify the change of use by an intention to "renew the experience" without creating a leasehold right. What few people know: this solution has been consistent for several years. The Court of Cassation here confirms its position, without reversal. It considers that the penalty for non-compliance with the conditions of the short-term lease is reclassification as a commercial lease, and this from the second lease, even if the tenant has not yet acquired a right to renewal.

What this changes for you — concretely

For landlord lessors, this decision is a wake-up call. If you rent premises in Cagnes-sur-Mer and you sign a first short-term lease for 23 months, then a second for a different activity, you are in breach. The tenant can demand a 9-year lease with a right to renewal, and you will not be able to recover the premises easily. undefined, I have encountered cases where landlords, thinking they were doing the right thing, had to pay eviction compensation (often several years' rent) to recover their property. For tenants, on the contrary, this case law is protective: it allows you to secure your occupation after a trial period. If you are in this situation, you must check whether you have accumulated successive short-term leases with the same landlord. If so, you can request reclassification and benefit from the guarantees of the regime (9-year term, right to renewal, rent cap). However, beware: this reclassification is not automatic; you must apply to the judicial court. The time limit to act is 5 years from the conclusion of the last short-term lease. In terms of cost, proceedings can range from €2,000 to €5,000 in lawyer's fees, but the stakes are often much higher.

Four tips to avoid this type of dispute

• Do not multiply successive short-term leases with the same tenant. If you want a trial period, a single short-term lease of a maximum of 23 months is sufficient. Beyond that, conclude a standard commercial lease directly.
• Observe a waiting period between two short-term leases. Case law requires that short-term leases not be concluded "consecutively"; an interval of at least 3 to 6 months between two leases is advisable to avoid reclassification.
• Draft a clear addendum if you change activity. The change of use is not enough to avoid reclassification, but a precise addendum stating the parties' intention not to create a commercial lease may be useful.
• Consult a lawyer lawyer before signing a second short-term lease. The stakes are too high to improvise. A 30-minute consultation can save you years of litigation.

Further reading: related case law and developments

The Court of Cassation had already ruled in a decision of 14 February 2007 (No. 05-19.333) that the succession of short-term leases on the same premises, between the same parties, leads to reclassification as a commercial lease, without any condition of identity of activity. The 2012 decision merely confirms this line. Courts are increasingly strict: any arrangement aimed at circumventing the regime is penalised. In the future, one can expect judges to reclassify even non-successive short-term leases whose chronology suggests fraud. The trend is clear: the commercial lease regime is a matter of public policy (i.e., it cannot be derogated from by contract), and any attempt to circumvent it is doomed to failure.

Checklist before taking action

• Q: Can I conclude a short-term lease of 23 months with a tenant? A: Yes, once. If you want to renew, wait a reasonable period (at least 6 months) or sign a commercial lease.
• Q: What if my tenant claims the status after two short-term leases? A: Consult a lawyer. You can negotiate a commercial lease or contest the reclassification if the leases are not strictly consecutive.
• Q: What is the maximum duration of a short-term lease? A: 24 months, including renewal. Beyond that, it is a commercial lease.
• Q: Does the change of activity protect the landlord? A: No, the Court of Cassation has ruled: the activity may be different, the reclassification applies anyway.
• Q: How much does a reclassification proceeding cost? A: Between €2,000 and €5,000 in legal fees, but the stakes can be tens of thousands of euros in eviction compensation.

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