Transfer of a Commercial Lease: The Landlord Cannot Claim Rent from the Assignor after the Assignment

Imagine: you own a commercial premises in Vandoeuvre-lès-Nancy. You have signed a lease with a tenant who, one day, decides to assign his lease to a third party. You are informed, you give your consent, and the new tenant moves in. But a few months later, the rent stops being paid. Whom do you claim from? The former tenant, who is no longer in the premises? Or the new one, who still occupies the premises?

This question is asked by hundreds of landlords every year. And the answer is not always intuitive. Many believe that the assignor (the former tenant) remains liable for the rent, especially if the assignee (the new tenant) does not pay. But the law says the opposite, and the Court of Cassation firmly reminds us of this in a judgment of 12 July 1988.

In this decision, the judges ruled: in the absence of a joint and several liability clause (a contractual undertaking by which the assignor and assignee are jointly liable for payment), the landlord cannot pursue the assignor for rent due after the assignment. The assignor is released from all lease obligations from the date of the assignment, provided that it is regular. A security for assignors, but a trap for landlords who have not included a joint and several liability clause.

The Facts: An Everyday Story

Mademoiselle X., a landlord in Vandoeuvre-lès-Nancy, leases a commercial premises to the Y. partnership under a commercial lease. In 1980, the Y. partnership assigns their lease to Madame Z. The assignment is regular: the landlord is informed and gives her consent. Madame Z. thus becomes the new tenant.

But very soon, the rent stops being paid. Mademoiselle X. then turns to the assignors, the Y. partnership, to claim payment of the unpaid rent. She considers that they remain liable for payment, even after the assignment. The Y. partnership refuses, arguing that they are no longer tenants and have no obligation to pay rent after the assignment.

The case goes before the Tribunal de Nancy, then to the Court of Appeal. In 1986, the Court of Appeal of Nancy finds in favour of the assignors: it dismisses Mademoiselle X.'s claim. She appeals to the Court of Cassation.

Before the Court of Cassation, Mademoiselle X. argues that the assignment of a lease does not, unless otherwise agreed, release the assignor from their obligations towards the landlord. According to her, the assignor remains liable for the rent, even after the assignment, because the landlord did not consent to a novation (change of debtor).

The Y. partnership responds that, in the absence of a joint and several liability clause, the regular assignment of the lease substitutes the assignee for the assignor in all rights and obligations arising from the lease. The assignor is therefore no longer liable for rent due after the assignment.

The Reasoning of the Court — Analysed

The Court of Cassation, in its judgment of 12 July 1988, rejects Mademoiselle X.'s appeal and confirms the decision of the Court of Appeal of Nancy. The reasoning is simple and rests on an essential principle of contract law: the assignment of a lease is an assignment of a contract (transfer of the status of tenant from one person to another).

The judges recall that, unless otherwise agreed, the assignment of a lease entails the substitution of the assignee for the assignor in all rights and obligations arising from the lease. In other words, from the date of the assignment, the assignee becomes the sole debtor for rent and charges. The assignor is released for the future.

The Court relies on the principle of the relative effect of contracts (agreements bind only the parties who signed them). The assignor is no longer a party to the lease after the assignment. Consequently, the landlord cannot demand from him payment of rent due after the assignment, unless a joint and several liability clause has been provided in the lease or in the assignment deed.

This decision is not a surprise: it is consistent with the constant case law of the Court of Cassation. As early as 1970, the Court ruled that the regular assignment of a lease releases the assignor from future obligations (Civ. 3e, 18 February 1970). The 1988 judgment merely confirms this solution, specifying it: the absence of a joint and several liability clause is decisive.

The arguments of Mademoiselle X. (novation, no release of the assignor) were dismissed. The Court considered that the assignment is not a novation (creation of a new obligation) but a transfer of contract. The landlord does not have to consent to a release of the assignor: the law prevails, unless the parties intend otherwise.

Thus, the fate of the assignor is clear: once the assignment is regularly carried out, he can rest easy. It is the assignee who bears future rents. The landlord, on the other hand, must be vigilant: if he wants to retain a recourse against the assignor, he must insist on a joint and several liability clause.

What This Changes for You — Practically

For the Landlord

If you own a commercial premises in Nancy or elsewhere, and your tenant wishes to assign his lease, you must absolutely insist on a joint and several liability clause in the assignment deed. Without this clause, you lose any recourse against the former tenant for unpaid rent after the assignment. Imagine: you consent to an assignment, the new tenant (assignee) pays for three months and then disappears. Without a joint and several liability clause, you cannot claim the rent from the former tenant, even if he is solvent. You must pursue the assignee, who is often more difficult to catch.

Example: a monthly rent of €2,000, unpaid for 6 months = €12,000. Without a joint and several liability clause, you cannot claim this sum from the assignor. With the clause, you can.

For the Assignor Tenant

If you are a tenant and you assign your lease, this decision is good news: you are released from all obligation to pay rent after the assignment, provided that the assignment is regular (notification to the landlord, consent, etc.). You do not have to fear being pursued for the assignee's unpaid rent. Simply check that the lease does not contain a joint and several liability clause binding you to the assignee. If it does, you remain jointly liable for a specified period (often until the end of the lease or for a certain number of years).

For the Assignee Tenant

You must be aware that you become the sole debtor for rent and charges from the date of the assignment. The landlord can claim directly from you the sums due. Make sure you have the means to pay before committing.

For Real Estate Professionals

Estate agents, notaries, lawyers: when dealing with an assignment of a commercial lease, you must systematically propose a joint and several liability clause to protect the landlord. Failing this, the landlord could hold you professionally liable in the event of unpaid rent.

Four Tips to Avoid This Type of Dispute

• Insist on a joint and several liability clause in the assignment deed: if you are a landlord, have a clause drafted stating that the assignor remains jointly liable for the payment of rent for a specified period (e.g., 3 years or until the end of the lease). This allows you to pursue him if the assignee defaults.
• Check the initial lease: before agreeing to an assignment, read the lease carefully. Some leases already contain a joint and several liability clause that automatically applies in case of assignment. If so, no need to add one.
• Insist on the assignee's solvency: as a landlord, you can ask for guarantees (surety, security deposit) from the new tenant before giving your consent. This limits the risk of unpaid rent.
• Have an addendum drafted: if you consent to the assignment, have an addendum to the lease signed with the assignee, restating all clauses. This clarifies each party's obligations and avoids subsequent disputes.

Further Analysis: Related Case Law and Developments

The solution of 1988 is constant. The Court of Cassation has reaffirmed it on several occasions, notably in a judgment of 3 March 1999 (no. 96-22.160): "the assignment of a lease, regularly granted, releases the assignor from his obligations for the future, unless otherwise stipulated." And again in a judgment of 14 November 2019 (no. 18-22.002): "the assignor is not liable for the payment of rent after the assignment in the absence of a joint and several liability clause."

The courts apply this rule strictly. Even if the landlord was not informed of the assignment, the penalty is different (nullity of the assignment, damages), but the principle of release of the assignor remains valid if the assignment is regularised retrospectively.

A recent development: the Pinel Law of 18 June 2014 strengthened the rights of landlords in matters of assignment of commercial leases, notably by imposing formalities (notification to the landlord). But it did not modify the principle of release of the assignor. The case law therefore remains current.

For the future, it can be expected that landlords will become increasingly vigilant and systematically require joint and several liability clauses, or even bank guarantees. The trend is towards protection of the landlord, but within the limits of contract law.

Summary and Next Steps

FAQ

1. Can I claim rent from the former tenant if the new tenant does not pay? No, unless a joint and several liability clause has been provided in the lease or the assignment deed.
2. What if I am a landlord and I have no joint and several liability clause? You must act quickly against the assignee: formal notice, seizure, termination of the lease. You can also claim damages if the assignee is insolvent.
3. Must the assignment be notified to the landlord? Yes, the assignment must be served on the landlord by a bailiff or notified by registered letter with acknowledgement of receipt. Failing this, the landlord can seek nullity of the assignment.
4. Can the assignor be pursued for rent due before the assignment? Yes, he remains liable for unpaid rent before the assignment. The release only applies for the future.
5. What is the time limit for action against the assignee? You have 5 years from each unpaid instalment (standard limitation period). But act quickly to avoid the debt increasing.

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