Commercial leases: a limitation to the refusal of the lease renewal for irregularity of the sub-lease

July 10th 2015

With regard to commercial leases, the sub-lease is subject to specific regulations listed in the French Commercial Code, which, in particular, provides two conditions for the regularity of the sub-lease.

Firstly, the sub-lease must be authorised, either by a provision of the lease, or by an approval from the lessor.

Secondly, and insofar as the first condition is met, the lessor must be convened by the lessee to participate in the sub-lease agreement.

Upon failure to do so, the sub-lease shall be invalid and the lessor shall be entitled to refuse the renewal of the lease.

In this case, even though the sub-lease had effectively been granted to the lessee by an express provision of the lease, the lessor had not been convened to participate in the sub-lease agreement.

The lessor rightfully intended to assert the lessee’s failure to comply with the second condition in order to refuse the renewal of the lease, which enabled the lessee to run a hotel management activity in the rented premises.

It was clearly specified in the lease that the lessee should run accommodation facilities consisting of the sub-lease of accommodation located in the premises, for residential use.

With regard to the lease, the Court considered that the lessor had specifically and unequivocally waived from being convened to participate in sub-lease agreements by adding that the latter was incidentally incompatible with the lessee’s activity.

The key point to remember is that if sub-letting is the very basis of the lessee’s activity, the latter is not obliged to convene the lessor to participate in sub-lease agreements.

Advice: as the lessee’s obligation to convene the lessor to participate in the sub-lease agreement is not a matter of public policy, it may be advisable to make a provision in the lease, whenever possible, to exempt the lessee of his obligation in this regard.

Gérald Garcia

(3rd Civil Chamber, April 15, 2015)