French Business Law:
Notice to Quit Without Offer of Renewal
If during the course of the 9-year term of the lease the tenant has not complied with the terms of the lease, for example non-payment of rent, then the Landlord may serve notice to quit without an offer to renew the lease at the end of the term.
This notice to quit without an offer to renew is generally perceived as a sanction and is often undertaken in parallel with other actions such a judicial recovery of the outstanding rent etc.
However, the underlying principle at French Business Law (which is very different in conceptual terms from the common-law system) in regard to commercial leases is that the tenant who complies with the terms of his lease has an absolute right of
renewal for a further 9 year period at the end of the 9-year term.
Thus, if the Landlord wishes to recover the vacant possession of the property, viz. in the absence of any failure on
behalf of the tenant to meet the latter's commitments, then the Landlord must pay considerable compensation so to do.
The amount of compensation is generally fixed on an ad hoc basis by the Court, i.e. at the suit of one of the parties, the Presiding Judge appoints a specialist expert witness whose opinion will be usually binding on the Landlord and the Tenant.
The compensation can often be very substantial, for example up to 90% of one year's turnover, based upon the average of 3 or 4 years turnover of the business using the premises or perhaps the equivalent of 2 year's profit, but the overall amount of the compensation will ultimately always depend on the formula adopted by the expert witness which generally varies greatly according to the type of business carried out.
During the course of the litigation, which may take a number of years, the Tenant remains in place in the premises.
Moreover, the Landlord retains the possibility of waiving the notice given if he considers that the amount of
compensation ultimately set by the Court is more than he is prepared or able to pay.
The foregoing is not intended to be exhaustive and for specific information on questions flowing from the notice to quit
without an offer of renewal, please click here
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Triplet & Associés – XI.IV.MMII