Termination of a commercial lease: a comprehensive guide for lessees and lessors

You are the lessee (tenant) of premises or the lessor (owner) of commercial premises, and you feel that the end of the contract is approaching… or that it will arrive sooner than expected. But a commercial lease cannot be terminated in the same way as a residential tenancy. Between fixed term, renewal sometimes tacitly acquired, three-year period, resolutory clause, early termination for breach or change of situation, and judicial termination, each mechanism has its own rules, deadline, notification and financial consequences (pay or pay what, to whom, until what date, with what guarantee).

Here’sa complete, practical guide: when to terminate and when to give notice, how to calculate the 6-month notice period, which method to choose (registered letter or court-appointed agent), how to deal with registered creditors, and when an amicable agreement (exit agreement) is more advisable than legal action. The aim is to formalise the agreement correctly, comply with the applicable law and avoid a formal error triggering a dispute or a break-up with unexpected consequences.

To ensure the security of each stage of this complex procedure and avoid the pitfalls of the Commercial Code, expert assistance is often the best guarantee of success. By calling on the services of GOLDWIN AVOCATS , experts in business law in Paris, you can protect your financial interests from the moment you send your first notice of termination.

Time limits and notice periods: when can you give notice of termination of a commercial lease?

A commercial lease, often referred to as a 3-6-9 lease, is concluded for a minimum of nine years. However, the law provides regular breathing space to get out of this commitment. The fundamental principle is based on the three-year period, which allows the commercial lease to be terminated at the end of each three-year period. For the lessee, this option is an almost absolute right, whereas for the owner, the conditions for termination are much more restrictive and linked to specific works or reconstruction projects.

Timing is everything. To terminate a commercial lease properly, you must give 6 months’ notice before the end of the three-year term. If you are aiming for the end of the first period, i.e. the third year, your notice must reach the other party before the start of the last half-year.

If you are late, even by a single day, you will lose the term in question: the lease will continue and the rent will remain due until the next date on which notice can be given (the next three-year term or, after the term, according to the rules of tacit extension).

Three-year notice from the tenant: terminate after 3, 6 or 9 years

Tenants have the right to terminate their tenancy at each third anniversary of the contract. This three-year termination right does not require any legitimate reason or justification on the part of the retailer. Whether the reason is a change in circumstances, a drop in business or a move to larger offices, the termination procedure remains the same. All you need to do is express your clear intention not to renew the lease for the following period, in accordance with the legal requirements.

The calculation of the expiry dates is based on the date on which the lease takes effect (which may be different from the date of signature): it is this date that determines the three-year anniversaries and the notice periods. For example, if your lease began on 1 January 2023, the first notice period is 31 December 2025. The 6-month notice period therefore, requires formal notification before 30 June 2025.

Please note that failure to comply with this notice period prohibits any simplified early termination, unless a specific contractual clause allows this or if you obtain an agreement between the parties for amicable termination of the commercial lease.

Leaving at the end of the 9-year term and the risks of tacit extension

At the end of the fixed term of nine years, if neither party expresses its intention to terminate the commercial lease or to apply for a renewal of the lease, the contract does not come to an end. It continues under what the law calls tacit extension. The commercial lease then becomes a contract for an indefinite period. While this offers a degree of flexibility, it places the lessee in an uncomfortable position, asthe lessor can terminate the commercial lease at the end of each calendar quarter, subject to six months’ notice.

The major danger of tacit extension lies in the cumulative duration of the lease. If the contract exceeds 12 years without a new lease being signed, the rent cap mechanism disappears. The landlord is then entitled to demand a new rent based on the actual rental value of the commercial premises, which often leads to a sudden financial increase.

To avoid any disputes and secure your right to renewal, it is a good idea to make the decision before this critical 12-year threshold.

Termination formalities: how do you give notice of termination properly?

The form of notice is just as important as the substance.

In the case of commercial leases, a simple letter of termination on plain paper is not always sufficient. The Commercial Code strictly governs the way in which notice must be given in order to be enforceable. A formal defect, such as an incorrect address or a missing signature, can render the procedure null and void, forcing you to continue the tenancy even though you had planned to vacate the premises on leaving.

The contents of the termination letter or commissioner’s deed must be unambiguous. It must specify :

• the identity of the parties
• the precise description of the commercial premises concerned
• and the date on which the lease is due to expire.

It is crucial to state that the notice is given for the end of the three-year term or for the end of the initial nine-year lease.

Registered letter or bailiff (Commissaire de justice): which method should you choose?

For the tenant

Under the Pinel Act, tenants have the option of sending their notice by registered letter with recorded delivery. This is a practical and less expensive method. However, there is a real risk: if the registered letter is not properly delivered (undelivered, not requested, returned undelivered), the notice may be contested.

On the other hand, a document served by a judicial commissioner (formerly a bailiff) guarantees that the document will be delivered, even if the recipient refuses to sign it or is absent. The commissioner will leave a notice of delivery, which will ensure that the time limit begins to run.

For the lessor

The rule is stricter. If the landlord wishes to issue a notice of termination with a refusal to renew or an offer of compensation, he must use an extrajudicial document. He is not allowed to use a registered letter for this specific act.

If you have any doubts about your landlord’s solvency or responsiveness, a commissioner’s deed is still the most protective solution for a tenant, as it eliminates any risk of dispute over the date of receipt or content of the request.

Notifying registered creditors

When a tenant terminates his commercial lease, especially in the context of an amicable agreement, an invisible player must be taken into account: the registered creditor. If you took out a business loan to buy your business, your bank has probably registered a pledge. A lessor who accepts an amicable termination without checking the presence of these creditors is taking a major legal risk. Article L. 143-2 of the French Commercial Code requires these creditors to be informed of the intention to terminate the lease.

If they are not formally notified, the termination of the commercial lease cannot be enforced against them. In practical terms, the bank could ask for the termination of the contract to be annulled, or demand that the lessor pay the lessee’s debts to compensate for the loss in value of the business as a result of the disappearance of the leasehold rights. This stage is a complex formality that often warrants the involvement of legal advisers to ensure that the final exit from the premises is secure.

Faced with these procedural challenges and the need to notify registered creditors, it is essential to call on the services of a lawyer who is an expert in commercial leases. GOLDWIN AVOCATS in Paris will work with you to ensure that your deeds are compliant and to prevent any subsequent recourse.

Early termination by the tenant: how do you break a commercial lease before it expires?

In principle, a commercial lease cannot be terminated unilaterally and without cause before the end of a three-year period. The tenant is contractually bound for the duration of the three-year period that has already begun. Leaving abruptly would be tantamount to a serious breach of contract, exposing the lessee to the payment of the remaining rent until the next scheduled expiry date. However, the life of a business does not always follow this rigid rhythm, and personal or economic events may force an early exit.

There are legal and contractual mechanisms for breaking the lease early. These solutions vary depending on the lessee’s situation and the state of relations with the lessor. Whether the reason is retirement, the death of the lessee or fault on the part of the lessor, French law provides for safety valves. However, each exception is subject to very specific conditions for termination, often documented by the case law of the Cour de cassation, which must be strictly adhered to to avoid a financial debacle.

Grounds for early termination by operation of law

Leaving a contractual commitment before the end of the three years is an exception strictly governed by the French Commercial Code. There are several specific situations in which a lease can be terminated early without waiting for the next three-year period.

Retirement, disability or death of the manager

Retirement or permanent incapacity of the business owner are grounds for early termination by operation of law underarticle L. 145-4 of the French Commercial Code. In these cases, the tenant may give notice at any time. He must, however, give the usual 6 months’ notice.

This provision is a personal right attached to the manager’s position, enabling the business to be wound up in an orderly fashion without being bound by the residual term of the commercial lease. In the event of the tenant’s death, the heirs also benefit from this simplified termination option to end the lease and vacate the premises.

Termination by court order due to the fault of one of the parties

Commercial leases may be terminated outside the three years for serious and legitimate reasons. If the landlord fails to fulfil his obligation to deliver or maintain the premises, rendering them unfit for use, the tenant may apply to have the contract terminated by the courts. If the breach is flagrant, the court may order the lease to be terminated to the detriment of the landlord.

Conversely, the landlord may take the tenant to court for misconduct: non-payment of rent or charges, breach of contractual obligations (lack of insurance, unauthorised subletting) or destruction of the building.

The specific case of judicial liquidation

Finally, in the event of insolvency proceedings, in particular the compulsory liquidation of the lessee company, there are specific rules governing termination. In such cases, the liquidator alone has the power to decide whether to continue or terminate the contract. If the liquidator notifies the lessor of his decision not to continue the lease, the contract is automatically terminated on the date of notification.

The lessor may also request termination ipso jure if the rent is not paid within three months of the opening judgment, thereby freeing the premises for a new activity.

Amicable termination of a commercial lease: how do you negotiate an exit agreement?

Amicable termination of the lease is the most flexible way of ending a commercial lease outside the legal timetable. It is based on mutual agreement between the lessee and the lessor. For the business owner, it is an opportunity to vacate the premises quickly, for example, in the event of an amicable liquidation or a change of business. For the lessor, it can be anopportunity to rent the premises again at a higher price, or to use the premises for another project without paying eviction compensation.

To formalise this departure, it is essential to draw up an amicable termination agreement. This document must specify the exact date on which the lease ends, the procedures for the inventory of fixtures at the end of the lease and the fate of the security deposit. Often, the party requesting termination agrees to pay a lump sum to the other party to compensate for the damage caused by the early termination. A verbal agreement has no legal value and can lead to litigation if the landlord continues to claim rent after you have left.

Termination by the landlord: eviction, grounds and compensation payable

The lessor cannot terminate a commercial lease as easily as the lessee. The Commercial Leases Act protects the lessee’s commercial property, i.e. his right to remain on the premises to run his business. If the owner wishes to take over the property at the end of the lease, he must generally give reasons for his decision and, above all, compensate the lessee for any loss suffered. This financial barrier is designed to protect the stability of local shops and businesses.

However, termination by the lessor remains possible within certain clearly defined frameworks:

• either on the grounds of a legitimate and serious fault on the part of the lessee,
• or by exercising a right of repossession for works.
• or the landlord simply refuses to renew the lease and agrees to pay the price.

Each scenario is subject to a specific termination procedure, where the slightest failure to comply with the time limits or form of notification can render the notice ineffective in court.

Notice with an offer of eviction compensation

Refusal to renew is a right of the lessor, but it is a costly one. If the landlord wishes to reclaim the premises through no fault of the tenant, he must pay eviction compensation. This sum is intended to compensate for the loss of the business or, at the very least, the costs of transferring the business.

The amount may vary depending on

• the value of the business
• removal costs
• transfer taxes for new premises
• and any loss of profit associated with the change of location.

Calculating this compensation is often a source of dispute. If the parties fail to reach an amicable agreement, an expert appointed by the judge will set the amount. The tenant has the right to remain in the premises until the compensation has been paid.

For the lessor, this is a major financial decision that needs to be carefully considered. This mechanism ensures that the leasehold rights remain an important asset for the retailer, even if the landlord decides to terminate the lease.

Termination without compensation: the tenant’s fault

The lessor may be exempted from paying compensation if there is a serious and legitimate reason. The most common case is repeated non-payment of rent (and service charges). However, other breaches can also be cited:

• changing the activity (purpose of the lease) without authorisation,
• prohibited subletting
• or failure to maintain the rented premises.

In these situations, the landlord must first give the tenant formal notice to comply with his contractual obligations.

The procedure is not the same, depending on the grounds:

• if there is a resolutory clause, the landlord must issue a formal notice referring to the clause and complying with the legal time limit of one month;
• Inthe absence of a resolutory clause, the formal notice and the time limit depend mainly on the lease and thejudge’s assessment of the seriousness and persistence of the breach.

Termination for fault on the part of the tenant results in the loss of the lease and the business without any financial compensation. This is the ultimate penalty for a lessee who fails to comply with the ground rules laid down when the initial commercial lease was signed.

Resolutory clause: eviction proceedings for unpaid rent

The resolutory clause is a contractual stipulation found in almost all commercial leases. Its purpose is to allow the lease to be terminated ipso jure if the conditions set out in the lease are met, without any discussion of the seriousness of the matter, provided that the legal procedure is followed (summons referring to the clause and deadline). It acts as a cleaver: as soon as the breach is established and a grace period has passed, the lease is deemed to have been terminated by operation of law. It is the landlord’s preferred tool for dealing with unpaid rent.

Activation of this mechanism is strictly governed by the Civil Code and the Commercial Code. It is only effective if it is implemented in good faith. For the tenant, receipt of a deed invoking the resolutory clause is a red alert. This means that the tenant’s occupancy rights are at risk in the very short term. This is a rapid procedure that can result in eviction in a matter of months, a far cry from the usual timescales for traditional three-year termination.

How a summons to pay works

It all starts with a summons to pay issued by a court commissioner. This official document lists precisely the sums owed (rent, charges, taxes) and instructs the tenant to settle the debt within one month. This deadline is a matter of public policy, and cannot be reduced by contract.

During these thirty days, the tenant has the opportunity to regularise his situation to stop the legal process. If the tenant pays all the sums claimed, the resolutory clause is neutralised, and the lease continues as normal.

If, on expiry of the one month, payment has not been made or a settlement agreement has not been reached, the lessor may refer the matter to the interim relief judge of the court. The judge will then establish that the conditions for terminating the lease have been met. He does not have the power to assess the seriousness of the fault; he simply checks that the debt exists and that the procedure has been followed. The lease is then officially terminated, and eviction from the premises can be ordered.

How can the effects of a resolutory clause be suspended?

Even if the one-month deadline has passed, all is not lost for the tenant. The judge has the power togrant payment deadlines, up to a maximum of two years, if he considers that the tenant is in a position to regularise his situation. As long as these deadlines are met by regular payment of the fixed instalments, the effects of the resolutory clause are suspended. This is a vital breath of fresh air for businesses experiencing temporary cash flow difficulties.

To obtain this favour, the lessee must act quickly, ideally before the court hands down its decision to terminate the lease. They must prove their good faith and their financial capacity to honour their new repayment plan in addition to the current rent.

In 2025, given the economic stakes involved, the courts will continue to be attentive to the long-term viability of businesses, but rigour is still the order of the day. A single missed deadline in the repayment plan makes the termination final and enforceable immediately.

To navigate smoothly between amicable negotiations and resolutory clause proceedings, it is crucial to be advised by professionals. GOLDWIN AVOCATS in Paris, expert lawyers in real estate and corporate law in Paris, puts its know-how at your disposal to resolve your commercial lease disputes and secure your professional future.