The Commercial Lease When You Buy a French Business: What Transfers and What Can Kill the Deal

The commercial lease when you buy a French business: the asset that can kill the deal

In most French business purchases, the lease is the most valuable thing being sold - and the most dangerous. The law gives the selling tenant a public-order right to assign the lease to the buyer of the fonds, and no lease clause can take it away (C. com. Art. L 145-16). But everything around that right is negotiable, formal and sanctioned: valid clauses organise how the assignment happens, the landlord may hold an approval or a pre-emption right, the transfer must be made good against the landlord by specific formalities - and a cession that ignores any of it can leave the buyer an occupant without title, expellable from the premises it just paid for.

This guide goes deep on the lease side of the deal: the right that cannot be removed, the clauses that bind anyway, the landlord's role and its limits, the formalities and the état des lieux, the sanctions ladder when a cession is irregular - and how the lease is negotiated into the deal and its price.

The right that cannot be removed: the lease follows the business

Where the premises are essential to the operation, the shop, the restaurant, the hotel, the sale of the fonds necessarily carries the lease with it. And the selling tenant's right to assign the lease to the buyer of its business is a matter of public order: any lease clause forbidding it is deemed unwritten (C. com. Art. L 145-16). The courts have struck, on that basis:

• general and absolute bans on assigning the lease;
• clauses blocking the sale of an autonomous branch of the fonds - the statute draws no line between total and partial sales;
• a clause requiring personal operation by the tenant during the lease's last three years, which made the business unsellable for that period;
• clauses excluding whole categories of buyers, such as companies.

Hold the boundary precisely, because everything in the next section sits on its other side: the landlord cannot forbid the assignment that accompanies the sale of the business - but the landlord can lawfully organise it, condition it, and even reserve the right to step into the deal.

The lease clauses that do bind your sale

Clauses that limit or organise the tenant's right, rather than deny it, are valid and must be respected at the sale; and the professional who drafts the deed is bound by them as much as the seller: a notary instrumenting a fonds sale that includes the lease must comply with the assignment modalities the lease prescribes.

The approval clause (agrément). A lease may validly subordinate the assignment to the landlord's express authorisation - the landlord's tool for checking the buyer's respectability, competence and solvency. The mechanics matter:

• the authorisation is sought before the cession - though a sale under the condition precedent of the landlord's approval is possible, provided the condition bears on the cession's completion and a deadline is fixed for obtaining the approval;
• the landlord who approves does not become a party to the sale;
• a refusal without legitimate reason can be overridden by the courts. Legitimate: a pending action to terminate the lease against the selling tenant; the absence of any genuine fonds, where the seller operated no activity in the premises. Not legitimate: the failure of the landlord's own negotiations with the buyer over a new lease.

The landlord's pre-emption or preference clause. A clause giving the landlord a right of pre-emption if the tenant sells the fonds is valid - no statute forbids it, and it leaves the tenant free to sell at the price and terms of its choice, the landlord being able only to take the deal as freely agreed. The same holds for a preference pact inserted in the lease. For the buyer, both mean one thing: the deal you negotiated may be taken over your head, at your terms - check for the clause before investing in the negotiation.

The form clauses. A lease may impose formalities on the assignment - the landlord's participation in the deed, prior transmission of the draft, a notarial deed. The notarial-deed clause captures the entire sale of the business; the others go on the closing checklist, because the sanctions section below is what happens when they are skipped.

The clause in your lease - does it bind the sale?

Pick the clause you found - the check tells you whether it holds, and what it requires.

Making the lease transfer good against the landlord

The Article 1690 formalities. The assignment of the lease with the fonds becomes effective against the landlord only through the formalities for assignments of rights: service on the landlord by bailiff, or the landlord's acceptance in a notarial deed (C. civ. Art. 1690). The contract-assignment rules requiring the counterparty's consent do not govern here, the landlord has no consent to give, the assignment being the tenant's right, which is exactly why the notification route, not an approval route, applies. The deed of sale should fix who serves the landlord, when, and at whose cost.

The état des lieux. An inventory of the premises' condition is drawn up between the landlord and the incoming buyer at the entry into possession, and again at restitution. Its stakes are financial: where no état des lieux was established, the landlord cannot claim for degradations at the lease's end - displacing the older case law that made the last tenant answer for its predecessors' damage under the good-condition presumption of Article 1731 of the Civil Code. Where an état des lieux was drawn, the allocation of pre-existing degradations between seller, buyer and landlord is not settled by the courts - so the three of them should settle it themselves, in writing, at the handover.

The seller's rent arrears are not the buyer's debt - unless made so. The sale of the fonds transfers the lease for the future; it does not, by itself, put the seller's existing debts to the landlord on the buyer. A transfer of debt requires the creditor's agreement (C. civ. Art. 1327): where the landlord agreed to it in advance without being party to the deed, the transfer takes effect against the landlord only once notified to it or acknowledged by it (C. civ. Art. 1327-1) - and even then the seller is released for the future only if the landlord expressly consents; failing that, seller and buyer are liable in solidum for the debt, save a contrary clause (C. civ. Art. 1327-2). Two practical consequences for the closing file: the buyer who agrees to take over arrears should obtain the landlord's express release of the seller in writing, or price the solidarity in; and the buyer who has not agreed to take anything over should have the deed say so, with the seller's warranty that rents and charges are paid to the transfer date, backed by the landlord's receipt.

The sanctions ladder when the lease transfer goes wrong

The consequences of an irregular cession escalate - and they land on the buyer as hard as on the seller:

• Unenforceability against the landlord. Missing the Article 1690 formalities does not void the cession: between seller and buyer it stands, and the buyer can demand the premises. But against the landlord the cession does not exist - the buyer occupies without title and can be expelled, while the seller remains the landlord's tenant until the lease ends.
• Termination of the lease. An irregular cession, legal formalities or lease clauses ignored, lets the landlord pursue the lease's termination, through an automatic-termination clause or before the judge, who weighs whether the breach is grave enough. The majority case law holds the irregular cession beyond regularisation; the seller's remaining escape is a fresh cession done in conformity with the lease.
• Renewal refused without indemnity. The irregular cession can be the grave and legitimate motive allowing the landlord to refuse renewal without paying the eviction indemnity (C. com. Art. L 145-17): a violated approval clause, a cession concluded after the landlord's notice, or the disregard of clauses requiring the landlord's participation in the deed and prior transmission of the draft for its preference right.
• The evicted buyer's recourse. A buyer expelled as an occupant without title can sue the seller in damages - with a share of the loss left on the buyer where its own negligence contributed, notably the failure to check that the lease's prescriptions had been respected. The deed's drafter or the intermediary who failed to verify the lease's content answers too.

Read as a whole, the ladder gives the practical rule of this article: on the lease, form is substance. The buyer's protection is not the seller's promise that the landlord is relaxed - it is the clause-by-clause execution of what the lease requires, documented in the closing file.

When the seller had already lost the lease. The transfer can also fail for a reason older than the sale: the landlord had obtained, against the selling tenant, an order for unpaid rents and the termination of the lease. In such a case, where the lease was included in the sale of the fonds and the buyer was then expelled from the premises, the Cour de cassation held the seller liable to the buyer under the warranty against eviction, the deed containing no exclusion of warranty for that hypothesis (Cass. com. 20-2-2001 n° 98-16.842). The remedies then follow the general scale of partial eviction: the buyer can have the sale itself rescinded only if the element lost was essential - one without which it would not have bought (C. civ. Art. 1636); otherwise the recourse is damages or a reduction of the price (C. civ. Art. 1637). For a location-driven business, losing the lease is the textbook essential element. The prevention is cheaper than the remedy: before signing, obtain the landlord's written confirmation that no termination proceedings are pending and that rents are current - a pending termination action is also, as seen above, a legitimate ground for the landlord to refuse approval.

The lease transfer was botched - where do you stand?

Pick the scenario - the check names the sanction in play and the next move.

Negotiating the lease into the deal - and into the price

When the buyer's plans exceed the lease. A buyer wanting a fresh lease, or activities beyond those the lease authorises, needs the landlord's express agreement before the sale - a lease rider, which an exchange of letters can form, or a new lease. Landlords price their agreement: an indemnity for the change of permitted use (déspécialisation), a rent increase, or both. Negotiate it alongside the deed, recite the result in it, and never price the deal on activities the lease does not yet allow.

The lease's weight in the price. For a business tied to its location, the lease right is the heart of the value - and its floor. Remaining term and a rent favourable against the market add value, discounted for the revision that may come at renewal; on prestige pitches the lease right commands a strong price even at a full rent, because the location itself is scarce. The valuation methods in this series' pricing guide treat the point expressly - the rent-differential approach exists precisely to price the lease bargain separately from the trade.

The closing checklist, lease section. Read the lease before the offer; triage its clauses (void, valid, priced); obtain the approvals and agreements the clauses require, or condition the sale on them with deadlines; execute the Article 1690 formality at completion; hold the état des lieux at entry; and file every notice and answer. Six lines that decide whether the most valuable element of the fonds arrives with it.

Frequently Asked Questions

This article is for general information only and states French law as published in the sources available at the date shown above. It does not constitute legal advice. What a lease requires at a sale depends on its exact clauses. Always seek qualified legal advice before committing.