The reform strikes a balance between the rights of tenants and landlords
The reform of the law on commercial leases is designed to curb property speculation and restore the balance of power between landlords and tenants, in particular by prohibiting the “key money” (pas-de-porte) and framing the sublease.
More than four years after a series of businesses closures due to an increase in rents, parliament will adopt the much-awaited reform of the commercial lease on Wednesday. The law aims to strike a balance between the rights and duties of tenants and landlords.The strengths of the reform are the prohibition of “key money”, an additional charge that some owners asked of new tenants, or the supervision of the sublease. Thus, the main tenant will no longer be able to ask a sub-tenant to pay a rent higher than the one he pays himself to the landlord, unless the main tenant has made investments or if he bears the rental risk.
The reform also reduces the rental guarantee (which is today often set at the equivalent of 12 months’ rent), and adapts the term of the lease with a right to renew the lease for an unlimited time and gives preferential rights to the lessee for the first 9 years protecting them against any competitor who wishes to lease the premises. If the lease is not renewed, an eviction compensation is provided to protect the lessee's business.
In the course of parliamentary proceedings, following a recommendation from the Council of State, the committee decided to include service stations and breweries in the scope of the law.The breweries, which according to the rapporteur of the text, MP Tess Burton (LSAP), would often request higher rents from coffee makers, will be entitled to a period of one year to comply. She explained in parliament that with the exception of a few provisions, the law--as soon as it was published in the Mémorial--would apply to existing contracts, but not to current legal proceedings.
The bill should have been submitted to the vote of the deputies last October but last-minute changes were made and the Council of State could not give its opinion as soon as possible. Another change from the October text is the addition of a one-year transition period allowing lessees (especially in the brewery sector) to bring their subleases into compliance with the law.