Why must owners pay eviction penalty in case of termination of commercial lease ?
Published on :
19/05/2025
19
May
May
05
2025
Under French law, a landlord must rent a commercial premise (a shop, a factory, a restaurant), under a commercial lease (“BAIL COMMERCIAL”); for a minimum mandatory duration of 9 year.
When the lease reaches this 9 year term, the tenant is entitled to continue the contract.
If the landlord wishes to repossess the property an eviction penalty must be paid to the tenant, unless the tenant is in serious breach of contract (for repeatedly not having paid the rent for instance),
This eviction penalty is supposed to compensate the loss of turnover by the tenant induced by this repossession.
Payment of this penalty is a statutory requirement of French Commercial Code (“CODE DE COMMERCE”). Consequently, it does not have to be stipulated in the lease contract to be enforceable.
The statutory provisions on eviction penalty are mandatory, they cannot be excluded by the terms of the lease contract.
Nevertheless, under certain conditions, the tenant can waiver the benefit of the eviction penalty but only after termination of contract.
In case of dispute, a party can challenge the validity of such a clause before a Judge.
If the parties cannot agree on the penalty, it will be decided by a Judge and is usually equivalent to two to four years turnover of the tenant.
It is advisable to seek the advice of a lawyer before considering termination of a commercial lease.
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