French commercial lease (bail commercial)

The bail commercial (French commercial lease, often called a 3-6-9 lease) is the contract by which an owner lets a building or premises to a trader, craftsman or manufacturer who runs a business there. It differs from other leases not in its form but in the rules that apply to it: the statute of commercial leases, which stems from the decree of 30 September 1953 and is codified at articles L. 145-1 et seq. of the French Commercial Code. On its essential points this statute is a matter of public policy: minimum term of nine years, right to renewal, eviction compensation if renewal is refused, control of the rent.

For the property valuer, the commercial lease is daily work. Almost every engagement in this field turns on an amount to be fixed: the rent of the renewed lease, the compensation due to the tenant who has not been renewed, the occupation indemnity of the tenant who stays on, the value of the leasehold right that is assigned.

Where the rule comes from

Article L. 145-1 of the French Commercial Code defines the scope of the statute: it applies to leases of buildings or premises in which a business is carried on, whether that business belongs to a trader, a manufacturer or a craftsman. Article L. 145-4 sets the minimum term at nine years, with the tenant free to terminate at the end of each three-year period, hence the expression “3-6-9 lease”. Article L. 145-5 allows a short lease of up to three years outside the statute.

Articles L. 145-9 and L. 145-10 organise notice to quit and the request for renewal. Article L. 145-14 lays down the principle of eviction compensation. Articles L. 145-33 and L. 145-34 govern the rent: the first refers to the rental value, the second to the cap on its variation at renewal.

In a valuation report

I begin by reading the lease itself, its amendments and any deeds of assignment. I note the commencement date, the term, the permitted use, the allocation of charges, the indexation clause, the works placed on the tenant. These clauses are not details: each can raise or lower the renewal rental value (Charte de l’expertise en évaluation immobilière, French property valuation charter, Title III § 1.6) or the amount of eviction compensation (§ 1.19).

The report then sets out the measured and weighted floor area, describes the location, and ties each conclusion to the provision or the comparable on which it rests.

Example

An 85 m² shop in the centre of QUIMPER has been let since 2015 at €14,400 per year. The lease expires in 2024. The landlord wants to know whether he can ask for more. I first calculate the capped rent by applying the index, about €16,900, then the renewal rental value from rents of neighbouring premises, €21,000. Finally I indicate whether a ground for uncapping exists; if not, the renewed rent stays at the cap.

Not to be confused with

The professional lease (bail professionnel), reserved for the liberal professions, and the short-term lease (bail dérogatoire) fall outside the statute and give no right to eviction compensation. The precarious occupation agreement (convention d’occupation précaire), justified by a specific circumstance, also escapes it.