A reader submits the following question to us : the commercial lease with my tenant started on October 1, 1987 for 9 years. The tenant has already requested and received 3 rent renewals. Thus, by Sept. 30, 2023, the property will have been leased for 36 years. Recently, the tenant requested another extension. I am 80 years old and do not want to commit myself for a long time. What options are available to me ?
Only 3 legal rent renewals
The commercial tenant is not entitled to an additional lease renewal after 3 lease renewals that were legally requested and allowed. Thus, the tenant cannot force the landlord to allow a fourth lease renewal.
Conventional lease renewal
If both parties agree, they can enter into a conventional lease renewal. The parties are free to determine the terms (including rent, duration) of this lease. For example, they can agree that this lease renewal will be for a short term (say, 2 years).
Most authoritative authors agree that all agreements entered into by parties after exhaustion of the 3 statutory lease renewals are subject to common law unless the parties expressly enter into a completely new commercial lease.
The Supreme Court has also ruled that any renewal of the commercial lease in which the tenant continues to maintain continuous enjoyment of the premises after the expiration of the third lease renewal constitutes a renewal of the lease and not a new lease.
Thus, if a fourth renewal is granted, it does not create a new commercial lease. It cannot result in the lease being renewed 3 times later. After all, the landlord is granting a favor to the tenant by allowing a non-mandatory renewal. It is best to clearly state in the agreement that this fourth extralegal renewal is an additional renewal and not a new lease.
We recommend that this lease be registered – this is a tax obligation, by the way – so that the contract has fixed date. The formality of registration and its cost may be charged to the tenant.
Tenant just stays put
If the tenant who has exhausted his right to rent renewals and he is left in the property without objection or reservation on the part of the landlord, then the lease is governed by common law.
The tenant loses the protection of the Commercial Lease Act. He can no longer invoke the tacit rehiring within the meaning of Article 14,3° paragraph commercial lease law. Concretely, this means that each of the parties can terminate the lease at any time subject to the observance of one month’s notice (in accordance with Article 1736 of the Civil Code.). This is obviously a particularly precarious situation for both parties.
OPINION OF THE UNITED OWNERS
It is appropriate to prepare a written agreement if the tenant continues to occupy the premises after the expiration of the third lease renewal. Then both parties resume their contractual freedom, and it is important to clearly define the duration and the modalities of termination. Our legal department is available to customize such agreement.
Source: United Owners, owners’ magazine June 2023, No. 507