The commercial lease / 3-6-9 lease

Having premises for professional or commercial use is of paramount importance for any business owner. These premises must allow them to carry out or operate their business in complete freedom and peace of mind. To obtain such guarantees, the business owner must turn to commercial real estate in order to secure a commercial lease, also known as a 3-6-9 lease.

Generally speaking, and under commercial law, a commercial lease is the rental contract concluded between the landlord (the owner of premises or the usufructuary) and the tenant (the entrepreneur or the company) relating to the use of premises for professional or commercial purposes only. In French law, this lease is governed by Articles L145-1 et seq. of the Commercial Code.

What are the form, documents and conditions required to establish a commercial lease?

For the formation of a 3-6-9 lease, the law does not impose any specific conditions. As a result, whether it takes written or oral form, a commercial lease remains legally valid provided it meets the general conditions for the validity of a contract. These are:

• consent free from any defect;
• parties who have legal capacity;
• a specific and lawful subject matter;
• and finally, a lawful cause.

However, while the law does not require written form for a commercial lease to be valid, it is more advantageous for the tenant to sign a written lease agreement that they can rely on if needed.

Also, in the context of a commercial lease, the parties must provide certain administrative documents in advance. This serves, on the one hand, to verify the tenant's identity, their solvency and the nature of the activity they intend to carry out on the premises. On the other hand, it is intended to verify the landlord's identity and the premises being let. The required documents vary depending on whether the party is the landlord or the tenant.

The landlord must provide:

• proof of identity for individuals (a national ID card or passport);
• a copy of the up-to-date articles of association for legal entities;
• the title deed or the co-ownership regulations for the premises being leased;
• and a property inspection report.

The tenant in turn must provide:

• proof of identity for individuals (a national ID card or passport);
• an extract from the trades register;
• a copy of the up-to-date articles of association for legal entities;
• and proof of solvency (tax assessment, employer's certificate, etc.)

Once all these documents have been provided and verified, the commercial lease can be signed.

What are the validity period and the conditions for termination or renewal of a commercial lease?

A commercial lease is a long-term lease. It is valid for a period of at least nine (9) years. This minimum duration is a legal requirement and is binding on the landlord. A landlord who wishes to break the commercial lease before its term therefore incurs liability and will be required to pay the tenant a dilapidations indemnity.

By this provision, the legislature affords the entrepreneur-tenant the stability and peace of mind needed to carry out their professional or commercial activity smoothly.

Termination of the 3-6-9 lease

Furthermore, the tenant is given the option to terminate the commercial lease at the end of each three (3)-year period. It is precisely from this rule that the expression 3-6-9 lease derives, used to designate the commercial lease. It is therefore a contract that is very favourable to the tenant.

However, a commercial lease concluded for a term of nine (9) years may be terminated before that term expires. This is the case in particular where: the parties terminate the commercial lease by mutual agreement, or where the landlord requests termination at each three-year period or through legal proceedings.

Renewal of the commercial lease

The legislature also recognises the tenant's right to renew the commercial lease when it has reached its term. To exercise this right, the tenant must submit a renewal request within six (6) months before the expiry of the current lease.

What are the rules governing rent in a commercial lease?

The law gives both parties (the landlord and the tenant) the freedom to negotiate and determine the rent amount as well as the payment terms.

However, the rent may only be revised once a year or once every three (3) years, calculated on the basis of the national commercial rent index. During the term of the commercial lease, either party may request a rent review at the end of each three (3) year period. This is known as the triennial rent review.

The triennial rent review period is limited in its application by the rent cap rule. Indeed, any reduction or increase in rent is not freely determined. It is subject to an index-linked clause based on the quarterly commercial rent index.

What are the main obligations and responsibilities of the parties to a commercial lease?

A commercial lease places certain obligations on both parties (the landlord and the tenant). First, the landlord is required to:

• deliver the premises to the tenant in good condition;
• maintain the premises in good condition and carry out major repairs at their own expense;
• grant the tenant the right to peaceful enjoyment of the leased premises;
• and inform the tenant of all potential risks.

While the landlord is in principle responsible for maintaining the premises in good condition and carrying out repairs at their own expense, the commercial lease may nonetheless include provisions that result in the allocation of works and their associated costs between the landlord and the tenant.

In turn, the tenant is required to:

• use the premises responsibly and with due care;
• pay the agreed rent on time and in accordance with the stipulated deadlines;
• and operate the premises in accordance with the intended use set out in the commercial lease.

Each party must fulfil their obligations without exception.

Are assignment and subletting permitted under a commercial lease?

It is important to distinguish between the concepts of assignment and subletting of a lease. An assignment of lease is a contract whereby the tenant transfers their commercial lease to a third party, who then assumes responsibility for performing it in their place. Subletting, by contrast, is the act whereby the tenant rents out part of the premises they have themselves leased. Under commercial law, a tenant may freely assign their lease but may not, as a general rule, sublet it.

First, the legislature recognises the principle of commercial lease assignment, under which the tenant may freely assign their commercial lease, particularly to the buyer of their business. However, if the assignment concerns only the leasehold right, the landlord may object to it.

Second, the legislature prohibits subletting of a commercial lease as a general rule, and only permits it where the landlord has given their express consent, in particular by signing a subletting agreement.

That covers the essentials of the commercial lease: its form, its term and how it works in practice.

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