Right of withdrawal and termination clause: the Montpellier Court of Appeal protects the tenant following the renewal of the lease
A classic case of dispute in the French leaseback sector
In a judgment of 26 May 2026, the Montpellier Court of Appeal provided significant clarification on the consequences of a landlord exercising their right of withdrawal and on the use of a termination clause following the renewal of a commercial lease.
The case concerned Grand Bleu, a company operating tourist accommodation, which had held a commercial lease covering several units in a tourist accommodation complex since 1 January 2007. The lease provided for an annual rent of €10,658.51 excluding VAT, as well as various maintenance obligations.
On 9 May 2017, the lessor, MB Gestion Immobilière de Résidences de Tourisme, had served a notice of termination with a refusal to renew, whilst acknowledging that it was liable to pay compensation for eviction.
The operator then claimed eviction compensation, initially in the amount of €30,000, then €89,475, as part of legal proceedings initiated in 2019.
The landlord’s change of heart: a complete shift in strategy
Withdrawal of the refusal to renew
Whilst the dispute over the eviction compensation was ongoing, the landlord exercised his right of repentance by deed dated 12 May 2020.
In this deed, he expressly withdrew his refusal to renew and consented to the renewal of the lease in accordance with Article L.145-58 of the Commercial Code. He also pointed out that the eviction compensation was no longer applicable.
A few years later, however, the landlord changed his approach and issued a demand for payment invoking the termination clause for an amount of over €9,000, corresponding to rent and service charge arrears dating back several years.
The judgment at first instance
The Perpignan Judicial Court held that the demand for payment was valid, found that the termination clause had been triggered, and ordered the termination of the lease as of 23 January 2023. It also ordered the eviction of the tenant and ordered them to pay compensation for continued occupation.
Grand Bleu appealed against this decision.
The issue of the limitation period for rent
The two-year limitation period set aside
One of the key points of the judgment concerns rent claims dating from before 2019.
The court had held that the landlord’s claims relating to rent for the years 2016 to 2018 were time-barred under the two-year limitation period provided for in Article L.145-60 of the Commercial Code.
The Court of Appeal took a different view.
It noted that the two-year limitation period applies only to claims brought under the provisions governing commercial leases. By contrast, a claim for payment of rent based on the terms of the contract falls under ordinary law and not under Article L.145-60.
The rent claimed was therefore not time-barred. The judgment was overturned on this point.
The decisive effects of the right of withdrawal
A renewal already secured
The court reiterates a fundamental principle: the exercise of the right of withdrawal does not constitute a mere offer of renewal but immediately brings about the renewal of the lease from the date of its notification.
From 12 May 2020, the parties were therefore bound by a new commercial lease resulting directly from the exercise of the right of withdrawal.
The impossibility of reversing this choice
In the judges’ view, the right of withdrawal constitutes an irrevocable decision by the landlord to waive the eviction indemnity and to continue the tenancy relationship.
Consequently, the landlord cannot subsequently use the termination clause of the expired lease to indirectly obtain what he had relinquished by exercising his right of withdrawal.
The court further noted that the order to pay mixed together claims arising before and after the renewal, even though the new lease was legally distinct from the expired lease.
Insufficient evidence of unpaid rent
An inaccurate statement of account
The court also found that the statement of account attached to the order was incomplete and did not take into account several payments made by the tenant.
The landlord himself acknowledged the existence of partial payments without incorporating them correctly into his calculations.
The grounds for the order deemed to have been settled
After examining the documents submitted, the court found that the sums claimed were not sufficiently substantiated and that the grounds for the order had been settled within the required time limit.
As no evidence of a breach by the tenant was provided, the termination clause could not take effect.
The ruling
The Court of Appeal quashed the judgment of the court of first instance in its entirety. It found that the lease had been renewed on 12 May 2020 by virtue of the right of withdrawal, ruled that the termination clause was deemed never to have taken effect, dismissed the landlord’s claims for eviction and payment, and ordered the landlord to pay the costs as well as €3,000 pursuant to Article 700 of the Code of Civil Procedure.
Practical implications of the judgment
This judgment is of particular interest to operators of holiday accommodation. It serves as a reminder that the right of withdrawal results in the immediate and irrevocable renewal of the lease. Once this choice has been made, the landlord can no longer seek to challenge the continuation of the lease by relying on prior breaches of which he was aware at the time the right of withdrawal was exercised.
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