Judicial termination of a commercial lease even after a late payment of service charges
Late payment of service charges is not always sufficient
Under a commercial lease dated 30 August 2013, the owners granted the company Pierre & Vacances Exploitation France the use of a flat and a parking space located within a holiday residence. The lease was entered into for the purpose of operating a tourist residence or hotel-style accommodation, in return for an annual rent of €2,321 excluding VAT, as well as an annual right of residence.
Following the Covid-19 health crisis, the parties signed an amendment in July 2021 providing, in particular, for a significant rent waiver granted by the landlords and a commitment by the tenant to resume normal payment of rent and service charges thereafter.
The lease was subsequently continued by tacit renewal.
Believing that the tenant company was no longer paying the co-ownership charges and certain taxes for which it was contractually liable correctly, the landlords brought proceedings against PV Exploitation France before the Paris Commercial Court to obtain:
- the judicial termination of the lease;
- the eviction of the company;
- compensation for occupation;
- payment of arrears in service charges;
- reimbursement of rent waivers granted during the Covid period.
The claim for payment of service charges and taxes
The tenant’s contractual obligations
The lease placed the burden of most of the service charges relating to the building’s operation, as well as certain recoverable taxes, on the tenant. The 2021 amendment further reinforced this obligation by providing, in particular, for the payment of advances representing 90% of the estimated service charge budget.
The landlords produced the co-ownership statements, the property tax notices relating to the household waste collection tax, as well as several reminders sent to the tenant. They claimed a sum of €3,076.31.
PV Exploitation France’s arguments
The company maintained that it had already made several bank transfers intended to settle the charges claimed. It produced various payments made between 2020 and 2025.
However, the court noted that these payments had essentially been allocated to previous financial years and did not cover the sums due for the 2024–2025 period, in particular the provision for charges provided for in the amendment.
The judgment handed down
The court considered that the landlords had sufficiently demonstrated the existence of their claim.
PV Exploitation France was therefore ordered to pay:
- €3,076.31 in respect of contractual charges and taxes;
- interest at the statutory rate from 20 October 2025, the date of the summary submissions updating the claim.
The application for judicial termination of the lease
The complaint regarding non-compliance with the intended use of the premises
The landlords argued that the residence was no longer being operated as a three-star hotel. In their view, this situation meant they were losing certain tax benefits attached to their investment.
The court rejected this argument.
It noted that the use clause authorised the operation of a tourist or quasi-hotel residence with services. No provision required the maintenance of a three-star hotel rating or a particular standard of luxury. Moreover, the landlords provided no evidence demonstrating the actual loss of the tax benefits invoked.
Delay in payment of service charges
The court acknowledged that the tenant company had breached its contractual obligations for several years by failing to pay service charges and taxes by the agreed due dates.
However, the judges highlighted several mitigating circumstances:
- the parties had been in a contractual relationship for nearly thirteen years;
- the principal rent continued to be paid;
- the company had largely rectified its situation during the proceedings;
- the outstanding amount remained limited.
In these circumstances, the breach, although real, is not deemed sufficiently serious to justify the judicial termination of the lease.
The application for termination is therefore dismissed, as are the applications for eviction and compensation for occupation.
Reimbursement of Covid rent waivers
An effective contractual penalty clause
The July 2021 amendment expressly provided that in the event of the tenant’s failure to comply with its obligations, in particular regarding the payment of rent and service charges, the landlords would regain their rights to the rent waived during the health crisis.
The court found that the service charges had indeed not been paid in accordance with the agreed terms.
The landlords are therefore justified in seeking the application of this clause.
The order made
PV Exploitation France is ordered to reimburse:
- €1,710 corresponding to the rent waivers recovered;
- interest at the statutory rate from the date of the summons of 15 December 2023.
Scope of the decision
This decision illustrates the courts’ reluctance to order the judicial termination of a commercial lease where the tenant has continued to pay the principal rent and has settled the bulk of their outstanding debt during the proceedings.
However, the judgment highlights the effectiveness of settlement clauses agreed during the Covid period. Where a tenant fails to meet their commitments regarding service charges or rent, landlords may recover any rent waivers granted, even without successfully obtaining a court order to terminate the lease.
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