Here are a few key points to consider when negotiating the renewal of a commercial lease for a tourist residence, taking into account the general provisions applicable to commercial leases (articles L. 145-1 et seq. of the Commercial Code) and the specific characteristics of the tourism sector.
1. The rent and how it is revised
1. Ceiling or removal of ceiling:
In principle, when a commercial lease is renewed, the rent is capped according to the reference index (often the ILC or ILAT depending on the nature of the activity).
However, if the criteria for removing the cap are met (in particular a significant change in the local commercial factors or if the activity has changed significantly), the lessor may request a rent calculated at the actual rental value, which may be higher than the capped rent.
In the case of a tourist residence, the local commercial factors (tourist numbers, attractiveness of the area, infrastructure, etc.) can change significantly and justify removing the cap.
2. Indexation:
Check the indexation clause (sliding scale clause): which index is used (ILC, ICC, ILAT) and what are the terms of application (indexation frequency, possible variation limit, etc.).
3. Rent reductions or exemptions:
Negotiate, if relevant, a reduction or a franchise period at the start of the renewed lease or in the event of major works.
These mechanisms can be useful to smooth the impact of a rent increase or compensate for periods of heavy works.
2. The duration of the lease and terms of termination
1. Minimum legal duration of 9 years:
Commercial leases generally have a term of 9 years. The lease may however provide for longer terms, especially in a sector such as tourism, which requires the amortisation of significant investments (renovation, development, etc.).
2. Possibility of triennial termination:
Unless otherwise stipulated or in the case of a derogatory lease, the lessee (tenant) has the right to terminate the lease every 3 years.
It may be advisable to negotiate conditions that are more suited to the operation of a tourist residence, sometimes less restrictive or, on the contrary, more protective if the operator needs stability.
3. Early exit clause:
In certain cases, it is possible to negotiate an early exit in the event of force majeure, unfavourable legislative change, or in the event of impossibility of operating the residence (loss of classification, etc.).
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3. Distribution of charges, works and taxes
1. Rental charges:
Commercial leases must clearly specify the distribution of charges (property tax, household waste collection tax, major repairs, co-ownership charges, etc.).
Since the Pinel law and the decree of 3 November 2014, certain charges can no longer be charged to the tenant (in particular major repairs under Article 606 of the Civil Code for leases concluded or renewed since this reform).
2. Compliance/renovation work:
In a tourist residence, there may be obligations in terms of classification, security and accessibility (in particular for the reception of customers, fire standards, PRM, etc.).
Determine who is responsible for the compliance or renovation work and how it is distributed financially (participation of the landlord, partial or total responsibility of the tenant, etc.).
3. Tourist taxes and duties:
Tourist residences may be subject to certain specific taxes (tourist tax, for example). Clarify who is responsible for managing and bearing the financial burden.
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4. Purpose of the lease and operating obligations
1. Authorised activity:
The lease must clearly state the purpose (tourist accommodation) and any extensions (catering, bar, leisure activities, etc.).
Check whether subletting or making the premises available to other operators is authorised or whether a clause provides for restrictions.
2. Classification and standards of the tourist residence:
Tourist residences must meet certain standards in order to retain their classification (e.g. stars). The lease must specify the obligations incumbent on the tenant to maintain this classification (work, equipment, minimum services, etc.).
In the event of loss or non-renewal of the classification, provide for the consequences (rent review? termination of the lease?).
3. Minimum opening obligation:
Certain agreements or clauses impose a minimum number of weeks of opening per year to retain the status of tourist residence, and therefore the benefit of any advantages (tax, for example).
Check whether the tenant undertakes to respect a minimum occupancy rate or a minimum opening period.
5. Financial guarantees and insurance
1. Security deposit or bank guarantee:
The lessor may require a security deposit; the amount is often capped (generally 2 to 3 months’ rent excluding charges for a standard commercial lease, but may vary depending on the negotiation).
In the tourist residence sector, the operation may be seasonal; higher guarantees may be requested by the landlord to cover the risk of non-payment.
2. Compulsory insurance:
The tenant must take out at least ‘Civil Liability
Operations’ insurance, ‘professional multi-risk’ insurance and sometimes specific guarantees (swimming pool, spa, etc. in the residence).
Check whether the landlord wishes to take out insurance for the premises (generally at their expense), and require the tenant to provide proof of insurance annually.
6. Clauses specific to tourist residences
1. Partnership or joint operation clauses:
In certain arrangements (franchise, grouping, etc.), there may be clauses imposing commercial collaboration, for example the use of a shared booking platform or the sharing of certain revenue or administrative management.
2. Reassignment clauses:
If the tourist residence is no longer viable, can the premises be reassigned to another activity (senior service residence, aparthotel, etc.)? Provide for conditions to avoid disputes if the main activity can no longer continue.
3. Marketing commitments/activities:
Tourist residences sometimes require a certain level of activities and services (reception, breakfast, etc.). The lease may contain specific obligations, under penalty of termination or contractual sanctions.
7. Negotiations and securing agreements
1. Memorandum of understanding:
Before signing the renewed lease, formalise the negotiated points in a memorandum of understanding summarising the key elements: rent, duration, charges, works, etc.
Check that the memorandum is consistent with the final clauses of the lease.
2. Expertise and audits:
To justify or discuss the rent, it may be advisable to commission a commercial property valuation expert who will take into account the specific features of the tourist residence.
Check the financial soundness of the tenant (if it is a new operator): balance sheets, business plan, tourist occupancy forecasts, etc.
3. Long-term commitment:
Investments for tourist residences are often heavy (renovation, upgrading to standards). Landlords and tenants each have an interest in securing their relationship in the long term (beyond the minimum legal term ).
Possibly negotiate a clause providing for support or assistance from the lessor in the event of cyclical operating difficulties (e.g. health or economic crisis).
Conclusion
Negotiating the renewal of a commercial lease in a tourist residence involves mastering both the general rules of commercial leases and the specificities of the tourism sector. Anticipating classification obligations, the investments necessary for operation and the conditions for indexing or revising the rent is crucial to securing the contractual relationship. An in-depth audit (expert reports, inventory, market study) and a solid memorandum of understanding make it possible to negotiate and formalise balanced conditions, protecting the interests of each of the parties over the term of the lease.
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