Lessor owning the building and the business

A lessor who owns both the building and the business

Article L145-46 of the French Commercial Code, as it has been in force since September 21, 2000, deals with a specific situation in commercial leases where the lessor is both owner of the leased building and of the goodwill operating therein. This article imposes an obligation on the lessor to compensate the lessee on his departure, subject to certain conditions.

Here is an explanation of the terms of this article:

1 Owner of the building and the business :

The lessor is the owner of both the leased building and the goodwill running on it. This means that the lessor owns the two essential elements of the business: the real estate and the goodwill.

2. Lease covering both elements :

The lease contract covers both the building and the goodwill, which contractually binds these two elements.

3. Compensation due to the tenant :

At the end of the lease, if the tenant vacates the premises, the lessor must pay an indemnity to the tenant. This indemnity is linked to any material improvements the lessee has made to the leased premises.

4. Capital gain or rental value :

The indemnity corresponds to the profit that the lessor can derive from the increase in value of the business or the rental value of the building. This increase in value results from material improvements made by the tenant with the express agreement of the landlord.

5. Express agreement of the landlord :

For this indemnity to be payable, the material improvements must have been made with the express agreement of the landlord.

In short, this article protects tenants who have added value to the business or the rental value of the building through improvements, by guaranteeing them compensation from the landlord at the end of the lease. The purpose of this provision is to prevent the lessor from benefiting from an increase in the value of the property or business without any compensation for the lessee who carried out the work.

Feel free to ask us any questions you may have, free of charge, using the contact form t the bottom of the page.