Subletting presumed to be irregular
On June 27, 2024, the Third Civil Chamber of the French Supreme Court (Cour de cassation) partially overturned a decision of the Rennes Court of Appeal of October 12, 2022, in a dispute between SCI Le Pont Thomas (lessor) and Modulobox (lessee) concerning allegedly irregular subletting.
Lessor alleging unauthorized subletting seeks rent adjustment
In 2006, SCI Le Pont Thomas leased commercial premises to Modulobox. Modulobox then signed contracts with third parties for “services and office space”. The lessor, alleging unauthorized subletting, requested an adjustment of the rent.
Classification of subleases by the Court of Appeal
The Rennes Court of Appeal reclassified the Modulobox contracts as subleases. It ruled that these contracts, which provided for permanent access to the offices for a consideration calculated on the basis of surface area, and included services such as maintenance and security, constituted subleases, entitling the lessor to readjust the rent.
Argument concerning services such as furnishings and maintenance
Modulobox argued that these contracts were not subleases, but agreements for the provision of services such as furnishing and maintenance, which could not therefore be assimilated to subleases. It argued that these services, essential to the agreements, rendered their classification as subleases inappropriate, thus preventing the lessor from requesting a rent readjustment.
The French Supreme Court qualifies office lease agreements with specific services
The Cour de cassation ruled that the contracts in question provided overall remuneration for both the provision of office space and the specific services provided. It ruled that these agreements could not be considered as subleases within the meaning of article L. 145-31 of the French Commercial Code. Consequently, it quashed the judgment on this point, overturning the Court of Appeal’s classification, and referred the case back to the Paris Court of Appeal.
Consequence: rejection of the lessor’s request for rent adjustment
This decision calls into question the lessor’s request for a rent adjustment, since the assimilation to subletting is ruled out. SCI Le Pont Thomas is also ordered to pay the costs of the proceedings and 3,000 euros to Modulobox under article 700 of the French Code of Civil Procedure.
Legal issues
This case highlights the complexity of distinguishing between subletting and providing services, with major consequences for lessors’ rights under commercial leases. Here, the Cour de cassation reaffirms that the intention and content of the services provided in the agreements can exclude the qualification of sublease, thus limiting lessors’ recourse to readjust rents in the case of mixed agreements.
Full text:
DECISION OF THE COUR DE CASSATION, THIRD CIVIL CHAMBER, JUNE 27, 2024
I. Société Le Pont Thomas, a société civile immobilière (non-trading property company) with its registered office at [Address 1], lodged appeal no. N 22-22.823 against a judgment handed down on October 12, 2022 by the Rennes Court of Appeal (5th Chamber), in a dispute with Société Modulobox, a société à responsabilité limitée (limited liability company) with its registered office at [Address 2], the defendant in the appeal.
II. Modulobox, a société à responsabilité limitée (limited liability company), lodged appeal no. S 22-24.046 against the same judgment in the dispute with Le Pont Thomas, a société civile immobilière (non-trading property company), the defendant in the appeal.
The plaintiff in appeal no. N 22-22.823 puts forward a plea in law in support of its appeal.
The plaintiff in appeal no. S 22-24.046 puts forward two grounds for cassation in support of its appeal.
The files have been sent to the Public Prosecutor.
On the report of Mrs. Aldigé, Conseiller référendaire, the observations of SCP Le Bret-Desaché, counsel for the company Modulobox, of SARL Meier-Bourdeau, Lécuyer et associés, counsel for the company Le Pont Thomas, and the opinion of Mrs. Compagnie, avocat général, after debates at the public hearing of May 14, 2024, in which were present Mrs. Teiller, President, Mrs. Aldigé, Conseiller référendaire rapporteur, Mr. Echappé, Conseiller de la magistrature, and Mr. Ménard. Echappé, Conseiller doyen, M. David, Mmes Grandjean, Grall, M. Bosse-Platière, Mme Proust, conseillers, Mme Schmitt, M. Baraké, Mmes Gallet, Davoine, MM. Pons, Choquet, conseillersréférendaires, et Mme Maréville, greffier de chambre,
the Third Civil Chamber of the Cour de Cassation, composed, pursuant to article R. 431-5 of the Code de l’Organisation Judiciaire, of the aforementioned president and councillors, having deliberated in accordance with the law, has delivered the following judgment;
Joinder
1. Appeals no. 22-24.046 and 22-22.823 are joined due to their related nature.
Facts and procedure
2. According to the judgment under appeal (Rennes, October 12, 2022), handed down on remand after cassation (3rd Civ., September 9, 2021, appeal no. 20-19.631), on July 27, 2006, the société civile immobilière Le Pont Thomas (the lessor) leased commercial premises to the company Modulobox (the lessee).
3. The lessee entered into contracts with third parties entitled “provision of services and office space”.
4. Alleging irregular subletting, the lessor summoned the lessee to readjust the principal rent.
Examination of the grounds
The first, third and fourth grounds of appeal and the fourth ground of appeal in appeal no. 22-24.046
5. Pursuant to article 1014, paragraph 2, of the Code of Civil Procedure, there is no need to issue a specially reasoned decision on these grounds, which are clearly not such as to result in cassation.
But on the second part of the first plea in law of the same appeal
13/11/2024 10:19 Cour de cassation, civil, Civil Division 3, June 27, 2024, 22-22.823 22-24.046, Published in the bulletin – Légifrance
Statement of grounds
6. The tenant criticizes the judgment for finding the existence of sublease agreements and, consequently, for upholding the landlady’s action for readjustment of the rent, on the grounds that “only a lease agreement can justify readjustment of the rent between the landlord and his lessee ; that for a sublease to exist, the contract must meet two cumulative conditions: firstly, it must relate solely to the provision of the premises or, at the very least, this provision must not be accompanied by significant additional services; and secondly, it must provide the principal lessee’s co-contracting party with continued enjoyment of the premises; an agreement to make space available to a third party by a commercial lessee, distinct from a sublease, providing for the payment of a price corresponding to enjoyment for a limited period and to services provided by the main lessee, relating to equipment, maintenance of the premises and control of reception and security, cannot be qualified as a sublease enabling the lessor to request readjustment of the main rent on the basis of article L. 145-31 of the French Commercial Code; that in the present case, Modulobox had argued in its pleadings and supported by evidence that the provision of fully-equipped premises with numerous services included in the price of the offices according to their surface area, such as furnishing and maintenance of the premises, heating, internet access, telephone, insurance, access to shared areas (refectory, kitchenette, meeting room, relaxation room, free self-service coffee machine, sanitary facilities), reception service, surveillance and security of the buildings could not be qualified as a sublease; that by claiming that the essential service of the contract with Modulobox is the provision of office space and not the supply of services such as maintenance, reception and security, insurance and wifi, which are merely ancillary to the supply of office space, when, on the contrary, the numerous services provided by the Modulobox company to equip and maintain the premises, as well as the control of reception and security services provided by the latter, constituted a necessary and indispensable condition and were such as to demonstrate that the leasing contracts entered into by the latter could not be reclassified as a sublease allowing for a readjustment of the rent, the Court of Appeal violated article 1709 of the French Civil Code, together with L. 145-31 of the French Commercial Code.
The Court’s response
Having regard to articles 1709 of the French Civil Code and L. 145-31, paragraph 3, of the French Commercial Code:
7. Under the terms of the first of these texts, the leasing of things is a contract by which one of the parties undertakes to allow the other to enjoy a thing for a certain period of time, and in return for a certain price which the latter undertakes to pay.
8. Under the second, when the sublease rent is higher than the main rental price, the owner has the right to demand an increase in the main rental price, the amount of which, in the absence of agreement between the parties, is determined in accordance with a procedure laid down by decree by the Conseil d’Etat, in application of the provisions of article L. 145-56 of the French Commercial Code.
9. Subletting, as defined in article L. 145-31 of the French Commercial Code, does not apply when the lessee makes the leased premises available to third parties in return for an overall fixed price, which covers both the provision of the premises and the specific services required by customers.
10. In order to qualify the lease as a sublease and uphold the claim for readjustment of the rent, the court noted that the contracts for the provision of office space to companies specifically mentioned the office number and surface area, that they provide for a financial consideration based on the surface area of the office and solely on the provision of services, that the companies have permanent access to their office, that they undertake to maintain it in a good state of repair and to lock it up, and that the duration of the contracts is fixed at one month but renewable by tacit agreement.
11. He concludes that the essential service of the contract is the provision of office space to third parties, exclusively and without any time limit, since the services provided, such as maintenance, reception, security, insurance and wifi, are merely incidental to the provision of equipped office space.
12. In so ruling, even though it was clear from its findings that the overall fixed fee paid for both the provision of equipped offices and the specific services sought by customers, the Court of Appeal, on grounds that failed to characterize sublease contracts within the meaning of article L. 145-31 of the French Commercial Code, violated the aforementioned texts.
And the first part of the second plea in law of the same appeal
Statement of grounds
13/11/2024 10:19 Cour de cassation, civil, Civil Division 3, June 27, 2024, 22-22.823 22-24.046, Published in the bulletin – Légifrance
13. The tenant criticizes the judgment for granting the request for readjustment of the principal rent and for setting the amount of the readjusted rent at a certain sum and for a certain period, whereas “the annulment of the first ground for annulment, having established the existence of sublease agreements for the property leased by SCI Le PontThomas to Modulobox, located in the Basses Forges business park in Noyal-sur-Vilaine, will entail the annulment of the second ground for annulment. Vilaine will, by way of consequence, pursuant to article 624 of the French Code of Civil Procedure, result in the judgment upholding SCI Pont Thomas’s request for an adjustment of the principal rent, and consequently setting the amount of the adjusted rent at 94,018, 15 euros excl. VAT per annum for the period from June 19, 2013 to December 31, 2016. ”
The Court’s response
Having regard to article 624 of the French Code of Civil Procedure:
14. According to this text, the cassation extends to all the provisions of the judgement overturned having a link of indivisibility or necessary dependence.
15. The annulment of the part of the judgment finding the existence of sublease contracts for the leased premises extends to the parts of the judgment granting the claim for readjustment of the principal rent and fixing the amount of the readjusted rent at a certain sum, which are linked to it by a necessary dependency link.
16. This annulment renders irrelevant the examination of the appeal in cassation no. 22-22.823 lodged by the lessor, who complains that the judgment set the amount of the readjusted rent at a certain sum.
FOR THESE REASONS, and with no need to rule on the other complaints of appeal no. 22-24.046, the Court :
REVERSE AND ANNUL, except insofar as it dismisses the claim that the action for readjustment of rent is time-barred and declares the action admissible, the judgment of the Rennes Court of Appeal of October 12, 2022, between the parties;
Restores the case and the parties to the status they were in prior to this judgment, except for these points, and refers them back to the Paris Court of Appeal;
Order Société Civile Immobilière Le Pont Thomas to pay the costs;
Pursuant to article 700 of the French Code of Civil Procedure, rejects the claims made by société civile immobilière LePont Thomas and orders it to pay société Modulobox the sum of 3,000 euros;
Orders that, at the request of the Public Prosecutor of the Cour de cassation, the present judgment shall be transmitted to be transcribed in the margin or following the partially quashed judgment.
Dont’ hesitate to ask your questions via the contact form below.
(0.00 out of 5)