FRANCE Law and Practice Contributed by: Antoine Mercier, Myriam Mejdoubi and Gabriel Dalarun, DLA Piper France LLP
6.8 Costs Payable by a Tenant at the Start of a Lease There are no specific costs to be paid by the ten - ant at the start of a lease, although the tenant will often transfer the amount of the rental deposit, if any, on the execution date of the lease. 6.9 Payment of Maintenance and Repair If there is more than one tenant, the expenses are shared according to the terms of the relevant leases and on a pro rata basis. 6.10 Payment of Utilities and Telecommunications See 6.9 Payment of Maintenance and Repair. 6.11 Insurance Issues The landlord must take out an insurance policy to cover the risks associated with the premises occupied under a commercial lease, while the tenant must insure the risks associated with its own activities on the premises. The insurance policy usually covers the risk of fire, explosion and theft. However, it is common to include an express clause in the lease agree - ment whereby the tenant reimburses the owner for the cost of insuring the premises as part of the service charges. 6.12 Restrictions on the Use of Real Estate Leases usually specify the permitted use, which is narrowly defined, and any changes require the landlord’s consent and/or administrative permis - sions. 6.13 Tenant’s Ability to Alter and Improve Real Estate Any works must have the prior consent of the landlord if they will have an impact on the struc - ture of the property (walls, floors and roof) or if
Parties may also agree on an automatic yearly rent revision. The index chosen by the parties must have some connection with the activity carried out by one of the parties or with the pur - pose of the lease. Variable rents, although permitted by law, are not common in leases for offices, but are a common The parties may freely determine the rent of a renewed lease. The landlord will typically aim to fix the new rent of the lease at the then-appli - cable rental value of the premises (such rental value may be capped in certain specific cases). If the parties disagree on the rent of the renewed lease, whether or not the rent cap is excluded, either party may apply to the French court so as to have the current rental value of the rented premises assessed. In most cases, the judge appoints a judicial expert with the duty to assess the then-current rental value of the rented premises and, as the case may be, to determine whether rent capping is applicable. 6.7 Payment of VAT The landlord can elect to subject the rent to VAT (at 20%) under certain conditions. VAT can be recovered (totally or partially) by the tenant if it uses the building for the purposes of a VAT-able business. feature of hotel and retail leases. 6.6 Determination of New Rent If VAT does not apply to the rent, then CRL ( Con- tribution sur les Revenus Locatifs – contribution from rental revenues) does, at a rate of 2.5%. CRL is not recoverable but is a tax-deductible expense.
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