FRANCE Law and Practice Contributed by: Antoine Mercier, Myriam Mejdoubi and Gabriel Dalarun, DLA Piper France LLP
they will alter the premises’ character or legally permitted use. 6.14 Specific Regulations There is a specific law governing residential leas - es, which are normally granted for terms of three years and require a cash deposit corresponding to one month’s rent. Offices, retail spaces and hotels are usually let under commercial leases, with the level of rent determined with reference to the market value of similar premises. Professional premises are usually let under pro - fessional leases with a duration of six years. 6.15 Effect of the Tenant’s Insolvency Under an insolvency proceeding, the administra - tor appointed by the court can decide whether to terminate or continue the lease. This option is a public policy rule, and the lease cannot provide for an automatic termination when the tenant is subject to an insolvency proceeding. In the continuation of the lease, rents due for the period after the opening of the insolvency proceeding are to be paid on time, failing which the landlord can ask for the termination of the lease, as usual. The opening of an insolvency proceeding freez - es the triggering of the termination clause based on unpaid rent and charges, as long as a court has not acknowledged the effect of the termina - tion clause. 6.16 Forms of Security to Protect Against a Failure of the Tenant to Meet Its Obligations A security deposit usually equals one rent instal - ment excluding VAT, but can bear interest to the
benefit of the lessee for sums exceeding two rent terms, pursuant to Article L 145-40 of the French Civil Code. Cash security deposits are increasingly being replaced by bank guarantees and/or corporate guarantees (which overall guaranteed amount is not framed by the aforementioned Article L 145- 40 of the French Civil Code). 6.17 Right to Occupy After Termination or Expiry of a Lease Subject to certain exceptions, a tenant under a commercial lease has a right to renew the lease for a nine-year term and the landlord must pay compensation ( indemnité d’éviction ) to the ten - ant for a refusal to renew, unless the refusal is due to serious and legitimate reasons, or in cer - tain other circumstances provided for by law. 6.18 Right to Assign a Leasehold Interest The assignment of the leasehold right may be framed and/or prohibited by the lease’s stipula - tions and the assignment of the business which includes the leasehold right may not be contrac - tually prohibited (it may only be framed under certain specific conditions). Article L 145-31 of the French Commercial Code states that, unless the lease provides to the contrary, any subletting, whether of the whole or a part of the leased premises, is prohibited. Subletting authorisation is, however, typically granted to parent companies and/or third-party companies of equivalent financial health. 6.19 Right to Terminate a Lease The landlord under commercial leases may ter - minate the lease at the end of each three-year period based on certain limited grounds, such as:
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