Commercial Leases In France: The Law On The Simplification Of Economic Life

For over a year, and in an unstable political context, the draft law on the simplification of economic life has been trying to make its way to enactment.

Initially tabled in the Senate by a previous Government, the draft law aims to respond to the demands of small and medium-sized businesses. It is notably guided by the will to "ease" the cash flow of these retailers, and also by prior discussions held before the newly established National Retail Council, which led to a sector-wide agreement on 30 May 2024, the flagship measure of which is the introduction of a right to monthly rent payments.

The text has since been extensively rewritten throughout the parliamentary process. On 17 June 2025, it was adopted by the National Assembly and, given the differences with the text voted by the Senate, a Joint Committee (Commission Mixte Paritaire "CMP") was convened.

It was only at the beginning of 2026 that its work resumed and, on 14 and 15 April, a final text was voted. The Commercial Code will thus be further expanded.

To provide legal insight based on an analysis of the text and parliamentary proceedings, we have prepared for you a guide to the key measures.

Tenant’s right of first refusal

The special Senate committee, established for the purposes of the draft law on the simplification of economic life, proposed to clarify the scope of the tenant’s right of first refusal for premises used for commercial and artisanal purposes, introduced by the Pinel Law of 2014 and set out in Article L.145-46-1 of the Commercial Code.

Under current law, the tenant’s right of first refusal does not apply to all premises let under a commercial lease, but only to "commercial" and "artisanal" premises. However, neither the original 2014 text nor its version amended by Law No. 2022-217 of 21 February 2022 relating to differentiation, decentralisation, devolution and various measures to simplify local public action, clearly defines the concepts of "commercial premises" and "artisanal premises". This lack of legal definition has led to differing interpretations as to whether premises used for professional or industrial purposes are included.

Given this uncertainty and the consequences attached to the absence of the right of first refusal being exercised (nullity of the sale for five years), the Senate had included a definition of these activities. However, this provision was simply deleted from the text adopted by the National Assembly.

The CMP has finally decided: the definition is deemed necessary. A new paragraph will thus be inserted after Article L.145-46-1 of the Commercial Code, containing the following definitions:

• "A commercial premises within the meaning of the first paragraph means any premises intended primarily for the conduct of retail or wholesale trade or the provision of commercial services, including storage areas and adjoining spaces used for these activities or services, excluding premises used exclusively as offices and warehouses."
• "An artisanal premises within the meaning of the same first paragraph means any premises intended primarily for the conduct of an independent professional activity of production, transformation, repair or provision of services listed by decree of the Conseil d’État, including storage areas and adjoining spaces used for this activity, excluding warehouses."

We now hope that the decree of the Conseil d’État will not be long in coming, particularly to clarify the notion of "provision of services".

Right to monthly rent payment

This is the flagship measure of the draft law, the one that was the subject of an agreement between real estate and retail federations, and which seems to have unanimous support in the debates.

The aim here is to allow certain tenants of commercial leases to require their landlord to accept monthly rent payments. Identifying the tenants eligible for this new right was a laborious process. The adopted text now targets tenants of any "premises intended for the conduct of retail or wholesale trade or the provision of commercial or artisanal services". This measure is guided by a will to "ease" the cash flow of these retailers in view of the quarterly payment that is currently the norm.

This provision will be of public order policy, so that the parties cannot contractually derogate from it.

During committee discussions, the Senate decided to make the right to monthly rent payment conditional on the tenant’s full and timely payment of rent and charges. In other words, any unpaid rent would deprive the tenant of the right to monthly rent payments. This condition was removed in the National Assembly’s plenary session, on the grounds that the businesses most in need of help are those in arrears. The CMP has finally decided: the right to monthly rent payment is conditional on the absence of rent and charge arrears.

Tenants of so-called "monovalent" premises were initially excluded from the benefit of the right to monthly rent payment, but the National Assembly did not wish to maintain this exception, and the CMP followed suit.

Finally, the text provides for the immediate application of this right to monthly rent payment, including to existing leases.

So-called "tunnel" indexation clause

Also stemming from the sector-wide agreement of 30 May 2024, this measure provides for the recognition of the validity of so-called "tunnel" indexation clauses, i.e. clauses that would limit the effects of indexation both upwards and downwards.

The validity of such clauses is debated in legal literature and has never been decided by the Cour de cassation (i.e. French Supreme Court).

The risk of legal uncertainty surrounding these clauses — which benefit both parties as the landlord is protected against excessive decreases and the tenant against excessive increases — is now removed, provided that the upward and downward limitations are set in the same proportions.

Guarantees

The new measure, initially limited to the security deposit, has, surprisingly — and worryingly — been extended to all guarantees provided under a commercial lease.

On the cash deposit

Under current law, the parties are free to determine the amount of the security deposit paid to the landlord as security for the tenant’s proper performance of its contractual obligations. At most, Article L.145-40 of the Commercial Code provides for the payment of interest on any amount paid in excess of two rent instalments. This provision was, moreover, the main obstacle to monthly rent payments.

Again, motivated by concerns for the cash flow of retailers, the draft law aims to simply prohibit the payment of a security deposit exceeding one quarter’s rent, without the parties being able to derogate from this. However, this limitation would only benefit tenants of premises intended for "the conduct of retail or wholesale trade or the provision of commercial or artisanal services", i.e. tenants entitled to monthly rent payments.

The wording here is subtle, as it refers to a quarter’s rent and not an instalment, allowing this limitation to be combined with the right to monthly payments. The legislator specifies that the sums thus held do not bear interest for the tenant (the security deposit may therefore correspond to a quarter’s rent even though the rent is paid monthly and the amount held thus exceeds two instalments).

Furthermore, the draft seeks to address a second concern regarding the security deposit, namely the absence of a deadline for its return. Accordingly, the text provides (i) for the automatic transfer to the purchaser of the leased premises (new landlord) of the obligation to return to the tenant the sums paid as a guarantee (this is usually dealt with contractually in leases and in sale deeds) and (ii) an obligation to return said sums within three months of the return of the keys (without prejudice to deduction of any "amounts still owed to the landlord and amounts for which the landlord may be liable in place of the tenant, provided they are duly justified"). Will this wording allow landlords to retain part of the security deposit to cover any subsequent service charge settlement?

On additional guarantees

This is undoubtedly the real bombshell dropped by the deputies and more or less taken up by the CMP parliamentarians.

Indeed, the measure relating to the limitation of the security deposit amount was extended by the special committee of the National Assembly, and then by the National Assembly itself, to all sums "paid as a guarantee", "whether paid or provided by third parties".

While the CMP deleted this addition, it reintroduced it in a new form. The new Article L.145-40 of the Commercial Code will now provide that "Sums paid as a guarantee by the tenant of a premises referred to in Article L. 145 32 1 [i.e. tenants of premises intended for 'the conduct of retail or wholesale trade or the provision of commercial or artisanal services'] may not exceed the amount of rent due for one quarter. The same applies to the value of goods, securities, undertakings and guarantees of any kind required to ensure the proper performance of the lease contract."

In practice, the level of guarantees required by landlords depends on the financial strength of prospective tenants. While current law does not prohibit a cash security deposit in excess of one quarter’s rent, in practice, due to the payment of interest, few landlords go beyond this. However, it is quite common for the landlord to request additional guarantees, such as a surety or first demand guarantee, the amount of which may exceed — alone or in addition to the security deposit — one quarter’s rent.

It is precisely this accumulation that is targeted by the adopted measure.

Initially, this measure was to apply immediately to all existing leases and would have required landlords to return "excess amounts" or "waive guarantees covering an excess amount" within six months.

The CMP did not retain this immediate application but deferred it: the obligation to return and/or waive guarantees will apply in the event of a change of ownership of the premises. Henceforth, in the event of a transfer of ownership of the premises, whether for consideration or free of charge, such transfer will "automatically render void the guarantees of any kind referred to in the second paragraph of this article" (i.e. the paragraph limiting the guarantees of tenants of premises intended for "the conduct of retail or wholesale trade or the provision of commercial or artisanal services" to one quarter’s rent).

Is it not said that the road to hell is paved with good intentions? By seeking to protect tenants too much, do we not risk excluding the most vulnerable, those whom landlords will reject due to insufficient financial strength?

This measure, which is already causing controversy, is incorporated into Article L.145-40 of the Commercial Code. The problem is that, while this limitation targets the guarantees "mentioned in the second paragraph of this article", the text can be interpreted in two ways: (i) either the guarantees mentioned are those that cannot be required from tenants of premises intended for "the conduct of retail or wholesale trade or the provision of commercial or artisanal services", in which case only the leases of such tenants will be subject to the voiding of excess guarantees (which is the logical consequence); (ii) or it is interpreted as a stand-alone measure and could therefore apply to all commercial leases, far beyond the intention of the text to protect small retailers and artisans.

The first interpretation seems to us to reflect the legislator’s intention as it emerges from the parliamentary debates. The initial wording of this provision comes from an amendment tabled in the special committee of the National Assembly, justified as follows: "since rents are paid monthly, a guarantee of three months is sufficient to cover the risk of non-payment" and "maintaining the possibility of combining several types of guarantees would result in over-protection of the landlord to the detriment of the tenant".

Finally, let us recall that the Government and the rapporteur of the special committee expressed their opposition to the inclusion of such a provision, considering that maintaining it would "break the balance reached between landlords and retailers" at the end of the sector-wide agreement of 30 May 2024.

Tenant’s difficulties

The sector-wide agreement of 30 May 2024, which underpins the legitimacy of Articles 24A, 24 and 24 bis of the initial draft law, provided that "in return for the possibility of monthly payment of quarterly rent instalments, the signatory parties recognise the need to facilitate the recovery of unpaid rents, in particular by limiting the continued occupation of premises by defaulting tenants, which increases their debts. The signatories therefore recognise that it is legitimate and desirable to establish and generalise the following practices:

• making the granting of payment deadlines by a judge conditional on the tenant’s ability to pay the rent debt in question and on the resumption of full payment of current rents and charges at the date of the hearing;
• limiting to two months the period for the liquidator to return the keys to the landlord in the event of judicial liquidation."

This reflects what the parties to the agreement considered to be a balanced overall agreement.

Payment schedules and effects of the termination clause

The Senate included Article 24 bis in the draft law to specify that the tenant cannot benefit from a payment deadline or suspension of the termination clause if they are unable to pay their arrears. The provision is also intended to be the commercial counterpart of what was adopted for residential leases under Law No. 2023-668 of 27 July 2023.

However, the National Assembly deleted the entire article, arguing, in particular, the "explosion of bankruptcies in local retail" and preferring to leave it to the courts to assess the situation of tenants in difficulty.

The provision is, however, reinstated in the final text of the law under Article L.145-41 of the Commercial Code.

Judicial liquidation

This time, it was the special committee of the National Assembly that introduced a deadline for the return of premises by the judicial liquidator who had terminated the commercial lease, in line with the aforementioned sector-wide agreement. The measure thus required the liquidator to return the premises, empty of any occupation, furniture or goods, within two months of the judgment opening the judicial liquidation, so as to allow landlords to re-let the commercial premises.

This measure was not unanimously supported, mainly due to technical issues, particularly where the court decided to temporarily maintain the activity, or in the event of an appeal against the judgment opening the judicial liquidation. It was partly on this basis that an amendment was tabled, stating that "While the intention to facilitate the release of premises to support the economic activity of landlords is understandable, the adopted provisions present legal and practical difficulties that could have unintended consequences" and that "in a judicial liquidation, the liquidator generally tries to sell the business in order to maximise the value of the assets for the benefit of creditors. This process involves several stages that make it impossible to comply with a deadline as short as two months. Maintaining this obligation could block any sale in this context."

The National Assembly ultimately did not retain this proposal from its special committee. The CMP confirmed its removal.

Property tax

This is the second bombshell initially inserted into the draft by the National Assembly.

By an amendment during the National Assembly’s plenary session, the deputies voted to prohibit landlords from passing on property tax to tenants, against the advice of the government and the rapporteur. The amendment was justified as a means of protecting small businesses.

The debate was temporarily closed by the CMP, which deleted this provision. Temporarily only, because a separate bill was tabled last January to cap the amount of property tax that can be passed on to the tenant at 50%. To be continued.

In any event, this measure, which would alter the economic balance of leases, would surely, if adopted in the future, justify an increase in rental values to incorporate this cost into the rent offered by landlords

Referral to the Constitutional Council

Finally, it should be noted that a referral to the Constitutional Council was filed on 21 April 2026 by more than sixty members of parliament, pursuant to Article 61 of the Constitution. Although the provisions targeted by the referral do not appear, in principle, to concern commercial leases, it will nevertheless be necessary to monitor the outcome of this procedure in order to determine whether all or part of the new law will be struck down by the institution.

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.