Precarious occupation

agreement (precarious lease):

The occupancy agreement is a creation of the practice. Until the law n°2014-626 of June 18, 2014 relating to crafts, commerce and very small enterprises, there was no legal or regulatory definition of the precarious occupation agreement. The law of June 18, 2014 introduced into the Commercial Code an article L.145-5-1, which provides that “is not subject to this chapter (chapter V of title IV of book I of the Commercial Code on the commercial lease) the precarious occupation agreement which is characterized, whatever its duration, by the fact that the occupation of the premises is authorized only because of special circumstances beyond the sole control of the parties”.

The precarious occupation agreement assumes that two conditions are met:

• the fragility of the occupant’s right
  
• the existence of a legitimate reason for precariousness, independent of the sole will of the parties.
   

The fragility of the right of occupancy arises from the clauses allowing either party to terminate the contract at any time. It may also result from the characteristics of the surface made available, and in particular from the impossibility of qualifying them as “premises” within the meaning of Article L.145-1 of the Commercial Code. Thus, for example, a location located within the walls of a department store, with an approximate surface area, whose opening and closing hours are determined at the discretion of the owner, cannot be the subject of a commercial lease, but of a precarious occupancy agreement.

The criterion of the low remuneration of the owner (usually called “royalty” and not “rent”) is often retained by case law to characterize the precarious occupation agreement. The low amount of the royalty (or even the outright absence of remuneration) is in a way the counterpart of the fragility of the occupant’s right of enjoyment.

The precariousness of the right of occupation must be justified by “special circumstances beyond the sole control of the parties”. Case law provides many examples:

•  
  agreement entered into pending expropriation or relating to a building to be demolished;
•  agreement concluded on premises that the owner himself was to use after the completion of development work;
• etc…

The precarious occupancy agreement is not subject to the common law of the lease, nor to the status of commercial leases, nor to that of the derogatory lease.

The occupant is not entitled to the renewal of the agreement upon its expiry, and is not entitled to any eviction compensation.

However, when the precarious occupation agreement has been concluded for the sole purpose of defeating the legal provisions, and it thus constitutes a disguised commercial lease, the judges may pronounce their requalification as a commercial lease.