Right of option and return of premises

The right of option can be particularly useful in the event of renewal of the commercial lease. Indeed, the tenant can, during the rent fixing procedure and after having exercised his right of option, return the premises quickly: there is no need to wait for the three-year deadline. 

The right of option in the context of a commercial lease renewal procedure
 

The right of option is a specific mechanism of the status of commercial leases that allows both the lessor and the lessee, after having initiated the process of renewal of the lease, to evade it. 

Article L. 145-57 of the Commercial Code provides that:

 “For the duration of the proceedings relating to the fixing of the price of the revised or renewed lease, the lessee is required to continue to pay the rents due at the old price or, where applicable, at the price which may, in any event, be fixed provisionally by the court seised, unless an account is to be made between the lessor and the lessee, after final fixing of the price of the rent. 

Within a period of one month following the service of the final decision, the parties draw up a new lease under the conditions laid down in court, unless the lessee waives the renewal or the lessor refuses it, at the expense of the party who has expressed his disagreement to bear all the costs. Failing by the lessor to have sent within this period for the signature of the lessee the draft lease in accordance with the aforementioned decision or, in the absence of agreement within the month of this sending, the order or judgment fixing the price or the conditions of the new lease is worth lease “.

Consequently, if this right of option is exercised by the lessor, he must pay his lessee an eviction indemnity.  

If it is the tenant who exercises this right of option, he must return the premises. 

But what if the tenant does not return the premises following the service of his right of option? 

A judgment of the Court of Cassation was delivered on 16 March 2023, answering this question, highlighting the consequences arising from the exercise of this right of option, while specifying the applicable statute of limitations. 

After recalling that under the terms of Article L. 145-60 of the Commercial Code, “All actions exercised under this chapter are prescribed by two years”, it ruled as follows:

 “It follows from these texts that the occupancy allowance, due by a tenant for the period preceding the exercise of his right of option, finds its origin in the application of Article L. 145-57 of the Commercial Code and the action for payment of this allowance is, as such, subject to the biennial limitation period enacted by Article L. 145-60 of this code” (Cass. 3rd civ., 5 February 2003, Appeal No. 01-16.882, Civil Bulletin 2003, III, No. 26). 

It follows that the landlord is not aware of the facts allowing him to act in payment of this compensation, which retroactively replaces the rent due on the basis of Article L. 145-57 of the same code, that from the day he is informed of the exercise by the tenant of his right of option, the biennial limitation period runs only from this date. 

In addition, when the tenant remains on the premises after the exercise of his right of option, he is liable for an occupancy allowance under ordinary law subject to the five-year limitation period, the period of which runs from the same day “. 

Therefore, the action for fixing the statutory occupancy allowance is prescribed by two years from the date of exercise of the right of option, while the action for fixing the statutory occupancy allowance is prescribed by five years. 
Common Law Occupation

Allowance and Statutory Occupation Allowance
 

It should also be recalled that the ordinary law occupancy allowance is fixed under Article 1240 of the Civil Code and is, in theory, higher than the statutory occupancy allowance, since this ordinary law allowance may also allow the lessor to be compensated for the damage suffered by an occupation without right or title of the lessee. 

In a recent decision, the High Court also recalled that it follows from Articles L. 145-28, paragraph 1 and L. 145-57, paragraph 2, of the Commercial Code that when the lessor exercises his right of option, the lessee becomes liable for an occupancy allowance, equal to the rental value, which retroactively replaces the rent due, from the expiry date of the lease for which the lessor had first accepted the principle of renewal (Cass. 3rd civ., February 27, 2025, No. 23-18.219). 

It should also be noted that this occupancy allowance is set at the rental value, without capping or smoothing. 

The amount owed to the lessor by the lessee for the occupation of the premises may therefore be particularly large. 

Finally, it should be recalled that this right of option can be useful to the tenant, when at the end of his lease, he wonders whether or not he intends to renew his lease. 

Even in the event of renewal of the commercial lease and under certain conditions, the tenant may thus, during the rent fixing procedure and after exercising his right of option, return the premises quickly.