Right of option and return of premises

The right of option may be particularly useful in the event of renewal of the commercial lease. Indeed, the tenant may, during the procedure of rent fixing and after exercising his right of option, return the premises quickly: 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 commercial lease status which allows both the lessor and the lessee, after having initiated the process of renewing the lease, to evade it.

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

“Penduring the duration of the proceedings relating to fixing 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, except for an account 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 will have to pay to his tenant, a 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 of 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:

« This is a matter which has been under exami-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 compensation is, as such, subject to the biennial prescription enacted by Article L. 145-60 of this code ” (Cass. rd 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, until the day he is informed of the exercise by the tenant of his right of option, on Statute of limitations runs only from that date.

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

Therefore, the action for determination of the statutory occupancy allowance is prescribed by two years from the date of the exercise of the right of option, while that in fixing of statutory occupancy allowance is prescribed for five years.

Common Law Occupation Allowance and Statutory Occupation Allowance

It should also be recalled that the ordinary occupancy allowance is fixed under Article 1240 of the Civil Code and is, in theory, higher than statutory occupancy allowance, since this compensation under ordinary law 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 tenant becomes liable for a Occupancy Allowance, equal to the rental value, which retroactively replaces the rent due, from the expiry date of the lease from which the lessor had first accepted the principle of renewal (Cass. rd civ., 27 February 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 remembered 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.

This can avoid waiting to give time off for triennial deadlines.

This right of option can be particularly useful within the framework of the term of the commercial lease!