Real Estate Insights November 2024

"Pinel" Law

Case law clarifies tenant’s legal right of pre-emption and rental charges rebilling

"Pinel" law right of pre-emption

The French Supreme Court (Cour de cassation) has clarified the scope of the “Pinel” Law right of pre-emption, by restrictively interpreting the provisions of article L. 145-46-1 of the French Commercial Code. Under the terms of this article, commercial tenants benefit from a right of pre-emption only in the event that “the owner of premises used for commercial or craft purposes is considering selling them”.

• Industrial premises are not commercial or craft premises: for the first time, the French Supreme Court has excluded industrial premises from the “Pinel” Law right of pre-emption, and defined the notion of industrial premises. According to this decision, industrial premises are defined as “any premises used primarily for the exercise of an activity that directly contributes to the manufacture or transformation of tangible movable assets, and for which the technical installations, materials and tools used play a predominant role”.

Nota Bene: as part of the “Economy Simplification” bill currently under discussion, it is proposed to define the notion of commercial or craft premises; the (provisional) text of the bill provides the following definition: “premises for commercial use within the meaning of the present article are understood to be any premises fitted out, on a principal basis, for the physical reception of clients with a view to the on-site sale of goods or the on-site provision of services. For the purposes of this article, premises used for handcraft purposes means any premises used primarily for production, processing or repair activities, as well as for the sale of goods and services resulting from these activities, where customers are received on a regular basis.”

• The seller must not be forced to sell: the French Supreme Court has ruled that the “Pinel” Law right of pre-emption cannot be applied in the case of sales made under judicial authority (judicial sale on seizure of property, sale as part of a judicial liquidation). If a sale does indeed take place, it is not decided by the owner. In such cases, the owner cannot be deemed as “considering” selling its property within the meaning of article L. 145-46-1 of the French Commercial Code.

Rulings:

• Cass. 3rd civ, June 29, 2023, n°22-16.034 ;
• Cass. 3rd civ, February 15, 2023, n°21-16.475 ;
• Cass. 3rd civ. November 30, 2023, no. 22-17.505;

Chargeback and “Pinel” inventory

Article L. 145-40-2 of the French Commercial Code stipulates that “all leases must include a precise and restrictive inventory of the categories of charges, taxes and fees associated with the lease, including an indication of how they are to be apportioned between the lessor and the lessee”. Based on these provisions, the judges of the Versailles Court of Appeal ruled that the “Pinel” inventory lease’ appendix was the only way to allocate charges to the tenant.

This decision is noteworthy not only because it is rare for judges to rule on this issue, but also because of the surprising solution adopted.

In this case, the stipulations of the lease submitted to the Court of Appeal’ analysis, which nevertheless provided for the re-invoicing of charges, were deemed unlawful on the grounds that they “circumvented” the rule of article L. 145-40-2 of the French Commercial Code. According to the Versailles Court of Appeal, the “Pinel” inventory must necessarily constitute an appendix to the lease.

In our view, however, this solution is questionable, insofar as the Pinel law in no way requires the inventory referred to in article L. 145-40-2 to take the form of an appendix to the lease. Although the scope of this decision, as it concerns an isolated Court of Appeal ruling, can be put into perspective, it would be desirable for the French Supreme Court to take a position, given the legal uncertainty it is likely to engender.

Ruling: 

• CA Versailles, March 7, 2024, no. 22/05759

Contractual chargeback clauses

According to the principle defined to date by case law, a lessor may only re-invoice the lessee for an expense other than a so-called “rental” expense (major repairs excluded), if a clear and precise clause is stipulated in the lease. In three recent decisions, judges have had occasion to apply this rule rigorously.

In this case, the judges pointed out that, in the absence of an express mention, expenses relating to the repair of the roof (when such a repair cannot be assimilated to a “major repair” within the meaning of article 606 of the Civil Code), or those relating to dilapidation, could not be validly re-invoiced to the tenant.

In the event of a dispute with the tenant concerning the rebilling of charges, judges will strictly interpret the clauses of the lease. Indicative and non-limitative enumerations, or “catch all” clauses (e.g.: “the tenant shall be responsible for all necessary repairs”) will thus be considered insufficient to allow the lessor to re-invoice expenses other than those falling into the category of rental repairs.

Rulings:

• Cass. 3rd civ., March 16, 2023, n°21-25.107 ;
• CA Rouen, March 30, 2023, n°22/01253 ;
• CA Lyon, June 22, 2023, no. 22/03628;