Applicable As of November 2014, France Lists Which Charges May No Longer Be Imposed by Lessors to Lessees under French Commercial Leases

November 12, 2014

The Pinel Law (Law No. 2014-626 of June 18, 2014) makes mandatory to include within commercial lease agreements a specific inventory regarding taxes, fees, royalties and charges, as well as to clearly determine their allocation between the Lessor and the Lessee, thus putting an end to the contractual freedom of former commercial leases (New Article L. 145-40-2 of the French commercial Code). Furthermore, the law left it to a decree to determine the list of charges, taxes and fees that, because of their nature, may not be imposed to the Lessee.

This much awaited decree (Decree n°201-1317 of November 3, 2014) has been released today. The Decree confirms the abolition of the practice of "triple net" leases in France for offices or commercial shops. Indeed, from now onwards, for leases entered into or renewed on or after November 5, 2014, the following can no longer be charged to Lessees:

  • The expenses regarding major repairs according to Article 606 of the Civil Code ("grosses reparations") as well as the fees related to the execution of the major repairs;
  • Expenses for the purpose of addressing the obsolescence of the premises or the building in accordance with the regulations, when these works fall into the category of major repairs of Article 606;
  • Taxes (including the business tax (i.e. contribution économique territoriale)) for which the legal debtor is the Lessor; however, by way of exception, real estate tax (taxe foncière) as well as garbage tax and taxes linked to the use of the building by the Lessee or to a service benefiting to the Lessee, directly or indirectly (such as the annual tax on offices, VAT) can be charged to the Lessee;
  • The Lessor fees related to the management of the rents of the leased building; and 
  • In a property complex, expenses, taxes as well as the cost of works for vacant premises or due by other Lessees.

Gibson, Dunn & Crutcher LLP        

Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues.  Please contact the Gibson Dunn lawyer with whom you usually work or any of the following lawyers:

Jérôme Delaurière – Paris (+33 (0)1 56 43 13 00, jdelauriere@gibsondunn.com)
Jeffrey M. Trinklein - London and New York (+44 (0)20 7071 4180, +1 212-351-2344, jtrinklein@gibsondunn.com)
Nicholas Aleksander – London (+44 (0)20 7071 4232, naleksander@gibsondunn.com)
Hans Martin Schmid – Munich (+49 89 189 33 110, mschmid@gibsondunn.com) 

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