The Nature of the Commercial Lease and the Activity Specified in the Lease
A lease does not become a commercial lease simply by virtue of the activity carried out on the premises. In other words, a cafe, hotel, restaurant, or nightclub cannot be operated without a 3-6-9 year commercial lease (except in exceptional cases such as a short-term lease). Furthermore, a cafe, hotel, restaurant, or nightclub cannot be operated in premises designated for professional or even residential use, even if the actual commercial activity is only carried out in a portion of the premises. Nor can it be operated in a portion of the commercial premises not specifically designated for that purpose.
The nature and activity of the commercial lease are crucial considerations when a cafe, hotel, or restaurant is to be operated in commercial premises.
Therefore, if a business owner wishes to operate a hot food service (e.g., a traditional restaurant or kebab shop), a karaoke bar, or a nightclub, but the lease or condominium regulations only allow for non-nuisance food service, they must:
- request permission from the landlord to add a new or additional activity if the lease prohibits odor or noise nuisances;
- request that the landlord call a general meeting of the condominium association to amend the condominium regulations if the regulations prevent such an activity (e.g., a basement cellar mentioned in the condominium regulations, but which the business owner has converted into a kitchen with an extraction system that has been in place for 10 years).
This applies even if the amendments have already been made.
In this situation, the landlord will very often request a rent increase, especially since the new activity will, in principle, generate new revenue for the business owner.
This is the case, for example, of the Café Hotel Restaurant Discotheque, which is undertaking significant renovations to expand its restaurant area by incorporating the back kitchen, resulting in a 20m² increase in floor space. The renovation also involves removing a partition wall in an office, converting it into a 5m² sales area, and reducing the size of the vestibule providing access to the restrooms used by customers, thus creating a 3m² bar area. These renovations, which free up space for additional seating and therefore an extra 28m² of sales area, require the landlord’s authorization. The landlord will also most often request a rent increase due to the partial change in the use of the premises.
If the café hotel restaurant discotheque operates activities not authorized by the lease, the landlord, or the condominium regulations, it risks…
1 – Legal action by the landlord, who will request:
- the enforcement of the termination clause, in other words, the eviction of the hotel, restaurant, or nightclub (CHRD): the landlord will most often request this through summary proceedings, meaning very quickly, and will have it officially recorded within two to three months on average (the average timeframe for a summary proceeding),
- damages and interest payable solely by the hotel, restaurant, or nightclub, in addition to the amount of rent remaining until the end of the commercial lease.
2 – Additional sanctions:
- The temporary or permanent administrative closure of the establishment by the prefect, intervention by SACEM (the French Society of Authors, Composers and Music Publishers) and SPRE (the French Society for the Collection of Reproduction Rights) in the event of music use, in order to recover royalties, which can amount to substantial sums, to which surcharges and penalties will be applied. Commercial Lease
3 – Potential Penalties:
- Heavy fines, or even closure of the establishment if an offense has been committed, particularly within the establishment.
Example: Customers leaving a nightclub or restaurant where other patrons were dancing participate in a fight causing injuries or deaths in the vicinity of the establishment, even though this activity is not permitted. A nightclub allowing people to dance without authorization is liable to these penalties. Similarly, simply allowing customers to dance in a restaurant at least twice can lead to the establishment being reclassified as a nightclub and subjecting it to the aforementioned risks.
Finally, just because another business is operating an unauthorized activity in the building does not mean that the café, hotel, restaurant, or nightclub can do the same.
For example: a kebab shop or a karaoke restaurant operates in the same building as your business, but odor or noise nuisances are prohibited by the lease or the condominium regulations: it is not possible to do the same thing, even if the landlord is the same.
Whether the landlord is the same or not, tolerance is not authorization, and a hotel, restaurant, or café (HORECA) that does the same thing without authorization is subject to the penalties mentioned above.
Finally, it is also important to be aware that, even if authorized by the building owner (or the owner of the business in the case of a lease-management agreement), or by the condominium association, a change of use or the addition of a new activity may not lead to the termination of certain administrative authorizations.
For example, the use of the premises is changed when the intended purpose, both inside and outside the premises, is altered. This is precisely the case when a restaurant becomes a shisha bar. Beyond the issues of smoke extraction and the installation of a ventilation supply and exhaust system, which require work and the landlord’s authorization, the landlord must also authorize the activity not stipulated in the lease. Similarly, the terraces cannot be used to serve shisha (Arghilés), under penalty of revoking the administrative permits for the terraces.
Another important point: if you change the activity stipulated in the lease, either partially or completely, without the landlord’s authorization and, if necessary, the condominium association’s authorization, it is impossible to take into account the revenue generated by this new activity. Indeed, this revenue is precarious and can be eliminated overnight by a procedure initiated by the landlord or the condominium association. Therefore, it cannot be considered by the buyer (or the tenant-manager) when the business is put up for sale (or leased out). Example: the unauthorized operation of a dance floor and karaoke area in a restaurant, generating significant alcohol consumption, as stipulated in the lease.
Finally, these issues also arise during lease renewal.
Therefore, concluding or renewing a commercial lease requires the assistance of a lawyer specializing in cafes, hotels, restaurants, and nightclubs. This lawyer will advise you from the outset on the most suitable clauses for your business and will be involved in drafting the lease, as well as in any amendments the hotel, restaurant, or café (HORECA) wishes to make during the lease term. They will also represent you in court on these matters.
The lawyer will help you avoid the pitfalls and risks mentioned above, which the business owner is often unaware of and which can lead to the total loss of the establishment’s revenue and, consequently, the business itself.