Termination of a commercial lease at the landlord's initiative: choosing between the three exit routes

A tenant stops paying rent, lets the premises deteriorate or abandons the operation of the business. The landlord, whether an institutional investor or the owner of an income-producing asset, must then choose between exit routes that do not have the same timetable, the same cost or the same risk of failure. Choosing the wrong one means losing eighteen months, paying an eviction indemnity (indemnité d'éviction) that was meant to be avoided, or having the stay of individual proceedings raised against it the day after an opening judgment. This guide compares the three mechanisms by which a landlord can end a commercial lease (bail commercial), the termination clause (clause résolutoire), judicial termination and refusal of renewal on serious and legitimate grounds, against four operational criteria: timing, cost, risk of failure and reversibility. It then deals with the tenant's move into collective insolvency proceedings as the factor that determines the choice, and incorporates the rewriting of Article L. 145-41 of the French Commercial Code by Law No. 2026-403 of 26 May 2026.

Three mechanisms, three legal regimes not to be confused

The most frequent confusion is to group under the same word, "termination", three operations of which only two end the lease while it is running.

The termination clause: termination by operation of law, but under judicial supervision

The termination clause is the contractual route. The lease provides that, failing performance of a specified obligation (payment of rent or service charges, taking out insurance, compliance with the permitted use), the lease will be terminated by operation of law. The commercial lease statute strictly regulates this mechanism. Article L. 145-41 of the French Commercial Code requires a prior payment order (commandement):

Any clause included in the lease providing for termination by operation of law takes effect only one month after an order that has remained without effect. The order must, on pain of nullity, state this period.

Two practical consequences follow. First, the clause applies only to the breaches it expressly covers: a termination clause in a commercial lease drafted solely for non-payment of rent does not allow a failure to maintain the premises to be penalised. Second, the payment order is a formal act, and any irregularity in it ruins the whole procedure and requires starting again. The mandatory contents of this act, the calculation of the one-month period and the grounds for neutralisation are analysed in our article on the payment order invoking the termination clause.

The reform of 26 May 2026 tightened the conditions for judicial suspension. Judges seised of an application made in the forms and conditions of Article 1343-5 of the French Civil Code may, by granting time to pay, suspend the operation and effects of termination clauses, for as long as termination has not been recorded or ordered by a decision that has acquired the force of res judicata. But the provision now adds that the grant of time to pay and the suspension of the effects of the termination clause for non-payment of rent are, moreover, conditional on the tenant's ability to pay the rent debt and on the resumption of full payment of the current rent before the date of the first hearing. These provisions apply to applications for suspension made from the entry into force of the law, that is, 28 May 2026.

The change is strategic for the landlord. Suspension is no longer a reflex favour granted to a tenant who promises to recover: it requires demonstrated ability to pay and an actual resumption of the current rent before the first hearing. The landlord must build its case on that ground, documenting the payments received after the payment order.

Judicial termination: breach that is sufficiently serious, put before the judge

Judicial termination of a commercial lease rests on the general law of contract. Article 1224 of the French Civil Code states that termination results either from the application of a termination clause or, in the event of a sufficiently serious breach, from notification by the creditor to the debtor or from a court decision. Article 1227 adds that termination may, in any event, be sought from the courts. Article 1741, specific to leases, provides that a lease is terminated by the loss of the thing let and by the respective failure of the landlord and the tenant to perform their undertakings.

This route remains open even where there is a termination clause: Article 1227 says so "in any event". It is indispensable where the breach is not covered by the clause, where the payment order has been annulled, or where the landlord prefers a debate on the merits about the seriousness of the tenant's conduct to a formalistic dispute over the regularity of an act.

Its price is uncertainty. The judge assesses whether the breach is sufficiently serious to justify termination. That assessment is a matter for the judge's sole discretion and is decided case by case: a rent debt cleared during the proceedings, an isolated breach of the permitted use, or a failure to maintain that has been partly remedied may lead to the claim being dismissed.

Notice on serious and legitimate grounds: a refusal of renewal, not an early exit

Notice on serious and legitimate grounds is not a third way of terminating a lease while it is running. It is a refusal of renewal without an eviction indemnity, provided for in 1° of I of Article L. 145-17 of the French Commercial Code. It can be served only at the expiry of the lease or, during tacit extension, in the forms and within the time limits of Article L. 145-9.

Article L. 145-9 requires notice to be given six months in advance and, during tacit extension, for the last day of the calendar quarter. Since Law No. 2015-990 of 6 August 2015, the provision is clear: notice must be given by extrajudicial act. Any service by registered letter is ineffective. The notice must also, on pain of nullity, state the grounds on which it is given and indicate that a tenant who wishes either to challenge the notice or to claim payment of an eviction indemnity must bring the matter before the court before the expiry of a period of two years from the date for which the notice was given.

A preliminary formality specific to serious and legitimate grounds applies in addition. Where the ground is the non-performance of an obligation or the cessation, without serious and legitimate reason, of the operation of the business, the tenant's breach may be relied on only if it has continued or been repeated more than one month after the landlord has given formal notice to put an end to it. That formal notice must, on pain of nullity, be served by extrajudicial act, state the ground relied on and reproduce the terms of that paragraph.

The trap is twofold: a landlord who serves the formal notice without reproducing the paragraph loses the benefit of the ground; a landlord who serves notice before the one-month period has expired, or when the tenant has ended the breach, is exposed to owing the eviction indemnity.

The timing criterion: when is the asset released

The termination clause is the fastest route. The clock starts running on service of the payment order, and the clause takes effect one month later if the order has remained without effect. It then remains to have the acquisition of the clause recorded by a court and to obtain eviction, which requires an application to the judge. The actual duration depends on hearing lead times and on whether or not the tenant applies for suspension, variables that no provision fixes.

Judicial termination involves a debate on the merits, with an exchange of submissions and, where applicable, an appeal. The landlord must think in quarters, not weeks. It offers no certain date of release.

Notice is the longest route, by construction. It takes effect only at the expiry of the lease or, during tacit extension, at the end of a calendar quarter, at least six months after it is served. If the tenant challenges the serious and legitimate grounds, litigation begins and may last until all remedies are exhausted, bearing in mind that the tenant has two years from the date for which notice was given to bring the matter before the court. Throughout that period, the tenant remains in the premises.

Remaining in the premises is in fact a right where the indemnity is due. Article L. 145-28 states that no tenant who may claim an eviction indemnity can be compelled to leave the premises before having received it, and that until payment of that indemnity the tenant is entitled to remain in the premises on the terms and conditions of the expired lease, the occupation indemnity being determined in accordance with sections 6 and 7 of the chapter.

The cost and reversibility criteria

Cost sets the first two routes radically apart from the third. The termination clause and judicial termination penalise a breach: no indemnity is owed to the evicted tenant. Notice works on the opposite logic. Article L. 145-14 lays down the principle: the landlord may refuse renewal of the lease but must, except in the cases provided for in Articles L. 145-17 et seq., pay the evicted tenant a so-called eviction indemnity equal to the loss caused by the failure to renew, comprising in particular the market value of the business goodwill (fonds de commerce) determined according to the customs of the trade, increased where applicable by the normal costs of removal and reinstallation and by the transfer costs and duties payable for a business of the same value, unless the owner proves a lesser loss.

Notice on serious and legitimate grounds is therefore a gamble: if the ground is rejected, the refusal of renewal stands but becomes indemnity-bearing. The financial exposure moves from zero to the market value of the business.

This is precisely where reversibility comes in, which exists only for the notice route. Article L. 145-58 gives the owner a right of withdrawal (droit de repentir): until the expiry of a period of fifteen days from the date on which the decision becomes final, the owner may avoid paying the indemnity, at the cost of bearing the costs of the proceedings and consenting to renewal of the lease. This right is subject to two conditions: it can be exercised only so long as the tenant is still in the premises and has not already let or bought another property for its reinstallation. The regime of withdrawal, the conditions for exercising it and the choice between paying and depositing the indemnity are set out in our article on the landlord's right of withdrawal.

Withdrawal is therefore a safety valve, not a guarantee. A tenant that has secured replacement premises during the proceedings neutralises its exercise. A landlord that serves notice on serious and legitimate grounds must take into account from the outset that the exit may close on an imposed renewal, together with the costs of the proceedings.

Conversely, the termination clause and judicial termination are irreversible once termination has become final. A landlord who only wished to obtain payment and not release of the premises must therefore weigh the risk of vacancy and loss of rental value of the asset before serving the payment order.

The risk of failure criterion: where each route breaks down

Three distinct weaknesses, calling for three different checks of the file.

• The termination clause fails first on form: a clause that does not cover the obligation relied on, a payment order omitting the one-month period, an erroneous description of the sums due. It fails next on judicial suspension, now conditional, since 28 May 2026, on the tenant's ability to pay the debt and on the resumption of full payment of the current rent before the first hearing.
• Judicial termination fails on the merits: the judge does not find a sufficiently serious breach within the meaning of Article 1224 of the French Civil Code. Assessment of that seriousness is a matter for the judge and depends on the scale, persistence and any remedying of the breach.
• Notice on serious and legitimate grounds fails on the procedural chain: no formal notice by extrajudicial act reproducing the terms of the paragraph, breach ended within the month, notice without stated grounds or not mentioning the two-year period under Article L. 145-9.

A common constraint applies in addition. Article L. 145-60 provides that all actions brought under this chapter are time-barred after two years. The chronology is not a comfort, it is a calendar of time bars.

Finally, freedom of contract is limited. Article L. 145-15, in the version resulting from Law No. 2026-403 of 26 May 2026, deems unwritten, whatever their form, clauses, stipulations and arrangements which have the effect of defeating the right of renewal or the provisions of Articles L. 145-4, L. 145-32-1, L. 145-37 to L. 145-41, the first paragraph of Article L. 145-42 and Articles L. 145-47 to L. 145-54. No lease can therefore remove the prior payment order or the judge's power of suspension. In a related area, Article L. 145-42 temporarily neutralises clauses providing for termination by operation of law on cessation of activity for the time needed to carry out the alterations linked to a change of use (déspécialisation), within a limit of six months from the agreement or the court decision authorising it.

The move into collective proceedings: the factor that governs the choice

This is where the choice becomes fixed. As soon as the tenant shows signs of failing, the landlord no longer thinks only in terms of timing and cost, but in terms of the window for action before an opening judgment.

Principle: opening does not terminate the lease

Article L. 145-45 of the French Commercial Code states that reorganisation (redressement judiciaire) and compulsory liquidation (liquidation judiciaire) do not by operation of law result in termination of the lease of premises used for the debtor's industrial, commercial or craft activity, including premises forming part of those buildings and used as the home of the debtor or the debtor's family, any stipulation to the contrary being deemed unwritten. Since Law No. 2005-845 of 26 July 2005, the references to reorganisation also cover safeguard proceedings (sauvegarde). In the same direction, I of Article L. 622-13 provides that, notwithstanding any statutory provision or contractual clause, no indivisibility, termination or rescission of a contract in progress may result from the mere opening of safeguard proceedings.

A clause providing for termination by operation of law in the event of collective proceedings is therefore ineffective. It does not gain a single day.

The stay of proceedings neutralises the non-payment route

Article L. 622-21 provides that the opening judgment interrupts or bars any court action by all creditors whose claim is not referred to in I of Article L. 622-17 and seeking, on the one hand, an order against the debtor to pay a sum of money and, on the other, the termination of a contract for non-payment of a sum of money. III adds that time limits imposed on pain of forfeiture or termination of rights are accordingly interrupted.

Two operational readings. First, the landlord's action based on prior arrears is locked. Second, the one-month period running after the payment order, a period imposed on pain of termination of the tenant's rights, is interrupted: a payment order served a few days before opening will not automatically take effect during the proceedings. The question of the effects of a termination clause whose acquisition was already final before the opening judgment is a matter for case law and must be assessed case by case.

By contrast, the provision covers only termination for non-payment of a sum of money. For a breach of a different kind, failure to maintain the premises, irregular subletting, breach of the permitted use, the interaction with the stay of proceedings calls for prior verification of case law, the provision not expressly settling the situation.

Safeguard and reorganisation: the three-month waiting period

For rent relating to occupation after the opening judgment, Article L. 622-14 sets up a specific regime. Where the landlord applies for termination, or has termination recorded, of the lease for non-payment of that rent and those charges, it may act only after a period of three months from that judgment. And if the sums due are paid before the end of that period, there is no ground for termination. The same provision specifies that, notwithstanding any contrary clause, failure to operate during the observation period in one or more premises leased by the business does not result in termination of the lease. Continuous operation clauses are therefore ineffective during this phase.

The landlord does, however, have an active lever: III, 1° of Article L. 622-13 provides that a contract in progress is terminated by operation of law after a formal notice to decide whether to continue the contract, sent by the counterparty to the administrator and left unanswered for more than one month, the supervising judge (juge-commissaire) being able to set a shorter period or grant an extension which may not exceed two months.

Compulsory liquidation: a three-month period not to be missed

Article L. 641-12, 2° requires a landlord who applies for judicial termination, or has termination by operation of law recorded, for causes prior to the compulsory liquidation judgment, or, where that judgment was given after safeguard or reorganisation proceedings, prior to the opening judgment of the preceding proceedings, to bring its application within three months of publication of the compulsory liquidation judgment, if it has not already done so. For rent relating to later occupation, 3° refers to the conditions of Article L. 622-14.

This three-month period is a diary date. A landlord who lets it pass loses the benefit of the earlier grounds for termination. On the landlord's timetable and the ranking of its claim, see our analysis of the fate of the commercial lease on the tenant's compulsory liquidation.

The sale plan: the lease goes with the asset

The most underestimated risk is that of forced transfer. Article L. 642-7 provides that the judgment adopting the plan carries the transfer of the contracts determined by the court as necessary to the continuation of the business, and that those contracts must be performed on the terms in force on the day the proceedings were opened, notwithstanding any contrary clause. By derogation, any clause imposing on the assignee of a lease provisions making it jointly liable with the assignor is deemed unwritten. The court may also authorise the buyer to add to the activity provided for in the contract related or complementary activities, after having heard or duly summoned the landlord.

In other words: a landlord that has not acted before opening may find itself bound to a buyer it did not choose, on the economic terms of the original lease, without joint guarantee from the assignor, and with a wider permitted use. The landlord's hearing on the extension of activity is the only useful moment to defend the usability and coherence of the asset.

Decision matrix

What to decide, and when

The right choice comes down to three questions, asked in this order.

First question: is the breach financial and covered by the clause? If so, the termination clause is the default route, because it is the fastest and because the reform of 26 May 2026 has tightened the conditions for suspension in the landlord's favour. It demands flawless discipline in the acts.

Second question: is the tenant at risk of collective proceedings? If the risk is serious, the window for action closes on the opening judgment. Acting late means undergoing the three-month waiting period of Article L. 622-14, the interruption of time limits under Article L. 622-21, then the three-month time bar of Article L. 641-12 in the event of liquidation, and ultimately the transfer of the lease to the buyer under Article L. 642-7.

Third question: does the landlord genuinely want to recover the premises? If the aim is to take back the asset at expiry rather than to impose an immediate sanction, notice on serious and legitimate grounds offers a reversibility that the other two routes do not have, but at the price of exposure to the eviction indemnity under Article L. 145-14 if the ground is rejected.

Our position is clear: for an institutional landlord, a well-drafted and well-implemented termination clause remains the main steering instrument, judicial termination the fallback for non-financial breaches, and notice on serious and legitimate grounds an option to be reserved for situations where the expiry date is close and the file on the breach has been documented for several months. Before any service, have the lease clause, the chain of acts and the tenant's real financial situation audited: it is the tenant's position under Book VI of the French Commercial Code, not the seriousness of the breach, that most often determines the economic outcome of the procedure.

Frequently asked questions

Can a landlord terminate a commercial lease without a termination clause? Yes. Article 1227 of the French Civil Code provides that termination may, in any event, be sought from the courts, and Article 1741 of the same code provides that a lease is terminated by the respective failure of the landlord and the tenant to perform their undertakings. The landlord must then show a sufficiently serious breach within the meaning of Article 1224 of the French Civil Code. This route is longer and less certain than the termination clause, but it is not bound by any specific prior formality.

What are the new conditions for suspending the termination clause since the law of 26 May 2026? Article L. 145-41 of the French Commercial Code, in the version in force since 28 May 2026, makes the grant of time to pay and the suspension of the effects of the termination clause for non-payment of rent conditional on the tenant's ability to pay the rent debt and on the resumption of full payment of the current rent before the date of the first hearing. These conditions are added to the framework of Article 1343-5 of the French Civil Code, which limits postponement or staggering to two years. The provision applies to applications for suspension made from the entry into force of Law No. 2026-403.

Does notice on serious and legitimate grounds always avoid the eviction indemnity? Only if the ground is upheld. Article L. 145-17, I, 1° of the French Commercial Code allows the landlord to refuse renewal without indemnity if it shows serious and legitimate grounds against the outgoing tenant. If the ground is the non-performance of an obligation or the cessation, without serious and legitimate reason, of the operation of the business, the breach may be relied on only if it has continued or been repeated more than one month after a formal notice by extrajudicial act stating the ground and reproducing the terms of the paragraph. Failing that, the indemnity under Article L. 145-14 becomes payable again.

Does the opening of collective proceedings terminate the commercial lease? No. Article L. 145-45 of the French Commercial Code states that reorganisation and compulsory liquidation do not by operation of law result in termination of the lease of premises used for the debtor's activity, any stipulation to the contrary being deemed unwritten. I of Article L. 622-13 confirms that no termination may result from the mere opening of safeguard proceedings. Clauses providing for automatic termination on collective proceedings are therefore ineffective.

What time limit must the landlord observe to apply for termination after an opening judgment? In safeguard or reorganisation proceedings, for rent relating to occupation after the opening judgment, Article L. 622-14 prohibits acting before a period of three months from that judgment, and payment made before the end of the period prevents termination. In compulsory liquidation, for prior causes, Article L. 641-12, 2° requires the application to be brought within three months of publication of the liquidation judgment. These periods are calendar points to be entered as soon as the proceedings become known.

Can the landlord go back on a notice refusing renewal? Yes, on strict conditions. Article L. 145-58 of the French Commercial Code allows it, until the expiry of a period of fifteen days from the date on which the decision becomes final, to avoid paying the indemnity, at the cost of bearing the costs of the proceedings and consenting to renewal. This right of withdrawal can be exercised only so long as the tenant is still in the premises and has not already let or bought another property for its reinstallation. No equivalent reversibility exists for the termination clause or judicial termination.

Can the lease be transferred to a buyer without the landlord's consent? Yes, in the case of a sale plan. Article L. 642-7 of the French Commercial Code provides that the judgment adopting the plan carries the transfer of the contracts necessary to the continuation of the business, which must be performed on the terms in force on the day the proceedings were opened, notwithstanding any contrary clause, any clause imposing on the assignee joint liability with the assignor being deemed unwritten. The court may authorise the buyer to add related or complementary activities, after having heard or duly summoned the landlord. This is the main argument in favour of early action by the landlord.