Notice to terminate for sale: choosing between an occupied sale and vacant possession

The exit from a let residential asset is rarely decided on the price gap alone between vacant value and occupied value. It is decided on a timetable: six months of notice that cannot be shortened, two successive offers of sale to the tenant, and, if the tenant stays on, eviction proceedings whose length is measured in quarters. In the meantime, the landlord holds an asset that no longer produces rent and bears property tax, non-recoverable charges and, where applicable, the cost of financing. The choice between an occupied sale and prior vacant possession is therefore a choice between an immediate and certain discount and a deferred price gain that is probable but exposed to procedural risk. This article sets out the formal requirements of the notice to terminate for sale (congé pour vendre), the mechanism of the tenant's pre-emption right, the causes of blockage, and then proposes an economic decision framework.

Framing the choice in financial terms before framing it in legal terms

Two scenarios stand against each other. In the first, the asset is sold as it stands, with the lease running, to an investor: the lease is enforceable against the buyer provided it has a certain date (Article 1743 of the French Civil Code), no notice is required, and no statutory pre-emption right is opened to the tenant outside particular cases. The price includes an occupied discount. In the second, the landlord serves a notice to terminate for sale at the end of the lease, recovers possession of the dwelling, possibly restores it, and then markets it vacant, in a wider and better-financed market of owner-occupier buyers.

The comparison is relevant only if it includes four items on the vacant possession side: lost rent during the vacancy period, holding costs (property tax, non-recoverable co-ownership (copropriété) charges, non-occupying owner insurance, interim interest), the cost of restoration or bringing the property up to standard, and a probability of litigation. This last item is the one that arbitrage models most often underestimate. A tenant who challenges the formal validity of the notice, or who stays on after its expiry, delays the sale by a period that depends on the court timetable and not on the landlord's will.

Conversely, an occupied sale is not frictionless. The pool of buyers is narrower, bank financing for an occupied property follows other criteria, and the negotiation shifts to parameters that the seller controls poorly: the tenant's age, the level of the current rent, the energy rating of the dwelling.

The notice to terminate for sale: an act with strict formal requirements

The notice to terminate for sale is governed by Article 15 of Law No. 89-462 of 6 July 1989. It is not a simple letter of termination: it is a unilateral act that takes effect on receipt and that serves at once as notice and as an offer of sale, and any defect of form in it is sanctioned by nullity.

Who serves it, and for which expiry date

The notice can take effect only at the end of the contract, that is, at the three-year expiry for a landlord who is an individual or a property holding company (société civile immobilière) formed exclusively between relatives and relatives by marriage up to the fourth degree inclusive, and at the six-year expiry for other legal entities (Article 10 of the 1989 Law). A fund or a property company holding residential units therefore reasons on a six-year step, which profoundly alters the window for the choice.

The identity of the person giving notice must be beyond reproach. Where the property is held in joint ownership (indivision), the notice comes from all the joint owners or from a duly authorised agent. For a company, the signatory must have power of representation. The notice must also be notified to each co-tenant under the lease, as well as to the spouse or to the partner bound by a civil solidarity pact (pacte civil de solidarité) whose existence the landlord knows of, Article 1751 of the French Civil Code deeming the family home to be subject to joint tenancy by right between spouses.

Two restrictions relate to the length of ownership. Where the end of the current lease falls less than three years after the acquisition of an already occupied dwelling, Article 15-I of the 1989 Law prohibits the landlord from serving a notice to terminate for sale before the end of the first tacit renewal or the first renewal. A buyer who purchases at a discount with the intention of obtaining vacant possession quickly therefore inherits a statutory waiting period, the holding cost of which must be built into the entry price. This is the first hidden risk of the discount.

Mandatory particulars and the sanction of nullity

The notice to terminate for sale must, on pain of nullity, state the reason, the price and the terms of the proposed sale, and reproduce the first five paragraphs of II of Article 15.

"The notice must, on pain of nullity, state the price and the terms of the proposed sale. The notice constitutes an offer of sale to the tenant."

Three points of vigilance structure practice. First, the price notified must be a genuine and final price: it cannot include the fee of an intermediary from whom the tenant has not benefited, and it is accepted that the price offered to the holder of the pre-emption right is understood to exclude any agency commission payable by the buyer. Second, the terms of the sale must be described with enough precision for the tenant to exercise the option with full knowledge: description of the unit, share of common parts, payment terms. Finally, the verbatim reproduction of the statutory paragraphs is not a decorative formality: its omission or inaccuracy opens a challenge that can be won.

The nullity of the notice has a simple and costly consequence: the lease continues for a new three-year or six-year period. An error of form cannot be repaired, it is paid for again in years.

The notice period and its starting point

The notice period for a notice served by the landlord of an unfurnished dwelling is six months. It is counted, depending on the method of notification chosen, from receipt of the registered letter with acknowledgment of receipt, from service of the act by a commissaire de justice (bailiff), or from delivery by hand against a signature or receipt. In practice, service by a commissaire de justice remains the method to prefer for an asset with significant value at stake: it secures the date, the identity of the recipient and the content of the act, and it neutralises disputes over the first presentation.

In a furnished letting, the regime differs on two decisive points. The notice period is three months (Article 25-8 of the 1989 Law) and the notice to terminate for sale does not carry an offer of sale to the tenant. The absence of a pre-emption right and the shortness of the notice period make the furnished status a parameter of the choice in its own right where the sale horizon is known in advance, subject to the planning rules on change of use applicable in the municipalities concerned.

The tenant's pre-emption right: two offers, two timetables

The tenant's pre-emption right attached to the notice to terminate for sale is not a mere right of priority: it structures the whole chronology of the sale and may, in practice, delay signature with a third party by several months. The conditions for exercising this right, the notification of the offer and the sanctions for disregarding it are set out in our guide on the tenant's pre-emption right.

The first offer, contained in the notice

The offer of sale contained in the notice is valid during the first two months of the notice period. The tenant's silence at the end of this period amounts to a waiver, and the lease ends on its expiry date.

If the tenant accepts the offer, the tenant has two months from the dispatch of the reply to complete the sale. This period is extended to four months if the tenant states, in the acceptance, an intention to take out a loan. Once this period has passed without completion, the acceptance is void by operation of law and the tenant forfeits the right by operation of law, the lease ending at the expiry of the notice period. The landlord then regains the freedom to sell, but has used up to six months of the timetable.

The subsidiary offer where the price is reduced

This is the mechanism most often neglected in sale structures. If, after the tenant's refusal, the landlord decides to sell on terms or at a price more favourable to the buyer, the notary must notify the tenant of these new prices and terms, on pain of nullity of the sale. This notification constitutes an offer of sale. It is valid for one month from its receipt, the tenant then having the same periods of two or four months to complete the sale.

The operational consequence is direct: any renegotiation of the price downwards during marketing revives the pre-emption right and reopens a waiting cycle. In a market where downward negotiation is the norm, this point must be anticipated when the price shown in the notice is set. A notice price set too high, in order to deter the tenant, is paid for later by a subsidiary notification and a delay in signing. A price set at the fairest level exposes the landlord to the opposite risk: the tenant pre-empts, and the landlord has sold at a price lower than the one that could have been obtained on the open market.

Competing pre-emption rights

Other rights overlap. Article 10 of Law No. 75-1351 of 31 December 1975 opens a pre-emption right to the tenant on the first sale of a dwelling following the initial division or subdivision of a building into lots, with an option period of four months. Article 11-1 of the 1989 Law extends existing leases by operation of law, for a period of three years, in the event of a sale by lots of more than five dwellings in the same building, the extension being increased to six years for tenants who meet conditions of age and income. To this is added, where applicable, the municipality's urban pre-emption right, triggered by the declaration of intention to sell.

For a break-up sale of a building, these texts dictate the sequencing: the exit strategy by lots is built over several years, and the yield calculation must treat the statutory extension of leases as an input, not as a contingency.

The causes of blockage: protected tenant and fraudulent notice

Article 15-III prohibits the landlord from giving notice to a tenant aged over sixty-five whose annual income is below an income ceiling, unless a dwelling corresponding to the tenant's needs and means is offered nearby. The age and income condition is assessed at the expiry date of the contract. The exception applies where the landlord is also aged over sixty-five or has income below the same ceiling, this situation being assessed at the date the notice is notified.

For a landlord that is a legal entity, the exception is unavailable. A protected tenant in a unit held by a company transforms the choice: vacant possession becomes legally conditional on an effective rehousing offer, and the value of the asset aligns lastingly with its occupied value. Identifying protected tenants is therefore the first filter to apply to a residential portfolio, before any projection of vacant value.

A fraudulent notice is, moreover, sanctioned. Article 15-IV, in its wording resulting from Law No. 2018-1021 of 23 November 2018 known as the ELAN Law, punishes a landlord who has served a fraudulent notice with a criminal fine not exceeding €6,000 for an individual and €30,000 for a legal entity. Beyond the fine, the court may, even of its own motion, verify the reality and seriousness of the reason for the notice. A notice to terminate for sale followed by a rapid re-letting exposes the landlord to an action for damages and, on a portfolio, to a reputational risk that goes beyond the stakes of the unit concerned.

The real cost of vacant possession: a timetable to be quantified, not hoped for

The favourable scenario is well known: notice served six months before expiry, offer not accepted, tenant leaves at the end of the term. The unfavourable scenario must be modelled with the same rigour.

A tenant who stays on after the end of the term becomes an occupant without right or title. The landlord must apply to the judge for protection disputes (juge des contentieux de la protection) to have the validity of the notice confirmed, order the eviction and set an occupation indemnity. Once judgment is obtained, eviction requires service of an order to vacate the premises (commandement de quitter les lieux), followed in principle by a period of two months (Article L. 412-1 of the French Code of Civil Enforcement Procedures). The judge may grant time, the maximum length of which was reduced by Law No. 2023-668 of 27 July 2023. To this is added the winter truce, from 1 November to 31 March, which suspends any eviction measure (Article L. 412-6 of the same Code), and, where the assistance of the police is refused, the State's liability, which gives a right to compensation but not to immediate vacant possession. On the sequence of acts after the decision, see our analysis of the enforcement timetable after the eviction judgment.

Three consequences follow for the choice. First, the occupation indemnity, even set at the level of the market rent, never compensates for the opportunity cost of a delayed sale. Second, the date of service of the notice must be chosen so that the end of the lease does not fall just before the winter truce, failing which a winter is automatically lost. Third, an asset whose vacant possession is contested does not sell any better than an occupied asset: it sells less well, because the buyer prices in the procedural risk that it takes on.

What the buyer really buys in an occupied sale

The determinants of the discount

The occupied sale is negotiated on identifiable parameters. The probable remaining length of occupation is the first: the more distant the exit, the greater the discount. The ratio between the current rent and the market rent is the second: an old lease, indexed to the reference rent index and possibly constrained by the rent control scheme arising from Article 140 of the ELAN Law and extended by Law No. 2022-217 of 21 February 2022 known as the 3DS Law, weighs lastingly on the buyer's yield. The tenant's age and income are the third, through the effect of the protection under Article 15-III. The impossibility of carrying out viewings calmly, of assessing the real condition of the property and of carrying out works is the fourth. The rent supplement, the sanctions incurred and the effect of the scheme on the valuation of the asset are detailed in our article on rent control in Paris.

Valuation practice, including in the work of the tax authorities on the valuation of real estate, allows a discount for occupation whose rate varies according to these same parameters. The seller therefore has an interest in documenting each of them rather than suffering a flat discount applied by the buyer: rent payment history, up-to-date rent receipts, insurance certificate, settlement of service charges, absence of statutory protection for the tenant. A well-documented occupied sale is negotiated several points above an opaque occupied sale.

The risks transferred

The buyer takes over the lease on its existing terms, including its weaknesses. The energy decency timetable arising from Law No. 2021-1104 of 22 August 2021 known as the Climate and Resilience Law is the most costly illustration: dwellings rated G can no longer be let since 1 January 2025, a deadline extended to 1 January 2028 for dwellings rated F and to 1 January 2034 for dwellings rated E. The order of 25 March 2024 also changed the calculation method of the energy performance certificate for small dwellings, which reclassified part of the housing stock.

An occupied unit rated F or G is therefore not bought only with its lease: it is bought with an energy capex at a known horizon, a voting constraint at the general meeting of the co-ownership (copropriété) if the works concern the common parts, and a risk of tenancy litigation on decency. On this type of asset, the choice frequently tips in favour of a quick occupied sale, before the market fully prices in the cost of the works, rather than in favour of vacant possession followed by renovation.

Building the decision: a five-input framework

The choice is structured around five questions, in this order.

• Is the landlord legally able to serve notice at the next expiry date, given the date of acquisition, the status as a legal entity and the personal situation of the tenant?
• What is the exact expiry date of the lease, and does the six-month timetable make it possible to avoid a collision with the winter truce?
• What price should be stated in the notice, bearing in mind that it caps the later negotiation unless the subsidiary pre-emption right is revived?
• What is the monthly holding cost of the asset while vacant, financing included, and over how many months is vacant possession plausible in a median scenario and in a degraded scenario?
• Does capital gains tax change the ranking of the scenarios, given the length of ownership and the reliefs under Articles 150 VC of the French General Tax Code and L. 136-7 of the French Social Security Code, full exemption being acquired after twenty-two years of ownership for income tax and thirty years for social levies?

The answer then reads simply: vacant possession makes sense only if the gap between vacant value and occupied value exceeds the cumulative holding cost, the cost of restoration and the value of the procedural risk. In a market where the marketing time for a vacant property is lengthening, this gap narrows.

Conclusion

The notice to terminate for sale is not a tool for adding value: it is a timetable tool, whose return depends almost entirely on the formal rigour of the act and on the tenant's personal situation. Our position is clear: on a single unit held by a legal entity, occupied by a tenant whose statutory protection is established or close, or rated F or G, a documented occupied sale is almost always the better choice, because it converts a contingency into a known discount. Conversely, on a well-rated asset, let at market rent, held for more than three years by an individual, with a lease expiry falling in spring, prior vacant possession remains value-creating.

Before any service of notice, have three elements audited: the chain of title to the lease and of the notifications, the tenant's age and income situation at the expiry date, and the consistency between the price stated in the notice and your real reserve price. A void notice cannot be corrected: it is paid for again in three or six years of enforced ownership.

Frequently asked questions

What is the notice period for a notice to terminate for sale in an unfurnished letting? The period is six months, counted from receipt of the registered letter with acknowledgment of receipt, from service by a commissaire de justice or from delivery by hand against a signature. The notice can take effect only at the end of the lease, that is three years for a landlord who is an individual or a family property holding company (SCI), six years for other legal entities. In a furnished letting, the notice period is reduced to three months under Article 25-8 of the Law of 6 July 1989.

Does the tenant always have a pre-emption right in the event of a sale? No. The pre-emption right provided for in Article 15-II of the 1989 Law is opened only where the landlord serves a notice to terminate for sale at the expiry of the lease of an unfurnished dwelling. A sale during the lease, with the tenant remaining in occupation, opens no pre-emption right, subject to the right opened by Article 10 of the Law of 31 December 1975 on a first sale following the division of the building into lots, and to the provisions applicable to sales of buildings of more than five dwellings.

Can a notice to terminate for sale be served on a tenant over 65? Only under conditions. Article 15-III prohibits the notice where the tenant is aged over sixty-five at the expiry date of the contract and the tenant's annual income is below the regulatory ceiling, unless a dwelling corresponding to the tenant's needs and means, located nearby, is offered. The exception benefiting a landlord who is also aged over sixty-five or has modest income is inapplicable to a legal entity.

What happens if the price is renegotiated downwards after the tenant's refusal? The notary must notify the tenant, on pain of nullity of the sale, of the new prices and more favourable terms granted to the buyer. This notification constitutes an offer of sale, valid for one month from its receipt. A tenant who accepts it then has two months to complete the sale, or four months if the tenant states that a loan will be used. Any price reduction therefore reopens a waiting cycle that must be anticipated when the price stated in the notice is set.

How long does it take to obtain vacant possession if the tenant stays on? One must add up the time of the proceedings before the judge for protection disputes, the two-month period following the order to vacate the premises provided for by Article L. 412-1 of the French Code of Civil Enforcement Procedures, any time granted by the judge, the maximum length of which was reduced by the Law of 27 July 2023, and the suspension of evictions during the winter truce, from 1 November to 31 March. A delay of several quarters must be modelled as a degraded scenario, not as a marginal hypothesis.

Can a notice to terminate for sale be served just after acquiring an occupied dwelling? No, where the end of the current lease falls less than three years after the date of acquisition: Article 15-I of the Law of 6 July 1989 then requires waiting for the end of the first tacit renewal or the first renewal. This period must be built into the entry price in any strategy of purchase at a discount followed by vacant possession.

Does the energy rating of the dwelling change the choice? Yes, decisively. Since 1 January 2025, dwellings rated G can no longer be newly let, dwellings rated F following on 1 January 2028 and dwellings rated E on 1 January 2034, under the Climate and Resilience Law of 22 August 2021. A buyer in an occupied sale takes over this works timetable, which the buyer prices into the discount. Selling before the market prices in the full capex is often preferable to vacant possession followed by a renovation financed from own funds.