Commercial Lease : the Constitutional Court has declared unconstitutional the limitation of the rent

Within the context of a conflict between two companies regarding the sublease of a commercial space, one of these two companies was the original tenant of the commercial space, the other was the subtenant. The lessee company claimed from the sublessee company a higher rent than the one it was paying to the initial owner. 

The article 1762-6, paragraph 4, of the Civil Code states that: except in the case of a sublease where investments specific to the sublessee's activity have been made by the lessee, the rents paid to the lessee by the sublessee may not exceed the ones paid by the lessee to the lessor, it being specified that this provision is effective since 1st of March, 2019.

This provision therefore deprives the initial lessee, in the event that he wishes to sublet the space of the right to claim for a higher rent than the one he himself owes to the initial owner and to pass on to the sublessee the operating costs incurred by the sublease, unless the tenant has made specific investments in connection with the activity that the sub-lessee is carrying out.

The preparatory works of the law of 3rd February 2018 from which article 1762-6, paragraph 4, of the Civil Code derives, specifies that the intention of this provision is to fight against speculation. This therefore allows this initiative of the legislator to be justified in terms of the general interest.

Within the context of this conflict, the Constitutional Court was seized and found that this limitation of the rent, in case of subletting, is not proportionate as it deprives the original lessee of the right to cover all the costs related to the subletting and to obtain a profit. As for the exception provided for in article 1762-6, paragraph 4, of the Civil Code, which allows a higher rent to be claimed in cases where the original lessee has to bear specific costs, the Court held that, due to its specificity, it is not such as to compensate the imbalance.

Therefore, the Court concluded that article 1762-6, paragraph 4, of the Civil Code is incompatible with article 11, paragraph 6, subparagraph 1 of the Constitution which guarantees the freedom of trade and industry. 

In practice, until the legislator intervenes to remedy the situation, the original lessee may not claim rent from the sublessee that exceeds the one actually paid to the original tenant. He is allowed to add the operating costs incurred by the sublease, and to make a reasonable profit from the sublease. The question remains as to what will be considered reasonable…