Key Implications for French Commercial Leases- The Economic Simpl

The Economic Simplification Act, enacted on 26 May 2026 (the Simplification Act) aims to ease certain administrative constraints and support companies’ cash flow. 

To this end, it introduces several measures amending the legal framework applicable to commercial leases, as set out in the French Commercial Code, in particular with respect to rent payment frequency, the regulation of guarantees, indexation clauses and the statutory right of first refusal.

Key Measures Affecting Commercial Leases

Below is a summary of the main changes to be noted.

Monthly Rent Payments and Regulation of Security Amounts

Note: These measures apply only to premises used for retail or wholesale trade or commercial or artisanal services.

• Monthly payment of rent at the tenant’s request (new Article L.145 32 1 of the French Commercial Code).
  • Condition: no outstanding undisputed rent or service charge arrears.
  • Effective date: from the next payment date provided for in the lease. 
• Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code, as amended by the Simplification Act).
• Which leases are affected? Leases into force as of the date of enactment of the Simplification Act, i.e. 26 May 2026.
• Cap on the amount of guarantees (Article L.145 40 of the French Commercial Code): Amounts paid as a security may not exceed one quarter’s rent. Likewise, the value of any assets, securities, undertakings or guarantees of any kind received by the landlord may not exceed one quarter’s rent.

Note: The Simplification Act would therefore appear to permit the inclusion of both a security deposit equal to three months’ rent and an additional security (such as a joint guarantee or a first-demand guarantee) of the same amount.

• Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
• Which leases are affected? Leases entered into or renewed as from the date of enactment of the Simplification Act, i.e. 26 May 2026.

Rental Guarantees: Two Clarifications Applicable to All Commercial Leases

• In the event of a transfer of ownership of the leased premises (Article L.145 40 of the French Commercial Code), the obligation to return the sums paid as security is transferred to the new landlord. Where applicable, such transfer results in the automatic lapse of any other guarantee (assets, securities, undertakings or guarantees of any kind referred to in the statute).
  • Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
  • Which leases are affected? Leases relating to premises transferred as from three months after the date of enactment of the Simplification Act, i.e. 26 August 2026.
• At the end of the lease—return of guarantees (Article L.145 40 of the French Commercial Code): any sums paid by way of security must be refunded within a reasonable period not exceeding three months from the handover of the keys. 

Any other security held by the landlord (e.g. a joint guarantee or a first-demand guarantee) must be returned or released within six months of the handover of the keys.

• Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
• Which leases are affected? Leases into force as of the date of enactment of the Simplification Act, where the handover of the keys takes place no earlier than three months after that date, i.e. 26 August 2026.

Indexation Clauses: Symmetrical Cap (So Called “Tunnel Clause”)—New Article L.145 38 1 of the French Commercial Code

• The lease may provide for a mechanism symmetrically capping, both upwards and downwards, the annual variation of the Commercial Rent Index (Indice des loyers commerciaux) (ILC) as provided for in the indexation clause. This does not apply to indexation clauses based on any other index, in particular the ILAT (Indice des loyers des activités tertiaires) index.

Note: While the new legislation appears to now permit so-called “tunnel clauses,” such clauses could nonetheless be held unenforceable where they have the effect of preventing a rent adjustment exceeding more than one quarter, which triggers the (public policy) right to seek judicial revision of the rent.

• Which leases are affected? Leases into force as of the date of enactment of the Simplification Act, i.e. 26 May 2026.

Tenant’s Right of First Refusal (Article L.145‑46‑1 of the French Commercial Code)

• The Simplification Act now excludes premises used exclusively as offices and warehouses from the scope of the tenant’s statutory right of first refusal.
  • Which leases are affected? Leases into force relating to premises that are the subject of sales completed after the date of enactment, i.e. 26 May 2026.

Property Tax Rechargeable to the Tenant: Legislative Rollback

The bill initially provided for a prohibition on landlords recharging property tax to their tenants.

However, this provision was deleted during the joint committee proceedings (commission mixte paritaire). 

Accordingly, no change has, for the time being, been made on this point, meaning that commercial leases may still validly provide for the recharging of this tax to the commercial tenants.

Note: this provision was removed while another bill, submitted before the French National Assembly on 13 January 2026, provides that, for leases entered into or renewed after its enactment, property tax could only be passed on to the tenant up to 50% of its amount, without this limitation being offset by a rent increase.

Forfeiture Clause: Strengthened Framework in Favour of Landlords

• With respect to forfeiture clauses, the court may grant payment deadlines and suspend the effects of the forfeiture clause in the event of unpaid rent only if the following two strict cumulative conditions are satisfied:
  • The tenant is able to clear its rental arrears; and
  • The tenant resumes full payment of the current rent before the first hearing.
• Is this a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
• Which leases are affected? Leases into force and subject to applications for suspension of the effects of the forfeiture clause filed from the date of entry into force of the Simplification Act, i.e. 27 May 2026.

Practical Impacts and Recommendations

• For tenants: consider requesting monthly rent payments where cash flow is a concern, ensuring that there are no outstanding, undisputed arrears.
• For landlords: review the “security deposit” and “guarantees” provisions in lease templates to ensure compliance with the cap introduced by Article L.145 40 of the French Commercial Code.
• In the event of a transfer or sale of the building: address in the transaction documentation the transfer of the obligation to return security amounts and the treatment (lapse or renewal) of existing guarantees.
• At the end of the lease: anticipate the timetable for the return of security deposits (three months) and for the release or return of guarantees (six months); organise the documentation supporting any deductions.
• Indexation: review existing ILC indexation clauses and consider whether a symmetric “tunnel” mechanism would be appropriate upon renegotiation.

Entry into Force—Summary