International Newsletter : Real Estate – Construction
Muriel Guillin-Modaine, Sarah Copeland
The French Economic Simplification Act of May 26, 2026: Key Changes to Commercial Leases
After two years of parliamentary debates, the French Economic Simplification Act (the Act) entered into force on May 26, 2026. A number of key measures affect commercial leases, notably strengthening the rights of tenants.
Right to pay monthly
Rent is generally paid quarterly in advance. To ease the burden on cash flow, eligible tenants may now request to make payments on a monthly basis. To be eligible, the tenant must occupy premises used for retail or commercial activity (tenants of offices and warehouses are not therefore eligible) and must not be in arrears.
Rent indexation mechanisms: validity of “tunnel” clauses
Rent indexation clauses may now include a cap on the variation of rent resulting from the commercial rent index applicable to commercial premises, provided the cap is symmetrical, limiting the variation to the same extent both upwards and downwards. This measure does not apply to indexation mechanisms linked to other indexes.
Cap on rental guarantees
The Act introduces a cap on rental guarantees that landlords may request from tenants. Cash security deposits, on the one hand, and other forms of security (such as suretyships and first demand guarantees), on the other hand, are each capped at 3 months’ rent. As the Act does not specify a cap on the combined total of guarantees, landlords can presumably request both a security deposit and a separate guarantee, each up to 3 months’ rent. This measure applies only to tenants of commercial premises eligible for monthly payments (see above).
Return of rental guarantees when the lease ends
Following the handover of keys at the end of the lease, landlords must now return rental guarantees within the following timeframes: (i) a reasonable period not exceeding three months for security deposits; and (ii) a maximum period of six months for other guarantees (suretyships, first-demand guarantees, etc.).
Since the service charges reconciliation at the end of the lease often occurs more than six months after the handover of keys and therefore after the return of all guarantees, landlords now find themselves with no guarantee for payment of any outstanding amounts resulting from such reconciliation
Treatment of rental guarantees in the event of a sale of the premises
When a property is sold, the obligation to return security deposits is now automatically transferred to the buyer (new landlord). Other guarantees (suretyships, first-demand guarantees, etc.) automatically lapse as a result of the sale, requiring sellers to return the relevant documents to tenants and to complete any releases within six months of the sale.
In practice, commercial leases will need to include an obligation on the tenant to provide the new owner with an equivalent guarantee no later than the date of sale, which means the seller must inform the tenant of the sale to allow the tenant to fulfil this obligation. Sale agreements will need to include a condition precedent requiring the provision of such a guarantee to the buyer.
Scope of tenant pre-emption right
Tenants of commercial property have a statutory pre-emption right in the event of the sale of their premises. The Act clarifies the scope of this pre-emption right, expressly limiting it to commercial premises and excluding offices and warehouses.
This measure puts an end to a series of lawsuits filed by tenants seeking to invalidate the sale of office space on the grounds that the pre-emption right should have been exercised.
Passing on property tax to tenants
One of the flagship measures originally proposed in the bill has – at least temporarily – been abandoned by lawmakers. The legislature refrained from prohibiting landlords from passing on property taxes to tenants, a standard provision in commercial lease agreements.
However, this prohibition could still be adopted in the future, in a new form, as a separate bill dated January 13, 2026, proposes a 50% cap on the amount of property tax that may be passed on to tenants. It remains to be seen whether such a measure will ultimately be enacted.
Muriel Guillin-Modaine, Partner
Sarah Copeland, Senior Associate