Beware of Pinel Law pitfalls, experts warn

ranging from the duration of commercial leases, recoverable taxes and charges, and the landlord’s duty to inform the tenant of works to the property and fees/charges.

Both investors and tenants should be aware of the many changes brought by the Pinel Law into the regime of commercial leases in France and the potential pitfalls, notably those regarding the charges,’ say Aline Divo and Arnaud Valverde, partner and associate respectively at the real estate unit of Paris-based law firm CMS Bureau Francis Lefebvre. ‘Parties should be particularly cautious when negotiating new leases as well as negotiating the renewals of older leases as the Pinel Law makes the regime of commercial leases more complex than it already was,’ they warn.

Charges and taxes

The biggest changes lie in the provisions relating to charges and taxes (see table).

Before the Pinel Law came into force, agreements between the parties regarding charges and taxes were defined by the terms of the lease. The new legislation requires every commercial lease agreement to include a precise inventory of the categories of charges and taxes linked to the lease. Moreover, it specifies a list of charges, taxes and works that are no longer recoverable from the tenant. The list includes structural repairs, work linked to wear and tear of the premises and compliance work that can be considered as structural repairs with the exclusion of refurbishments that cost more than replacement. In addition, the list includes landlord management fees linked to the management of rents and taxes where the landlord is personally liable for payment such as the Territorial Economic Contribution‘.

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