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Commercial real estate: a reminder of why landlords should keep evidence of all service charges and taxes

France
06/10/2020
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Since the Pinel law No. 2014-626 dated 18 June 2014 was enacted, every commercial lease agreement entered or renewed as of 1st September 2014, must provide a precise inventory of the categories of charges and taxes linked to the lease agreement. Over the past few years, much emphasis has been placed by authors and practitioners on this requirement set out under Article L. 145-40—2 of the French commercial Code.

However, the “Cour de cassation” - the highest court in the French judiciary – in a recent judgement issued on 17 September 2020[1], reminds that fulfilling this requirement will not be enough for landlords to effectively claim the payment of charges and taxes from tenants.

Indeed, based on Article 1353 of the French Civil Code, the onus is on the creditor to prove the existence and amount of the claimed debts.

In this specific case, a landlord claimed services charges and taxes arrears to be paid by a tenant’s guarantor. The guarantor made a counterclaim based on Article 1353 of the Civil Code in order to seek the reimbursement of on-account charges and taxes paid by the tenant. The guarantor argued that the existence and the amount of the service charges and taxes paid were not evidenced since the landlord had only provided for a summary of final charges and taxes without any invoices.

The “Cour de cassation” ruled in favour of the guarantor and that the landlord must provide evidence on (i) the existence of the charges and taxes and (ii) their amount. This is the case even though the lease agreement did expressly provide for the principle that the tenant must reimburse those charges and taxes.

Failure for landlords to provide invoices and tax notice, tenants could potentially seek the reimbursement of on-account charges and taxes under a claim for restitution of overpayment (“action en répétition de l’indu”). This claim is subject, under Article 2224 of the French Civil Code, to a statute of limitations of 5 years.

This case reinforces our recommendation for landlords to keep all documentation evidencing the existence and exact amount of the final charges and taxes available at all times and for at least 5 years.

[1] Cass. Civ. 3ème, 17 September 2020, No. 19-14.168

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