The main sources of real estate law in France are:

• the Civil Code – especially the provisions on property ownership, leases, contracts and obligations;
• the Planning and Construction Code – regulates land use, building permits and construction standards;
• the Tax Code – for rules on real estate taxation (eg, capital gains, rental income, VAT);
• case law (jurisprudence) – plays an important role in interpreting statutes; and
• EU law – where applicable, particularly in competition, environmental and investment regulation.

French commercial real estate volumes sharply declined due to rising interest rates, causing valuation adjustments, notably in the office market. Logistics and hospitality showed resilience, while sustainability regulations drove investments into green retrofits and high-performance properties. Investors focused increasingly on prime, centrally located assets amid elevated vacancy rates for secondary offices.

Major recent deals include Kering’s EUR837 million joint venture (JV) sale of prime Paris retail locations, Unibail-Rodamco-Westfield’s EUR235 million stake sale in Forum des Halles, and CDC's purchase of prime Paris offices. High-profile hospitality transactions, like Gruppo Statuto’s approximately EUR205 million Mandarin Oriental acquisition, and strategic logistics acquisitions by institutional investors, such as DWS, highlighted market selectivity.

Rising inflation and ECB rate hikes have significantly impacted the market, reducing transaction volumes, increasing yields and pushing asset values downwards, especially for offices. Financing costs surged, diminishing investor leverage, and construction slowed amid these higher costs. Legal caps limited rental growth, exacerbating stress on highly leveraged developers.

Real estate players accelerated their adoption of PropTech solutions and began piloting blockchain-based tokenisation projects. Developers increasingly repurposed commercial spaces into residential units. Alternative financing sources, such as bonds, debt funds and JV structures, grew as banks tightened credit, while lenders preferred workouts over foreclosures. Investors also shifted towards inflation-linked leases and hedging strategies.

Several proposals for reform could significantly affect real estate investment, ownership and development in France, as follows.

• Lease indexation reform: There is growing support for allowing lease indexation on international indices – such as the international construction cost (ICC) index combined with the Euro Interbank Offered Rate (EURIBOR) or EU-wide inflation metrics – as an alternative or complement to the current index of rents for tertiary activities (indice des loyers des activités tertiaires; ILAT). This would enhance contractual flexibility, particularly for cross-border investors. While the measure is under discussion within industry circles, no formal legislative timeline has been announced.
• Streamlining building permit litigation: To address the high volume of abusive or dilatory legal challenges to building permits, the government is considering mechanisms for faster purging of appeals, alongside stricter sanctions for clearly bad-faith litigation. These reforms are seen as critical for accelerating project timelines and restoring investor confidence. They are likely to be included in broader legislative efforts aimed at housing and urban planning, with potential implementation within the next 12 to 18 months.
• Clarification of withholding tax for non-residents: Current ambiguity surrounding the withholding tax applicable to capital gains realised by non-resident investors has raised concerns about potential double taxation and legal uncertainty. Proposals aim to clarify the applicable rules and strengthen treaty-based protections. While technical discussions are ongoing, reform could be introduced in the next Finance Bill, with possible entry into force in early 2026.

Property rights can be categorised into several distinct types. The most comprehensive is ownership, which grants the holder three key prerogatives: the right to use the property (usus), to derive benefits from it (fructus), and to dispose of it (abusus). In France, ownership is recognised as a fundamental right and enjoys constitutional protection.

Ownership can also be divided – most notably between usufruct and bare ownership. In such cases, the usufructuary holds the rights to use and enjoy the property, while the bare owner retains the underlying title without the right to use it until the usufruct expires.

In addition to ownership, other real rights can be acquired. These include security interests – such as mortgages, which secure a creditor’s claim by granting a real right over the debtor’s property – and servitudes, which impose a legal obligation on one parcel of land for the benefit of another, such as a right of way.

Real estate transactions are, in principle, governed by the general law of sale, primarily set out in the French Civil Code.

However, certain types of sales are subject to specific legal regimes that depart from this general framework. This is notably the case for the sale of buildings that are to be renovated or are under construction, including sales in a future state of completion (vente en l’état futur d’achèvement), which are governed by distinct legislative provisions found in specialised codes such as the French Construction and Housing Code.

In addition to these main legal frameworks, various ancillary rules may also come into play – such as pre-emption rights, which are governed by different legislative instruments and may impact the sale depending on the specific context (urban planning pre-emption rights, rural pre-emption rights, etc.).

In France, the lawful transfer of title to real estate can occur through various legal acts, including sale, gift, exchange or inheritance declarations.

Regardless of the method of transfer, a notarial deed is generally required, not as a condition of validity of the agreement itself but in order to ensure its enforceability against third parties and to serve as reliable evidence of the transaction. The notary is responsible for formalising the deed, collecting applicable taxes and ensuring compliance with mandatory legal formalities.

All transfers of title must be registered. This involves the payment of registration duties and the notary’s filing of the deed with the Service de la publicité foncière (the Land Registry).

Title insurance does exist in France but is not widely used. This is largely due to the high level of legal security provided by the notarial system and the thorough Land Registry process. However, some insurance companies are increasingly offering title insurance products, particularly for complex or high-value transactions.

In France, real estate due diligence is typically conducted by the buyer with the assistance of a lawyer and/or notary. The purpose is to verify the legal, tax, planning, technical and environmental status of the property.

This process usually includes a review of documents such as the energy performance certificate, risk and pollution reports, asbestos report and title deeds, and verification of the existence of any easements or other encumbrances on the property.

In France, several statutory warranties protect real estate buyers, as follows.

• Duty to inform: The seller, especially if a professional, must disclose all relevant facts about the property. The buyer has five years from the date they became (or should have become) aware of a breach to bring a claim.
• Warranty of conformity: The property must match the contract. Claims must be brought within five years of discovering any non-conformity.
• Warranty against latent defects: Covers hidden defects that impair use. Buyers have two years from discovery to act.
• Warranty of quiet enjoyment: Protects against third-party claims or seller interference. No statutory time limit applies.

In commercial transactions, contracts often include additional warranties (eg, building condition, zoning, tenant leases). Remedies may include price reduction, damages or rescission. Seller liability can be contractually limited, but abusive clauses may be unenforceable.

Representation and warranty insurance is increasingly used, especially in complex or cross-border deals. Title insurance remains rare in France.

When purchasing real estate, an investor must consider several key areas of law:

• civil law/contract law – this governs the sale agreement (promise or preliminary sale agreement), the final deed of sale and related contractual matters;
• urban planning law – this includes zoning regulations, building permits and any restrictions that may affect the use or development of the property;
• construction law – this covers regulations related to building standards, permits and contractor responsibilities; and
• tax law – this determines the taxes applicable to the transaction, including registration duties, VAT, property taxes and any other related fiscal obligations.

Under the “polluter pays” principle, the party responsible for pollution is generally the one who caused it. In principle, the purchaser of real estate cannot be held liable for historical or pre-existing pollution of the property, unless they contributed to the contamination.

In the case of an industrial site, the French Supreme Court holds that it is the “last operator” and not the selling owner who is responsible for bearing the cost of remediating the site.

Nevertheless, an investor purchasing a polluted site may contractually agree to assume the obligation to remediate the property. Therefore, careful attention should be paid to the drafting of clauses regarding potential contamination in the sale agreement.

To ascertain the permitted uses of a property under applicable zoning or planning law, a buyer should consult the local urban planning plan (plan local d’urbanisme; PLU). Additionally, the buyer can request a certificate of urban planning from the local municipality, which provides specific details about construction rules and the types of uses permitted for the property.

In France, expropriation for public utility allows the state or local authorities to force the sale of private property, provided it serves a public purpose.

The process has two stages:

• administrative phase – a public utility declaration is issued by decree, followed by a prefectural decree listing the affected properties; and
• judicial phase – a judge authorises the transfer of ownership and sets the compensation, which must fully reflect the property’s value and related losses.

Separately, certain parties (eg, co-owners, tenants, public authorities) may have a right of preemption, allowing them to buy a property before it is sold to a third party. This protects public interests in areas like urban planning or heritage conservation.

In an asset deal for the purchase of real estate, the applicable taxes are as follows.

• Notary fees: These include the notary’s fees and disbursements.
• Registration duties (droits d’enregistrement):
1. for the purchase of an older property, the registration duty rate is between 5.09% and 6.32% of the price paid for the property; and
2. for the purchase of new property (built within the last five years) or a property under construction (Vente en l’état futur d’achèvement – VEFA), the rate is 0.715%, provided the transaction is subject to VAT.
• Real estate security contribution (contribution de sécurité immobilière): This is charged at a rate of 0.1%.

If the property is sold for more than its acquisition price, capital gains tax applies, including income tax and social contributions, with certain tax allowances available for reductions.

In a share deal, where the buyer acquires shares in a property-owning company, the applicable taxes are as follows.

• Forproperty holding companies (sociétés civiles immobilières; SCI), the transfer tax rate is 5%.
• For commercial companies, the rate ranges from 0.1% to 3% depending on the legal structure of the company. However, a 5% non-capped duty applies to the transfer of shares in real estate-dominant companies (for which more than 50% of the gross assets are made up, directly or indirectly, of real estate assets or real estate rights).

In an asset deal as a share deal, transaction costs are generally borne by the buyer unless otherwise agreed between the parties. Exemptions may apply in specific cases or types of transactions.

In France, there are no general restrictions on foreign investors acquiring real estate, whether from EU or non-EU countries. However, specific sectors considered “strategic” (eg, defence, energy, telecommunications, critical infrastructure) may require prior authorisation from the Ministry of Economy under the Foreign Investment Regulation (Investissements Étrangers en France; IEF).

Notably, foreign investments in sensitive sectors may require prior approval if they involve control over a French company active in these areas.

Moreover, there are specific restrictions on foreign ownership of agricultural land to protect food security and agricultural policy.

In France, acquisitions of commercial real estate are typically financed through bank loans, often secured by either a conventional or legal mortgage.

For larger real estate portfolios or companies holding real estate, the financing may involve more complex arrangements, such as syndicated loans, mezzanine financing, bond issuance, etc.

Commercial real estate investors in France often provide several types of security when borrowing funds:

• mortgage (hypothèque) – can be contractual or automatic, notably when a notarised deed confirms a loan used to buy the property;
• pledge over shares – shares in a property-owning company may be pledged as collateral;
• pledge over bank accounts – bank accounts can also be pledged to secure the loan; and
• Dailly assignment – rental income or insurance proceeds may be assigned to the lender, sometimes with direct payment of insurance compensation thereto.

Personal guarantees (eg, cautionnements) are uncommon, but autonomous guarantees (garantie à première demande; GAPD) or personal commitments may be required in forward sales (vente en l’etat futur d’achèvement; VEFA) or development deals.

Under French law, banking monopoly rules generally prevent entities that are not licensed credit or financial institutions from regularly conducting banking activities for valuable consideration within France. However, there are exceptions to this, particularly for European long-term investment funds and certain alternative investment funds.

Regarding the granting of security and payments to foreign lenders, there are no specific restrictions, except for Dailly assignments. Foreign lenders can generally be granted security, and payments can be made to them under a loan agreement or security document. However, foreign investments may be subject to certain declaration obligations, particularly in relation to national security or regulations governing foreign investments.

A mortgage over real estate must be executed by notarised deed and subsequently registered with the Land Registry (Service de la publicité foncière). This process entails several statutory costs, including:

• Land Registry duty (taxe de publicité foncière) – 0.71498% of the amount secured;
• real estate security contribution (contribution de sécurité immobilière) – 0.05% of the amount secured;
• fixed deed fee – EUR25;
• registration fee – EUR125; and
• notarial fees – subject to regulatory scales.

However, in France, the legal mortgage of lenders of funds (hypothèque légale de prêteur de deniers) is exempt from Land Registry duty, making it less expensive than other types of securities.

Under French law, certain legal requirements must be met before a company can validly grant security over its real estate assets, as follows.

• Corporate benefit: The security must be granted in the corporate interest of the company providing it. Directors must ensure the transaction aligns with the company’s purpose and does not disproportionately affect its financial position.
• Financial assistance: A company is prohibited from granting loans, guarantees or security to facilitate the acquisition of its own shares.
• Corporate governance and corporate purpose: The decision to grant security must be properly authorised in accordance with the company’s by-laws and governance rules (eg, approval by the board of directors or managing partner), and must fall within the scope of the company’s corporate purpose.

In France, a creditor’s ability to enforce a security over real estate depends on whether the borrower is in insolvency proceedings.

If insolvency is not in place, the creditor must hold an enforceable title (eg, a notarial deed or a court judgment) to begin enforcement. This process involves serving a commandement de payer (formal notice), followed by potential actions such as public auction, court-ordered attribution of the property or appropriation (pacte commissoire) if stipulated in the deed.

If these formalities are not met, the creditor must obtain a court judgment to confirm the debt before enforcement can proceed.

Practically speaking, when the borrower defaults or is about to default, the usual resolution method is handing over the keys. Lenders and investors are aware that engaging in collective proceedings is often a waste of time and money, so the borrower simply hands the keys over to the lender.

If the situation is not resolved in this way, securities over shares or financial accounts can be enforced through a pacte commissoire (a provision allowing the lender to seize and appropriate shares or financial assets) when the borrower is in automatic bankruptcy. This allows the lender to take ownership of shares or assets.

If insolvency is in place, individual enforcement actions are stayed. Even secured creditors cannot enforce their security independently and must file their claims with the insolvency proceedings to seek repayment.

In certain circumstances, existing secured debt can be subordinated to new debt, either by agreement or under the law.

• Contractual subordination: Creditors may agree to subordinate their existing debt to newly created debt through a subordination or intercreditor agreement, in which one group of creditors agrees to be paid after another.
• Insolvency proceedings: If the debtor is in insolvency, a previously established security may lose its priority if not properly declared or registered. Additionally, claims arising after the opening of insolvency proceedings are paid before those with privileges or securities, except for salaries and certain legal fees. New debts contracted during the insolvency procedure, necessary for its continuation or management, will also be given priority over pre-existing secured debts.

In principle, a lender holding or enforcing security over real estate is not liable for pollution, unless it contributed to or knowingly allowed the environmental damage. Liability may arise only if the lender is found to have played a role in the contamination.

In principle, security interests granted by a borrower remain valid even if the borrower becomes insolvent. However, certain security interests created during the “hardening period” (période suspecte) – typically the period up to 18 months before the opening of insolvency proceedings – may be subject to annulment, particularly those securing pre-existing debts or payments made in advance for debts not yet due. This can be done either by automatic legal effect or at the discretion of the courts.

Certain security interests, such as those granted for new debts and those included in a safeguarding plan or conciliation agreement, are excluded from this rule.

In terms of other effects, insolvency proceedings generally suspend individual legal actions, meaning that even secured creditors are prohibited from pursuing individual enforcement actions, such as seizing the debtor’s assets, during the proceedings.

Concerning taxes on loans, see 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security.

The general legal framework applicable to land use and development is set out in the Urban Planning Code (Code de l’urbanisme) and further detailed in the National Urban Planning Regulation (Règlement National d’Urbanisme) enacted by the government.

In addition to national regulations, local authorities may implement local planning instruments such as territorial coherence schemes (schémas de cohérence territoriale – SCoT), PLUs or municipal maps (cartes communales; CC). These instruments establish specific zoning and development rules applicable at the local level.

Design and construction in France are subject to multiple layers of regulation, aimed at ensuring compliance with planning rules, architectural coherence and environmental protection.

Local urban plans govern aspects such as building volume, façades, alignment and materials. In the absence of a PLU, national planning rules apply. Additional design constraints may be imposed in protected areas (eg, historic districts, coastal zones), where consultation with heritage or environmental authorities is often required.

Administrative controls occur at various stages of the project.

• At the application stage, when a prior declaration (déclaration préalable) or building permit (permis de construire) is submitted, the local authority checks for completeness and legal admissibility.
• During the permit review, the administration verifies compliance with planning rules and, where applicable, consults external authorities (heritage, environmental, fire safety, etc).
• Upon completion, the project owner must file a declaration of completion (déclaration attestant l’achèvement et la conformité des travaux; DAACT). The administration has three months to verify compliance. In case of irregularities, formal notice may be issued to regularise or demolish the works.

The mayor is the primary authority responsible for granting planning permissions on behalf of the municipality.

Where authorisation from the national government is required – notably for works carried out near listed historical monuments – the application must be submitted to the prefect, acting as the state’s representative at the local level.

The principal authorisation required for construction projects is either a building permit or a development permit. Minor works are only subject to a prior works declaration.

The standard review period for a building permit application is approximately two to three months from the submission of a complete file to the municipality. If no decision is issued within this timeframe, the permit is deemed tacitly granted. Once obtained, the permit must be displayed on the construction site.

In principle, third parties are not entitled to participate in the permitting process itself. However, for large-scale developments, especially those subject to environmental impact assessments, a public consultation or public inquiry (concertation préalable or enquête publique) may be required before the permit is filed. These procedures allow third parties to express their views on the project at an earlier stage.

A building permit is valid for three years and may be extended twice, each time for an additional year.

An applicant may challenge a refusal to issue a building permit or a decision to suspend the review process by filing an administrative appeal within two months of receiving notification, either by sending a registered letter to the municipality or by lodging a formal complaint.

If the administrative appeal is unsuccessful, a new two-month period is granted to initiate proceedings before the administrative court.

Third parties may also challenge a granted permit by filing an informal administrative appeal with the municipality or, if no PLU is in force, a hierarchical appeal with the prefect. Alternatively, they may bring a judicial action before the administrative court within two months of the permit being posted on the construction site.

In development zones governed by a Concerted Development Zone (zone d’aménagement concerté; ZAC), developers may be required to enter into a participation agreement with the public developer or the relevant local authority. Such agreements specify the developers’ financial and operational obligations regarding the provision of public infrastructure within the zone.

Financial participation within a ZAC enables private developers to contribute to the cost of public facilities funded by the public developer.

In addition, connection easement agreements (conventions de servitudes de raccordement) may be required to set out the conditions under which buildings will be connected to utilities, including the routing of supply cables and the terms for accessing the metering equipment necessary to benefit from electricity and other services.

Restrictions on land development and use are primarily enforced through the urban planning permit system. Enforcement operates through three parallel mechanisms: administrative, criminal and civil:

• administratively, authorities may impose sanctions such as ordering the suspension of works or applying to the courts to seek demolition or regularisation measures;
• criminal enforcement applies to breaches of planning regulations; and
• civil actions may also be brought by third parties to seek remedies for unauthorised development impacting their rights.

There are several types of entities available for investors wishing to hold real estate assets, each serving different purposes and investment strategies.

• SCI (société civile immobilière): A real estate civil company, typically used by individuals or private investors (especially family investors) to hold and manage real estate. This is one of the most common structures for private, non-institutional investors.
• SAS (société par actions simplifiée): A simplified stock corporation offering significant flexibility in terms of governance. It is commonly used for more complex transactions or by professional investors due to its adaptability.
• OPPCI (organisme professionnel de placement collectif immobilier): A collective investment vehicle for institutional investors, typically used for large-scale professional real estate projects.
• SCPI (société civile de placement immobilier): A real estate collective investment company, ideal for investors looking for a collective real estate investment structure.
• SLP (société de libre partenariat): A growing structure often used for large-scale investment projects, especially by institutional investors.

Other structures, while less commonly used in practice, include:

• SARL (société à responsabilité limitée): A limited liability company offering more rigid management compared to an SCI, though the SARL de famille structure allows for income tax benefits, particularly for furnished rentals.
• SNC (société en Nom collectif): A partnership structure where partners have unlimited liability, offering less flexibility in management and less favourable tax treatment.
• SA (société anonyme): A stock corporation with a heavy management structure, higher administrative costs and limited flexibility, typically less used for real estate investments.

Each of these entities has its advantages depending on the investor’s needs, with SCI and SAS being the most popular for private investors, while OPPCI and SLP cater more to institutional investors.

SCI

The SCI has a simple and flexible structure, which is ideal for private or family real estate holding, and a low setup cost except for notarial fees when property is involved. The tax options are personal income tax (simplified but no depreciation) and corporate tax (allows depreciation and tax base optimisation, though leads to double taxation upon profit distribution).

SAS

The SAS offers great statutory flexibility and is suitable for sophisticated or structured investments. The SAS is automatically subject to corporate tax and is advantageous for structuring (eg, debt, holding companies). There are no social charges on dividends, but setup involves higher legal and advisory costs.

OPPCI/SLP

The OPPCI and SLP are designed for institutional investors, with a complex structure requiring expert advice and French Financial Markets Authority (Autorité des marchés financiers; AMF) approval in the case of OPPCI. The OPPCI and SLP have flexible governance tailored to investor needs.

As tax-transparent vehicles, there is no entity-level taxation, with income taxed only at the investor level. Corporate tax exemption may apply to qualifying operations. However, OPPCI/SLP management and setup are complex and costly.

SCPI

The SCPI is a real estate investment vehicle that allows collective investment in rental real estate and is managed by an AMF-approved manager. The SCPI is primarily used by individual investors for passive income and is tax transparent – income is taxed at the investor level (personal income tax). There is no VAT recovery, as the SCPI focuses on income generation rather than active property development.

SARL

The SARL is a limited liability structure suitable for smaller businesses and family-owned real estate ventures. It is restricted in terms of the number of shareholders and governance flexibility.

The SARL is subject to corporate income tax (CIT) by default, but one can opt for personal income tax for family-type structures. VAT recovery is possible if the property activities qualify for this tax.

SNC

The SNC is a general partnership with unlimited liability for partners. Used for small businesses and family real estate ventures, the SNC allows more flexibility in operations but exposes partners to personal liability.

The SNC is tax transparent (income taxed at the partner level) by default but one can opt for CIT. VAT recovery depends on the nature of the activities, particularly if the real estate is used for business purposes.

SA

The SA is a large corporate structure typically used for listed companies or JVs. It allows for significant capital and a broad shareholder base, and is highly regulated with complex governance structures.

The SA is subject to CIT. VAT recovery is possible if there are taxable real estate activities. Dividends are taxed at the shareholder level (either personal income tax or flat rate).

The French equivalent of a REIT is a société d’investissements immobiliers cotée (SIIC), which is a company that manages real estate assets on behalf of its shareholders. Unlike an SCPI or OPCI (organisme de placement collectif immobilier), a SIIC is publicly traded on the stock exchange.

There are no specific restrictions on foreign investors, who may freely invest in these vehicles.

Advantages of using a SIIC include:

• exemption from CIT on rental income and capital gains, provided certain distribution requirements are met; and
• high liquidity because shares are traded on a stock exchange, offering an accessible alternative to direct real estate investment.

Requirements for SIIC status include the following:

• the company must be a public limited company (SA) listed on a regulated market in the European Economic Area (EEA); and
• the company must distribute at least 95% of its rental income and 70% of its capital gains to its shareholders in the form of dividends or share buybacks.

For the SCI, SAS, SARL and SNC, the minimum share capital required is EUR1, offering flexibility and accessibility for both individual and professional investors. For the SA, the minimum share capital required is EUR37,000, and for the SCPI, it is EUR760,000.

Several types of entities are used in France for real estate investment, each with its own governance rules and obligations. The following provides an overview of the main governance features.

• SCI: A manager (gérant) is appointed by the shareholders.
• SAS: An SAS must have at least a president. Governance can be freely determined in the by-laws, and there may be a sole president, a collective decision-making body or a president with one or more delegated CEOs. The SAS offers great flexibility.
• SCPI: An SCPI is managed by an asset management company under the supervision of a supervisory board.
• SARL: A SARL must be managed by one or more individuals (gérants), who may or may not be shareholders and are appointed according to the by-laws or a separate shareholders’ resolution.
• SNC: Management for an SNC is freely determined in the articles. By default, all partners are managers, but the by-laws may assign management to one or more designated partners, or even to external persons.
• SA: There are two governance models for the SA: either a board of directors (conseil d’administration) with a CEO and an optional chairperson, or a management board (directoire) with a supervisory board (conseil de surveillance), depending on the structure chosen.

To serve as a legal representative of a company in France, the individual must meet certain legal requirements. They must not be subject to any disqualification, such as a criminal conviction or a court-imposed ban on managing or directing a company (interdiction de gérer). The representative’s identity and role must be publicly disclosed, notably through registration with the Trade and Companies Register (Registre du commerce et des sociétés; RCS). This ensures transparency and allows third parties to verify who has authority to bind the company.

Annual maintenance and accounting compliance costs in France vary depending on the type and complexity of the entity, but generally include accounting fees, legal publication costs and possibly auditor fees.

French law recognises several types of contractual arrangements that allow a person, company or organisation to occupy and use real estate for a limited period without acquiring ownership.

• The principal forms are leases governed by civil law, residential leases, professional leases, commercial leases, long-term leases such as the emphyteutic lease (bail emphytéotique) and construction leases (bail à construction).
• In addition, short-term occupation can be granted under a precarious occupation agreement (convention d’occupation précaire), typically justified by the temporary nature of the occupancy or external circumstances.
• For properties forming part of the public domain, occupation is granted through agreements that do not create real rights (conventions d’occupation du domaine public), and which are subject to administrative law rather than private law.

The standard form is the commercial lease (bail commercial), typically entered into for a term of nine years, with the tenant entitled to renew the lease or, failing renewal, to receive eviction compensation.

A short-term lease (bail dérogatoire or bail de courte durée) allows for shorter occupation (up to three years) without granting the tenant any right to renewal at the end of the term.

Additionally, professional leases (baux professionnels) are available for non-commercial liberal professions, such as doctors or lawyers, but do not fall under the regime of commercial leases.

The commercial lease regime in France is governed by mandatory rules relating to the tenant’s right of renewal, the minimum lease term, termination procedures and the payment of eviction compensation. Since the enactment of the Pinel Law in 2014, additional regulations govern the allocation of charges, taxes and repair obligations between the parties.

However, rent and rental adjustments remain subject to the principle of contractual freedom. Parties are generally free to determine the initial rent and its subsequent variation, except where specific statutory rules impose caps or adjustment mechanisms, particularly upon renewal.

The standard term for a commercial lease in France is nine years. The tenant may terminate the lease at the end of each three-year period, while the landlord’s right to early termination is restricted to limited circumstances, such as the reconstruction of the premises.

In terms of maintenance and repair, leases are typically structured on a net basis, meaning tenants bear the costs of ordinary maintenance and repairs. Traditionally, landlords could transfer the obligation to carry out major repairs (as defined under Article 606 of the Civil Code) to the tenant through contractual provisions. However, since the enactment of the Pinel Law in 2014, landlords can no longer impose major structural repairs on tenants. In addition, leases must now clearly set out the detailed allocation of charges, taxes and repair obligations between the parties.

Rent is usually payable either monthly or quarterly, most often in advance. A forthcoming legislative reform aimed at simplifying economic life would allow tenants to require monthly payment terms.

In principle, rent under a commercial lease in France may vary during the lease term through contractual and statutory mechanisms.

Most leases include an indexation clause allowing for automatic adjustment of the rent based on a chosen index.

In addition, a statutory rent adjustment may occur every three years under the mandatory triennial rent review rules. A statutory review may also be triggered if application of the indexation clause leads to an increase or decrease in rent of more than 25% since it was last set by agreement or by the courts.

The method for determining new rent depends on the basis for the rent variation.

If the rent adjustment results from a contractual indexation clause, the new rent is automatically calculated by applying the agreed index to the existing rent.

If the rent is revised under the statutory triennial rent review or upon lease renewal, the new rent is, as a rule, determined by reference to the variation of the applicable statutory index.

However, if specific legal or contractual conditions are met – such as significant modification of the premises or activities, or an express waiver of the rent cap (known as déplafonnement) – the rent may instead be reassessed based on the rental value of the premises, taking into account prevailing market conditions.

The application of VAT to a commercial lease is not automatic. If the lease does not provide for it, the rent is not subject to VAT. In practice, leases very often stipulate that the rent is subject to VAT.

When the rent is not subject to VAT, the landlord is generally liable for a contribution (contribution sur les revenus locatifs) equal to 2.5% of the rent amount, half of which may be recharged to the tenant.

In addition to rent, tenants are typically required to bear several costs at the commencement of a lease. These may include the payment of a security deposit, a key money amount (pas de porte) where applicable, marketing or agency fees related to the commercialisation of the premises, and the costs associated with the drafting and registration of the lease agreement.

Where the premises form part of a co-ownership structure, the expenses are shared among the co-owners according to their share of ownership on a pro rate basis.

Under commercial leases, landlords typically recharge these costs to tenants. However, following the Pinel Law enacted in 2014, such recharges are only enforceable if expressly provided for in the lease agreement.

Electricity and water supplies are typically metered separately, either through individual meters or through submeters, allowing direct billing to each tenant. In the absence of individual meters, consumption is generally allocated among the tenants based on the surface area they occupy.

If real estate taxes are primarily the responsibility of the landlord, it is common practice for commercial leases to provide that these taxes are recharged to the tenant, in whole or in part. Such recharging is only enforceable if it is expressly stipulated in the lease agreement. However, not all taxes can be recharged to the tenant.

Several types of insurance typically apply to leased real estate. Building insurance is generally contracted by the landlord, and the cost may be recharged to the tenant if expressly provided for in the lease agreement.

Tenants are required to take out rental risk insurance to cover damage caused by fire, explosion or water damage originating within the leased premises. Compliance with this obligation is often reinforced through a resolutory clause (clause résolutoire) allowing the landlord to terminate the lease in the event of non-compliance.

Following the COVID-19 pandemic, insurers largely refused to indemnify business interruption losses resulting from administrative closures. This led to substantial litigation. Courts generally upheld the insurers’ position, applying the insurance policies strictly and noting that business interruption coverage often required a prior insured event (such as material damage), which was not triggered merely by government-ordered shutdowns.

Landlords commonly impose restrictions on the tenant’s use of the premises through a purpose clause (clause de destination) in the lease agreement. This clause strictly defines the permitted activities, and any change of use by the tenant requires the landlord’s prior consent.

French law provides tenants with a mechanism known as déspécialisation, allowing them to modify or expand the permitted use under certain conditions.

• Partial change of activity (déspécialisation partielle): The tenant may add activities that are related or complementary to those specified in the lease. This requires notifying the landlord, who has two months to object; otherwise, the change is deemed accepted.
• Full change of activity (déspécialisation plénière): The tenant seeks to change to entirely different activities. This requires the landlord’s consent or, failing that, judicial authorisation. The landlord may be entitled to compensation if the change causes prejudice or increases the rental value.

Certain activities, particularly those requiring technical installations such as extraction ducts, may be subject to additional restrictions or conditions.

Furthermore, local urban planning regulations, as set out in the PLU, may impose zoning restrictions that define the authorised uses of properties, distinguishing between commercial, artisanal, professional or residential activities.

Tenants are permitted to carry out fit-out works, provided that the alterations are compatible with the agreed use of the premises and do not modify the structure or fundamental purpose of the property. Leases generally require the tenant to obtain the landlord’s consent before carrying out any works.

At the end of the lease, tenants may be required to restore the premises to their original condition, and the lease may also contain an accession clause under which improvements become the landlord’s property without compensation.

French law mainly distinguishes between commercial leases and residential leases.

Commercial leases are intended to cover all categories of real estate assets used for economic activity. While the legal nature of the lease remains the same, the level of protection granted to the tenant may vary depending on the type of asset. For instance, the tenant of office premises will generally benefit from less legal protection than the tenant of retail space. Moreover, certain regulations may apply with varying intensity depending on the asset class. However, the core legal framework remains broadly the same across most asset categories.

Residential leases are governed by specific legislation, which imposes mandatory rules aimed at protecting tenants, including rent control measures, minimum lease terms and restrictions on termination.

The protective measures adopted during the coronavirus outbreak were broadly similar across all real estate asset classes.

The opening of insolvency proceedings does not automatically terminate the lease. The court-appointed liquidator has exclusive authority to decide whether to continue or terminate the lease. The landlord must file a proof of claim (déclaration de créance) for any unpaid rent due prior to the commencement of insolvency proceedings.

Rent and charges accruing during the continuation of the lease must be paid as debts necessary for the ongoing business operations. If these amounts are not paid, the landlord may request judicial termination of the lease.

By way of exception to general French law, a commercial lease does not automatically terminate upon expiry of its term. In the absence of action by either party, the lease continues under tacit renewal on the same terms. Moreover, tenants benefit from a statutory right to renew their commercial lease.

At the end of the lease, both the landlord and the tenant may initiate termination.

The tenant may terminate the lease by giving six months’ notice before the expiry of each three-year period or at the end of the lease.

The landlord, for their part, may either serve notice to terminate the lease with an offer to renew or serve notice without offering renewal. In the latter case, the landlord must pay eviction compensation, unless a serious and legitimate reason justifies refusal of renewal.

If the tenant receives a notice of termination without renewal and does not vacate the premises, they retain the right to remain in occupation until the eviction compensation has been paid. During this period, the tenant continues to be legally present in the premises.

However, once the tenant is no longer entitled to remain – either due to the lease’s expiry without compensation or following a court decision – their occupation becomes without right or title, and the landlord may initiate eviction proceedings and claim occupancy indemnities.

Under French law, and in the absence of any contractual restriction, a tenant is entitled to assign its leasehold interest. However, in practice, most commercial leases restrict or prohibit such assignments, requiring the landlord’s prior written consent or imposing specific conditions.

An important exception exists for the assignment of the lease as part of the sale of the tenant’s business (fonds de commerce). In this case, any clause prohibiting the assignment is deemed null and void under Article L.145-16 of the Commercial Code.

When an assignment is authorised, leases commonly provide that the assignor and assignee remain jointly and severally liable for the performance of the lease obligations.

Subleasing is generally prohibited under Article L.145-31 of the Commercial Code unless expressly authorised in the lease or approved in writing by the landlord.

Under a commercial lease, the tenant may terminate the lease at the end of each three-year period by giving six months’ prior notice, served either by a bailiff or by registered letter with acknowledgment of receipt.

The landlord may also terminate the lease at the end of a three-year period, but only in specific cases provided by law, such as demolition and reconstruction, restoration of the premises to residential use, or urban renewal or property restoration operations.

At lease expiry, the landlord may give notice to refuse renewal. In that case, eviction compensation must be paid to the tenant, unless the landlord can demonstrate a serious and legitimate reason to deny renewal without compensation.

In the event of a contractual breach by the tenant, the landlord may rely on a termination clause – if such a clause has been expressly stipulated in the lease – or seek judicial termination of the lease.

Reciprocally, the tenant may also bring an action for judicial termination in case of serious default by the landlord, such as failure to deliver peaceful enjoyment of the premises.

Under French law, a commercial lease is not required to be in writing and may be concluded orally.

Leases with a term of less than 12 years are not subject to mandatory registration or land record publication. However, parties may voluntarily register the lease for evidentiary purposes.

Leases with a term exceeding 12 years must be executed in a notarised form and published at the French Land Registry (service de la publicité foncière), in order to ensure enforceability against third parties.

Registration fees for publication are calculated at a rate of 0.70% of the cumulative amount of rent and charges payable over the duration of the lease. In practice, these costs are usually borne by the tenant, although allocation may be contractually agreed otherwise.

In the event of tenant default, a landlord may enforce a termination clause included in the lease. The landlord must serve a formal notice (commandement de payer) through a bailiff, expressly referring to the termination clause. If the tenant fails to remedy the breach within one month, the lease is deemed automatically terminated. The landlord must then apply to the summary judge to obtain a ruling formally acknowledging the termination. The timeframe for obtaining eviction varies by jurisdiction but generally takes up to one year.

If the lease does not contain a termination clause, the landlord must seek judicial termination, a process that typically takes longer.

In both cases, whether termination is sought under a contractual termination clause or through judicial proceedings, courts may grant the tenant grace periods for payment, which may extend up to 24 months.

Under French law, leases produce effects only between the parties, and third parties cannot normally terminate them.

An exception exists in the case of expropriation for public utility purposes, where the lease ends automatically on the date ownership is transferred to the public authority. In such cases, the tenant is entitled to compensation for the loss of leasehold rights, relocation costs and loss of clientele. This compensation is paid by the expropriating authority.

In rare cases, a lease may be declared null and void by a court if it was concluded in breach of public policy rules. For example, under Article L.631-7 of the Construction and Housing Code, using residential premises for another purpose without prior authorisation may lead to the lease being annulled at the request of the municipality.

A third party may also act indirectly, through an oblique action, if the tenant’s failure to act harms the third party’s rights.

In the event of tenant breach and lease termination, landlords cannot claim the full amount of rents due until the end of the lease as automatic damages. Damages must correspond to the actual loss suffered.

Penalty clauses are enforceable but may be reduced by the court if deemed excessive under French law.

Landlords typically require tenants to provide a security deposit, usually by bank transfer. Alternatively or additionally, other forms of security such as a first-demand bank or corporate guarantee may be accepted.

The security deposit may be applied against unpaid rent, charges, taxes, reinstatement costs and any initial damages resulting from the tenant’s breach.

Under French law, the two most common structures used to price construction projects are:

• fixed-price construction contracts (marchés à prix forfaitaire), under which the contractor undertakes to perform the works described in the contractual documents for a lump sum agreed in advance – this structure transfers the risk of cost overruns to the contractor and is frequently used in real estate development; and
• Measured works contracts (marchés à prix unitaire or marchés au métré), where the contractor is paid based on unit prices applied to the quantities of work actually executed. This model allows greater flexibility in project scope and is often used when quantities cannot be precisely established at the outset.

In France, the identity and legal status of the project owner (maître d’ouvrage) determine the overall contractual structure of the construction operation. The project owner may be:

• the final owner of the property, directly contracting for the design and construction works;
• a real estate developer, acting under a property development contract (contrat de promotion immobilière), and delivering the project on behalf of the future owner;
• a tenant under a construction lease (preneur à bail à construction), who builds and occupies the property for the lease term; or
• a private partner in a public-private partnership, responsible for designing, financing, building and operating public infrastructure before returning it to the public authority at the end of the contract.

Regardless of the project owner’s identity, the construction may be organised using various delivery models, including:

• separate trade contracts (marchés en corps d’état séparés), where the project owner enters into individual contracts with each contractor and directly assumes co-ordination responsibilities; and
• a general contractor arrangement, under which a single contractor manages the entire construction process.

In both models, a project manager (maître d’œuvre) may be appointed to oversee design, regulatory compliance and site co-ordination. The maître d’œuvre does not carry out the works but ensures proper execution on behalf of the project owner.

Construction risk in France is managed through a combination of statutory warranties, mandatory insurance and contractual safeguards.

French law provides for three mandatory warranties:

• the one-year defect liability period (garantie de parfait achèvement);
• the two-year warranty on equipment (garantie de bon fonctionnement); and
• the ten-year structural warranty (garantie décennale), which covers defects affecting the strength or fitness for purpose of the building.

In addition to these warranties, contractors are required to carry decennial liability insurance (assurance responsabilité décennale), and project owners must obtain construction damage insurance (assurance dommages-ouvrage).

It is also common for contracts to provide for the withholding of 5% of the contract price (or a bank guarantee in lieu), which may be retained by the project owner to cover defects or incomplete works at the time of delivery.

While contractual limitations of liability and waivers of certain categories of damages may be negotiated, such clauses remain subject to legal limitations and may be invalidated, particularly where they conflict with mandatory warranties or public policy.

Schedule-related risk on construction projects is typically addressed through contractual provisions imposing daily penalties for delay, which apply if the contractor fails to meet agreed milestone or completion dates.

However, the contractor may be released from liability in the event of delay caused by contractually defined excusable events, such as force majeure, exceptional weather conditions or delays attributable to the project owner. Only events expressly identified in the contract will suspend the application of penalties, unless a statutory force majeure event applies.

It is common practice in France for project owners to require additional forms of security to guarantee contractor performance, especially for high-value or risk-sensitive projects.

A frequently used instrument is the first-demand guarantee, under which a bank or financial institution undertakes to pay a fixed amount to the project owner upon simple request, without the need to prove breach or loss.

Project owners may also withhold part of the contract price in escrow until completion and the lifting of any reservations recorded at acceptance. This mechanism ensures that the contractor remedies any defects before final payment is released.

Under French law, contractors and certain service providers may secure unpaid claims by placing legal encumbrances on the property they have worked on.

The main mechanism is the builder’s privilege (privilège du constructeur de l’ouvrage), available to contractors and subcontractors with a direct contractual link to the owner. This privilege must be registered within two months of completion of the works to be enforceable against third parties.

In addition, a contractor may request a judicial mortgage after obtaining a court judgment, or apply for a conservatory mortgage with prior authorisation from a judge in case of payment risk.

To lift a registered privilege or mortgage, the owner may either pay the outstanding debt, deposit the corresponding amount into escrow (consignation) or seek release through an amicable or judicial procedure if the claim is disputed.

A building is deemed to be completed once the works and associated essential equipment can be operated in compliance with the agreed use. Parties are free to provide for any other definition of completion, except for residential buildings subject to mandatory requirements.

From an urban planning perspective, the owner has the obligation to file a declaration of completion and compliance of the works. Upon receiving this declaration, the administrative authorities have from three to five months to verify that the works are compliant with the administrative authorisation obtained. Thereafter, the owner can request a certificate of non-opposition to the compliance of the works.

Specific administrative authorisations may be necessary in order to be able to use the building in some limited cases (eg, premises to be opened to the public).

The sale of a new building or a building plot by a professional seller is subject to real estate VAT. Sales of properties completed more than five years ago, sales by private individuals, transactions for a symbolic price and gratuitous transfers are exempt from VAT. The applicable VAT rate varies depending on the nature and location of the property or building plot, but the standard rate is 20% (in some cases, the rate may be reduced to 10% or 5.5%).

There are methods available to mitigate transfer, recordation, stamp or other similar tax liabilities when acquiring large real estate portfolios, as follows.

• Acquisition through shares: Instead of purchasing the property directly (asset deal), investors acquire shares in the company that owns the real estate. This structure may significantly reduce transfer taxes – typically to 5% for non-listed real estate companies or even 0.1% for listed entities.
• Depreciation deductions: While not a direct transfer tax mitigation, owning real estate through a corporate vehicle allows for annual depreciation of the asset, reducing the company’s taxable income and improving after-tax returns.
• Creation of a SIIC: A listed real estate investment company (SIIC) can benefit from specific tax exemption schemes.

Other mechanisms, such as partial asset contributions, mergers or sales under the VEFA regime (sales in future state of completion), may offer additional tax planning opportunities – particularly where VAT is applicable and recoverable, thus avoiding standard transfer duties.

In France, businesses occupying commercial premises are subject to a business property contribution (cotisation foncière des entreprises; CFE), a local tax based on the rental value of the property used. This tax is payable annually to the municipality.

Additionally, the property owner must pay the taxe foncière (property tax), which may sometimes be passed on to tenants through lease agreements.

Moreover, the office tax – in Île-de-France and the Provence-Alpes-Côte d’Azur (PACA) region – is an annual tax that applies to office premises, commercial spaces, storage areas and parking facilities. It is paid by the owner of the premises or the holder of a real property right over them. For commercial premises, the landlord can pass the cost on to the tenant. Some premises or offices are exempt from this tax (professional premises or offices under 100 m², commercial premises under 2,500 m², etc).

Foreign investors earning rental income from real estate located in France are subject to French income tax at a minimum rate of 20% on net income, after deductible expenses. In addition, social charges apply. Rental income must be declared annually by the investor, although withholding may be required at the source in some cases.

Capital gains from the sale of French property by non-residents are taxed at a flat rate of 19%, plus social charges depending on the investor’s residency and social security affiliation. However, full exemptions apply after 22 years of ownership for income tax, and after 30 years for social charges. A surtax may apply for high capital gains.

Additionally, distributions made by French listed property companies (SIICs) to foreign investment funds (such as organismes de placement collectif; OPCs) are subject to a 15% withholding tax.

There are tax benefits to owning real estate in France.

If the property is owned through a company subject to corporate tax, depreciation of the building can be deducted from taxable income. This benefit does not apply to individuals taxed under personal income tax.

Individual landlords can deduct expenses such as mortgage interest, maintenance, property taxes and management fees from rental income.

Certain tax incentive schemes, like the Pinel or Malraux laws, also offer income tax reductions for investment in specific types of properties (eg, new, renovated or historic buildings).