The lease contract for commercial premises is governed by the same provisions as the residential lease (art. 253 to 274g CO), but has important specificities that reflect the specific needs of business tenants and institutional landlords. The duration of leases, the freedom to negotiate conditions, investments in fit-out works, key money and the transfer of the lease upon the sale of a business are all issues that PBM Avocats handles on a daily basis for its entrepreneur, investor and institutional landlord clients in Geneva and the canton of Vaud.
Specificities of Commercial Leases Compared to Residential Leases
Although the commercial lease is subject to the same legal framework as the residential lease, several practical and legal differences are worth noting. The maximum extension duration that a court may grant in case of lease termination is six years for commercial premises (art. 272b para. 2 CO) compared to four years for residential properties. This increased duration reflects the importance of location for the tenant's commercial activity and the investments they have made in their premises. Contractual freedom is also broader: the parties may freely set the lease duration, provisions on fit-out works, extension or reduction of floor space clauses, and rent indexation conditions.
Long-term commercial leases — five, ten or fifteen years — are common for large retailers, hotels and head offices. These leases often include renewal option clauses, break clauses (allowing the tenant to terminate mid-term), periodic rent review clauses and provisions on renovation works carried out by the landlord at the start of the lease (rent-free period, fit-out contribution). PBM Avocats negotiates and drafts these complex clauses to guarantee its clients a secure and balanced contract.
Duration and Renewal of the Commercial Lease
The parties to a commercial lease may choose a fixed or open-ended duration. A fixed-term lease ends automatically at the agreed date without a notice of termination being required (art. 266 CO), but does not benefit from the same statutory notice periods. If the parties continue to perform the lease after its expiry without concluding a new contract, it is converted into an open-ended lease (art. 266 para. 2 CO). The parties may insert automatic renewal clauses — unless terminated within a certain period before the expiry date — or renewal options at the tenant's sole discretion.
Renewal options are common in commercial leases: they give the tenant the unilateral right to renew the lease for one or more additional periods under the same conditions or predefined conditions. To be valid, the options must be drafted precisely (exercise period, form of exercise, renewal conditions). The registration of such options at the land register as annotations (art. 959 CC) makes them enforceable against successive purchasers of the building, which effectively protects the tenant in case of sale of the building.
Lease Transfer and Assignment of Business (art. 263 CO)
Art. 263 CO provides a special rule for commercial leases: the tenant may, with the landlord's consent, transfer the lease to a third party when they also transfer their commercial enterprise to that third party. This provision facilitates the sale of businesses by allowing the purchaser to take over not only the activity but also the premises, which are often the cornerstone of the business's value. The landlord may only refuse consent for legitimate reasons: insufficient solvency of the purchaser, nature of the new activity incompatible with the building or neighbourhood.
In practice, negotiating the lease transfer is a critical step in the sale of a business. The landlord's consent must be obtained before the finalisation of the sale, failing which the transaction may be compromised. PBM Avocats anticipates this step and coordinates the tripartite negotiation between the assignor, assignee and landlord, drafting the necessary documents (lease amendment, transfer agreement, release of the assignor from liability) to secure all parties.
Protection of the Commercial Tenant upon Termination
The commercial tenant benefits from the same legal protections as the residential tenant against abusive terminations (art. 271-271a CO) and has the right to request a lease extension in case of serious difficulties (art. 272 CO), with a maximum duration of six years. The challenge procedure is identical: the competent conciliation authority must be applied to within thirty days of receipt of the notice (art. 273 CO). PBM Avocats assesses the soundness of the notice received by the commercial tenant and advises on the advisability and chances of success of a challenge, taking into account the investments made and the importance of the premises for the business.
Frequently Asked Questions About Commercial Leases
What are the main differences between a commercial lease and a residential lease?
The commercial lease is subject to the same general provisions of art. 253 to 274g CO as the residential lease, but certain protection rules differ. The maximum extension duration that a court may grant is six years for commercial premises compared to four years for residential properties (art. 272b CO). There is no obligation to use an official form for notification of the initial rent for commercial premises in all cantons. The parties have greater contractual freedom for commercial premises, particularly regarding duration, fit-out works, tenant investments and allocation of charges. However, contractual freedom cannot infringe upon the semi-mandatory rights of the tenant.
What is a key money payment (pas-de-porte) and is it legal under Swiss law?
A key money payment (or entry right) is a sum paid by the new tenant to the landlord or the outgoing tenant in exchange for the conclusion of a commercial lease or the takeover of a business. Its legality under Swiss law depends on its legal classification. A payment made to the landlord for obtaining the lease is generally admissible if it corresponds to the commercial value of the location (goodwill) and not to a disguised rent. A payment made to the outgoing tenant for taking over the business (clientele, fittings, stock) is a commercial transaction separate from the lease itself. PBM Avocats analyses the legal classification and tax implications of each key money payment.
Can the commercial tenant transfer their lease to a purchaser of their business?
Yes, under certain conditions. Art. 263 CO allows the tenant to transfer the lease to a third party with the landlord's consent when they also transfer the commercial enterprise to that third party. The landlord may only refuse consent for legitimate reasons (doubtful solvency of the purchaser, change of activity incompatible with the building). If they refuse without a legitimate reason, the tenant may terminate the lease with one month's notice for the end of a month. Lease transfer is common when selling a business: it must be planned and structured contractually to avoid disputes between the assignor, assignee and landlord. PBM Avocats drafts lease transfer agreements and negotiates with landlords.
Can commercial rent be indexed to the tenant's turnover?
Yes. Turnover-linked rent is admissible under Swiss law and common in shopping centres and for certain types of premises (restaurants, luxury boutiques). It may be an entirely variable rent (rare) or a combination of a fixed base rent and an additional rent calculated as a percentage of turnover above a threshold (complementary proportional rent). The proportional rent clause must be drafted precisely (turnover calculation basis, reference period, landlord's audit right) to avoid disputes. This type of clause is subject to the same anti-abuse rules as fixed rents (art. 269 et seq. CO), but the assessment of the abusive nature takes into account the specificities of the proportional rent.
What precautions should be taken regarding fit-out works by the commercial tenant?
A commercial tenant wishing to carry out fit-out works in their premises must in principle obtain the landlord's prior consent (art. 260a CO). The consent should specify the nature of the authorised works, the conditions for their execution and their fate at the end of the lease (retention or restoration). In the absence of a contractual clause on this point, the landlord may require restoration at the end of the lease at the tenant's expense (art. 267a CO). If the works increase the value of the building, the tenant may claim compensation at the end of the lease, calculated according to the remaining added value at the time of return (art. 260a para. 3 CO). PBM Avocats drafts fit-out clauses to protect the tenant's interests.