Rental management or free management: definition
La rental management, also called free management, is a contract by which the owner of a business or a craft fund entrusts a person with the management of his operation in return for a fee and a security deposit. .
In a lease management contract, the owner of the fund is called "the lessor"; the operator is the tenant, called “managing tenant”.
The advantages of rental management
For the managing tenant:
The choice of rental management is often justified by a person who wants to carry on a business but who does not have sufficient capital to buy a fund immediately.
Free management has various advantages for the managing tenant:
- it allows him to assess the viability of the company, in the event of a takeover of the fund, at the end of the rental contract,
- it allows him to minimize the financial risks by not going into debt for the acquisition of the fund,
- the fee paid as part of the management lease is deductible from the company's results.
For the owner:
Offering a free management contract is a way for the owner to keep a fund that he does not want or cannot use, when he finds himself, in particular, in the following situations:
- he can no longer use the fund for health reasons,
- he is subject to a provisional ban on operating,
- he cannot exploit the fund he has acquired by way of inheritance (case of civil servants),
- it is the subject of a collective procedure…
The disadvantages of rental management
- For the managing tenant:
- The tenant manager is responsible for debts contracted during operation except during the first 6 months when the owner is jointly and severally liable,
- the tenant does not own anything at the end of the contract. Even if he has significantly increased the value of the fund, he is not entitled to any compensation.
- at the end of the lease management contract and unless otherwise stipulated, the tenant is not entitled to automatic renewal and the owner is entitled to take back his property without having paid compensation.
- For the owner:
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Lease management also involves risks for the owner of the fund:
- he is jointly and severally liable, until the publication of the lease-management contract, for the debts of the tenant-manager (e.g. supplier debts, indirect taxes, etc.),
- the lease-management contract is subject to strict formalism and the setting up of lease-management presupposes a long period of prior exploitation of the fund,
- if the goodwill is not sold at the end of the lease-management contract, the owner recovers it in the state where it is.
- the value of the goodwill may drop in the event of poor management by the tenant manager.
The terms of free management or lease management
To set up a lease management contract, several conditions are required:
- In order to avoid any dispute, it is necessary to make an inventory and list the furniture, equipment and goods
- The free manager operates all the elements of the goodwill, without reporting to the lessor.
- The indication of its registration number in the commercial register, on any document relating to its commercial activity
- The payment of the due dates of the fee, this must be included in the contract, it can be fixed or variable (depending on the turnover)
The lease-management contract must contain:
- the contact details and information relating to the owner of the business and the tenant manager
- the duration of the management lease (for a fixed or indefinite period)
- the amount and terms of payment of the fee
- the obligations of each of the parties
- the conditions for terminating the free management contract
- the lease-management contract may contain a unilateral promise to sell to be exercised by the lessee-manager at the end of the contract
- The free management contract must be published in the Journal des Annonces Légales (JAL) within 15 days of its signature.
The end of the free management contract or lease management
At the end of the free management contract, its owner will be able to recover his business without paying any compensation. This end of contract entails an advertisement in the journal of legal announcements and in the Official Bulletin.
The owner of the goodwill, after a period of 60 days, must return the amount of the security deposit, less any sums paid to creditors.