What is a "door step"?

When entering into a lease, the landlord may require the tenant to pay him a "pas de porte". What does this expression mean?

When an entrepreneur plans to occupy commercial premises, he may be required to pay a doorstep or a right to the lease to the outgoing tenant. These two notions of different legal nature should not be confused.

The doorstep:definition

The door step is a sum of money requested by the lessor from the tenant at the time of the conclusion of the lease contract. Its amount is freely fixed between the parties.

This entry fee can be thought of as:

• Additional rent :in the event of a dispute, this is a way for the landlord to protect himself against rent increases that do not follow the real rental value of the premises.
• Compensation :the key money can represent a pecuniary consideration for the depreciation of the market value of the premises and the commercial property acquired from the tenant. If the owner wishes to take over his premises, he will have to pay a significant eviction indemnity. The key money can also be considered as a pecuniary counterpart of elements of different natures, and in particular commercial advantages provided by the owner-lessor.

Finally, it can be mixed (rent supplement and allowance). Owner and tenant have every interest in specifying in the lease contract the qualification they wish to give to the door step. Otherwise, in the event of a dispute, the judges will most often consider it as an additional rent.

Writing and taxation of the doorstep

The door step must be provided for by a specific clause in the lease contract. Its amount, nature and payment conditions must be clearly specified. By signing the lease, the tenant then agrees to pay it to the owner.

The nature of the key money determines its taxation. When it is assimilated to additional rent, its amount is recognized as an expense and tax deductible over the term of the lease. When the door step is assimilated to an indemnity, the amount is recognized as an intangible asset and is not tax deductible.

Right to tenancy and no door:what are the differences?

The right to the lease should not be confused with the door step because it is not due to the owner but to the outgoing tenant. It intervenes when taking over a commercial lease. Therefore, the outgoing tenant assigns his lease in return for the payment of an indemnity:the right to the lease. The amount of the right to lease depends on the location of the premises, its characteristics and the duration of the lease before its end.

It is important not to confuse the transfer of the lease contract in return for the payment of a right to the lease with the transfer of the business as a whole. Indeed, the lease represents only one element of this fund.