Discount for occupation (décote pour occupation)

An occupied property does not sell like a vacant one. The buyer cannot live in it, cannot choose his tenant, receives a rent that may be below the market and must comply with the rules on notice. The discount for occupation measures the gap between the vacant-possession value and the tenanted value. It is not a fixed figure: it depends on the type of lease, its remaining term, the level of the rent against the market, the occupier’s solvency and the depth of the investor market for that type of property.

The Charte de l’expertise en évaluation immobilière (French property valuation charter) states it in tax matters: the tax authority recognises taxpayers’ right to apply a discount against the market value of properties sold with vacant possession, the accepted allowance varying with the type of lease; the more protective the lease is for the tenant, the higher the allowance. For business premises, the Charter adds a nuance: on the investment market, the value of an occupied building may exceed its vacant value.

Where the rule comes from

Title II § 8.14 of the Charter (6th edition, November 2025) is the professional reference. The protection of the occupier, which underpins the discount, comes from statute: the law of 6 July 1989 for dwellings (three or six-year lease, notice only on stated grounds, protection of elderly tenants on low incomes), the statute of commercial leases for business premises (right to renewal and eviction compensation). The market, for its part, sets the size of the discount, and it is the market that I observe.

In a valuation report

I establish the vacant-possession value by comparison, then analyse the lease: type, commencement date, expiry, rent, indexation, possibility of giving notice, age and situation of the occupier. I quantify two things: the loss of rent against the market over the likely period of occupation, and the weaker demand for an occupied property, which I measure from sales of comparable let properties. I cross-check the result by capitalising the passing rent at the market yield for let properties. The report presents the vacant value, the reasoned discount and the tenanted value, and notes that the discount may be nil, or even negative, for well-let business premises.

Example

A house with a vacant-possession value of €260,000, let at €780 per month under a residential lease renewed for the past eight years to a 74-year-old tenant of modest means, which limits the possibilities of notice. Market rent: €950. Discounted loss of rent over a likely occupation of ten years: €17,000. Sales of comparable let houses in the department: 15 % to 20 % below vacant value. Capitalisation of the passing rent at 4 %: €234,000. I adopt a discount of 18 %, giving €213,000. The same property let six months ago to a young couple at the market rent would have justified a discount of around 8 % to 10 %.

Not to be confused with

The occupation indemnity is the sum owed by an occupier without title or by a joint owner who has sole use of the property; it does not reduce the value of the property. Division of ownership (démembrement: usufruct and bare ownership) is a legal division of the property, not occupation under a lease.