Glossary
Key money (pas-de-porte)
Sum paid by the tenant to the landlord when a French commercial lease is signed, in return for advantages linked to taking up the premises; it remains with the landlord for good.
Also called: entry fee, premium paid to the landlord, droit d'entrée.
Pas-de-porte (key money, also called droit d’entrée) is a sum that the incoming tenant pays to the landlord on signing a bail commercial (French commercial lease), on top of the rent. It is common in sought-after locations, where the landlord can choose between several candidates. Unlike the droit au bail (leasehold right), which is paid to the outgoing tenant, key money is received by the landlord and stays with the landlord whatever happens to the lease afterwards.
Its legal nature has long been debated. It may be analysed as a rent supplement paid in advance, or as an indemnity compensating various advantages: depreciation of the building, commercial advantages, the landlord’s waiver of certain rights. This characterisation, which depends on the wording of the lease and the circumstances, has consequences for tax and for the setting of the rent.
Where the rule comes from
No statute defines key money; it falls under freedom of contract and case law. The Charte de l’expertise en évaluation immobilière (the French property valuation charter, Title III, § 1.18) distinguishes it from the leasehold right: the entry fee or key money is analysed as the financial counterpart of advantages, on the signing of a lease, an amendment or a renewal, paid to the landlord and remaining definitively with the landlord. It adds that, while key money is lawful, its legal interpretation is more uncertain: a rent supplement paid in advance, or the counterpart of items of various kinds.
Where it is characterised as a rent supplement, it forms part of the respective obligations of the parties referred to in article L. 145-33 of the French Commercial Code and detailed in article R. 145-8, and may therefore weigh on the renewal rental value.
In a valuation report
I record the existence of key money in the original lease, its amount, its date and the characterisation the parties gave it. For a renewal rental value, I examine whether that payment should be treated as advance rent, to be spread over the term of the lease and added to the passing rent for comparison with the references, or as an indemnity with no effect on the rent. For an indemnité d’éviction (statutory eviction compensation under a French commercial lease), key money is not refunded as such, but it may explain a rent below market and therefore a high leasehold right.
Example
A tenant paid key money of €54,000 in 2016 for a nine-year lease, characterised in the lease as a rent supplement, at a rent of €20,000 a year. Spread over the term of the lease, the key money represents €6,000 a year; the real economic rent was therefore €26,000. At the 2025 renewal, I compare this overall burden with the references in the area, where the rental value comes to €27,000, and point out that the gap with the headline rent of €20,000 is largely explained by the key money.
Not to be confused with
The leasehold right, paid to the outgoing tenant on an assignment, and the security deposit, refundable at the end of the lease.
Sources
Does this term come up in your case?
Describe your situation: I will tell you which report answers it, in what timeframe and at what price.