A commercial lease (bail commercial, the French statutory business lease) covers one room in a care home for dependent elderly people. It provides for an annual revision of the rent “with a guaranteed net increase rate of 1.5 % per year”. The company operating the home asks for the clause to be deemed unwritten and for the increases of the last five years to be refunded. The Lyon Court of Appeal dismisses the claim: the price of occupation is fixed at signature for the whole term, and a flat-rate increase clause is lawful. On 3 September 2026 the Cour de cassation (the French supreme court for civil matters) quashed that ruling in a reported decision: a clause that raises the rent periodically, automatically and at a flat rate, with no cap and no time limit, does not fix the initial rent, it organises an upward-only revision, and it defeats the public-policy rules on rent revision. For the valuation of the premises and of the leasehold right alike, the rent path is no longer the one written in the contract.
The facts
A couple lets to the company Semillance, under a commercial lease, a room in a care home for dependent elderly people that the company operates. The lease provides that, at the end of the second full year after it takes effect, the rent will be revised annually on the following 1 January, “with a guaranteed net increase rate of 1.5 % per year”.
The tenant sues the landlords to have the clause deemed unwritten and to recover the rent unduly paid over the last five years. The Lyon Court of Appeal, on 13 March 2025, dismisses the claims: the clause depends on no index or variable, it guarantees the landlord a fixed increase of 1.5 % a year, and since the price of occupation is thus fixed from the conclusion of the lease for its whole term, save for the three-yearly revision, it is a flat-rate rent increase clause, which is lawful.
The decision
The third civil chamber quashed the judgment (Cass. 3e civ., 3 September 2026, no. 25-14.904, reported), under articles L. 145-15, L. 145-33, paragraph 1, L. 145-37, L. 145-38 and L. 145-39 of the Commercial Code. It first draws the line: “the determination of the original rent of a commercial lease falls within the parties’ freedom of contract”, and “any clause that defeats the operation of the statutory rent revision must be deemed unwritten”. It recalls that a stepped-rent lease, in which the parties provide at signature “rent levels applicable at fixed dates up to a ceiling determined in advance”, is a way of fixing the original rent that does not obstruct the statutory revision (3e Civ., 14 May 1980, no. 79-10.511), and that an indexation clause operating only upwards is deemed unwritten (3e Civ., 12 January 2022, no. 21-11.169).
The question is “the lawfulness of a flat-rate periodic rent increase clause stipulated in a commercial lease, with no limit of duration or ceiling”. The answer fits in one paragraph: “Unlike a stepped progressive rent, that clause, in that it stipulates as an ancillary term that the rent will increase periodically, automatically and at a flat rate, without providing any ceiling or time limit even though a commercial lease does not automatically end at its contractual term, does not determine the initial price of the lease but organises its automatic upward-only revision, which may exceed the variation of the indices.” Such a clause “thus has the effect of defeating the public-policy rules on rent revision, and must be deemed unwritten”.
By holding the clause lawful although it “provided for a flat-rate automatic increase of the price of the lease with no time limit, so that it amounted to an upward-only rent revision clause”, the Court of Appeal failed to draw the legal consequences of its own findings. Full quashing, remittal to the Lyon Court of Appeal differently composed, the landlords bearing costs and 3,000 € under article 700.
What this changes for valuation
Three clauses, three regimes. A stepped rent, with amounts fixed at fixed dates up to a ceiling, remains a way of fixing the initial rent. Indexation on the commercial rents index (ILC) or the tertiary activities rents index (ILAT) remains valid if it works both up and down and leaves open the revision of article L. 145-39 beyond a one-quarter variation. A perpetual flat-rate rise, with no cap and no term, falls, because a commercial lease continues beyond its term and the clause would have run indefinitely. The ruling of 22 June 2022 commented on here, which upheld a 4.5 % annual rise by placing it outside the indexation regime, can no longer be read without this reservation: what now matters is the existence of a time limit or a ceiling.
The face rent is no longer the reference. A care-home room, like a flat in a tourist or student residence, is sold to investors with a commercial lease signed by the operator, and a guaranteed rent progression is part of the sales pitch. An income valuation of the premises can no longer capitalise that progression. It starts again from the base rent and the statutory revision, three-yearly and capped by the index, or from the contractual indexation if it is regular. The French valuation charter (Charte de l’expertise en évaluation immobilière, 6th edition, November 2025, Title III, § 1.4 and 1.5) distinguishes market rental value from face rent and economic rent; here the face rent contains a part the court can erase.
A refund liability. An action to have a clause of a commercial lease deemed unwritten is not subject to limitation (3e Civ., 19 November 2020, no. 19-20.405); the refund of sums is limited to the last five years, which is what the tenant claimed. On a rent of 12,000 € a year, ten years of 1.5 % rises bring the rent to a little under 14,000 €; if the indexed three-yearly revision would have given only about 13,000 €, the annual gap accumulates over five years and comes off the price a buyer of the premises will pay. The valuation report flags the clause, rebuilds the lawful rent and quantifies the gap.
The leasehold right and the operator. For the tenant, the clause weighed on the effort ratio and on the value of its leasehold right, which the contractual rent eroded as it drifted from rental value. Its removal restores a rent closer to the market; the valuation of the operator’s business or shares, which capitalises a result, takes that into account at the chosen reference date.
Drafting and reading differently. A lease that wants a guaranteed progression stipulates it in steps, with amounts, dates and a ceiling; otherwise it indexes on a permitted index, in both directions. A valuer reading an existing lease classifies the clause in one of the three categories before projecting a single cash flow, and says so in the report.
What the valuer takes from it
- A flat-rate, periodic and automatic rent increase clause in a commercial lease, with no cap and no time limit, is deemed unwritten: it organises an upward-only revision.
- A stepped rent, with amounts, dates and a ceiling, and reciprocal indexation on a permitted index remain valid.
- An income valuation of the premises starts from the base rent and the statutory revision or a regular indexation, not from the guaranteed progression.
- The refund of increases over five years is a liability to quantify before a sale of the premises.
- The report classifies the rent evolution clause before projecting cash flows.
Further reading
The Commercial rent and leases page describes the assignment, its timescale and its fee. The glossary entries clause d’échelle mobile, indice des loyers commerciaux and valeur locative complement this article. On the same theme: French commercial lease: can rent rise automatically each year? and Renewal rent: advance rent and turnover rent. The decision is available on Légifrance.
What next
A rent that rises every year by contract, and a value to fix?
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