Three reported rulings of 2017 clarify what an evicted tenant may claim and the framework in which the expert works. In the first, a shop in an outlet village was evicted before its contract, reclassified as a French commercial lease, gave it a right to eviction compensation (indemnité d’éviction, the sum owed to a tenant whose lease is not renewed); the court of appeal refuses to compensate the loss of the right to remain in the premises, in its view already covered by that compensation. The Cour de cassation (the French supreme court for civil matters), on 30 November 2017, quashed: “the loss arising from the loss of the right to remain in the premises until payment of the eviction compensation is distinct from the loss repaired by that compensation”. The same ruling rejected the criticisms of the expert, whose provisional figures had been submitted to the parties’ written observations, “regardless of the absence of a preliminary report”. On 7 September 2017 the Court held that a landlord who has exercised its option and offered compensation “may deny the tenant the right to statutory protection as long as no final decision has been given on the setting of the eviction compensation”. And on 9 November 2017 it set the starting point of the limitation period for withdrawing an offer of renewal on serious grounds at the day the landlord learned of the breach. For the valuer, three markers on what the compensation contains and on how to conduct the assignment.
The facts
In the first case, a contract of 24 May 2000 grants a company, for an indefinite period, the enjoyment of a unit in the La Vallée Village shopping centre. On 4 March 2011 the grantor serves notice. A final ruling of 14 January 2014 reclassifies the contract as a commercial lease, annuls the notice, finds that the company cannot be reinstated in the premises and orders an expert appraisal of the eviction compensation. After the report is filed, the company asks to be reinstated, alternatively for the appraisal to be annulled and another expert appointed, criticising the expert’s impartiality, the lack of a preliminary report and the method, and claims compensation for the loss of its right to remain in the premises. The Paris court of appeal, on 22 March 2016, refuses reinstatement, upholds the appraisal, sets the compensation and rejects the head of loss relating to the right to remain, in its view already taken into account by the compensation.
In the second, the owner of commercial premises let on renewal from 1 January 1996 serves on 28 September 2009 a notice for 31 March 2010 with an offer of renewal; on 6 March 2012 it serves a new notice refusing renewal with an offer of eviction compensation, then, on 20 July 2012, sues the tenant for eviction, denying it statutory protection for lack of registration at the date of the notice and at its effective date. The Paris court of appeal, on 30 March 2016, holds the action time-barred, two years having passed since the effective date of the notice.
In the third, a landlord serves on 14 February 2008 a notice with an offer of renewal and eviction compensation; discovering on 7 March 2012 activities not authorised by the lease, it gives the tenant formal notice on 4 January 2013, withdraws its offer on 18 March 2013 on serious and legitimate grounds, then sues on 19 April 2013. The Toulouse court of appeal, on 17 May 2016, upholds the refusal of renewal.
The decision
First ruling (Cass. 3e civ., 30 November 2017, no. 16-17.686, reported): on the expert, the court of appeal, having found that the lawyer in question “had no longer been VR services’ counsel for nearly a year” at the time of the appointment, “could deduce that there was no breach by the expert of the principle of impartiality”; having noted “that the expert had communicated his provisional figures and asked for a summary written submission, which he received from both parties, who had been able to respond to the proposed calculation method and make their observations”, it could hold “that there was no breach of the adversarial principle, regardless of the absence of a preliminary report”. On the loss, under articles L. 145-14 and L. 145-28 of the Commercial Code, quashed: “the loss arising from the loss of the right to remain in the premises until payment of the eviction compensation is distinct from the loss repaired by that compensation”.
Second ruling (Cass. 3e civ., 7 September 2017, no. 16-15.012, reported): “the landlord who has offered to pay eviction compensation after exercising its option may deny the tenant the right to statutory protection as long as no final decision has been given on the setting of the eviction compensation”. Quashed.
Third ruling (Cass. 3e civ., 9 November 2017, no. 16-23.120, reported): “the limitation period of the action to withdraw the offer of renewal of the lease on serious and legitimate grounds runs from the day the landlord learned of the breach on which its refusal is based”. Dismissed.
What this changes for valuation
Loss of the right to remain comes on top of the eviction compensation. A tenant entitled to eviction compensation is also entitled to stay in the premises until it is paid, against an occupation indemnity; if deprived of that, because the landlord evicted it or because the premises were not returned after a notice was annulled, it suffers a loss of its own, distinct from the one repaired by the eviction compensation. The valuer quantifies it separately: margin lost between the forced departure and the date the compensation is paid, cost of temporary premises, or, if trading stopped, the lost chance of continuing. The report therefore keeps two accounts, that of the eviction, described in the glossary entry indemnité d’éviction, and that of the interim period. The article on the return of ancillary heads without relocation shows what becomes of the first account when the tenant does not relocate.
Provisional figures submitted for observations satisfy the adversarial principle. The expert is not bound to file a formal preliminary report if the parties received the method and provisional figures, could respond with a summary submission and did so. Practice remains to circulate a pré-rapport, but what matters is that each party could discuss the method before the final report. An expert who expects a challenge dates and keeps those exchanges. On impartiality, a past link between someone close to the expert and one party’s counsel, ended nearly a year before the appointment, is not enough to disqualify; the article on the independence of the court expert recalls what the expert must disclose on appointment.
Statutory protection can be disputed to the end. A landlord which, after exercising its droit d’option, offers compensation may still deny statutory protection, for instance for lack of registration, as long as the compensation has not been finally set. For the expert appointed to value that compensation, this means the assignment may be called into question along the way: from the outset they check the conditions of protection, registration at the relevant dates, actual trading, and flag in the report the points that could deprive the tenant of any right to compensation, without ruling in the judge’s place. The article on the time-barred tenant who becomes an occupier without title shows another case where the right to compensation disappears.
Withdrawal on serious grounds is time-barred from discovery. A landlord which offered renewal may withdraw it on discovering a serious breach, and its action is barred two years from the day it learned of it, not from the date of the notice. In an eviction file the valuer therefore checks whether a withdrawal was served and on what date the alleged breach was discovered, since the outcome of that action governs the very existence of the compensation being quantified. The article on notice with an offer of renewal on different terms deals with another form of notice that gives a right to compensation.
A reclassified contract is valued like a lease. The first ruling concerns a fee in an outlet village, reclassified as a commercial lease. The valuer then reconstructs the rent element within the fee, to establish the leasehold right and the value of the business, separating the services invoiced by the centre. The guide My landlord refuses to renew my commercial lease describes the documents to gather.
Registration must cover the activity carried on in the premises. In a reported ruling of 22 September 2016 (Cass. 3e civ., no. 15-18.456), the Cour de cassation quashed a ruling which had recognised a tenant’s right to eviction compensation, and ordered an expert appraisal to quantify it, although that tenant was registered in the trade and companies register for an activity which was not the one actually carried on in the premises. The landlord had refused renewal with an offer of compensation, then sought forfeiture of that right, without having formally called on the tenant to regularise; the Court held that “the denial of the right to the statutory protection of commercial leases on the ground of a failure to register need not be preceded by a formal demand”. The check on the conditions of statutory protection at the start of the assignment therefore also covers the match between the registration extract (K bis) and the activity observed on site. The article on registration for the activity carried on presents that ruling.
What the valuer takes from it
- Loss of the right to remain in the premises until the eviction compensation is paid is a distinct loss, quantified separately.
- Provisional figures communicated to the parties and discussed through written submissions satisfy the adversarial principle, even without a formal preliminary report.
- An old, ended link between someone close to the expert and a party’s counsel does not establish a lack of impartiality.
- A landlord which has exercised its option may deny statutory protection until the compensation is finally set; the expert checks the conditions of protection from the start.
- The action to withdraw an offer on serious grounds is barred two years after discovery of the breach.
Further reading
The Eviction compensation page describes the assignment, its timescale and its fee. The guide My landlord refuses to renew my commercial lease and the glossary entries indemnité d’éviction, indemnité d’occupation, droit d’option and pré-rapport complement this article. On the same theme: Eviction compensation: once time-barred, the tenant has no title and Eviction compensation: returning the extras, and who must pay. The decisions are available on Légifrance: no. 16-17.686, no. 16-15.012 and no. 16-23.120.
What next
A tenant evicted before being paid, a landlord disputing statutory protection during the appraisal, or a challenged expert report?
I establish the eviction compensation and the losses that come on top of it, including the loss of the right to remain, with a provisional figure submitted to the parties before the report, for the tenant, the landlord or the court.
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