A commercial tenant has built on the land it rents. Years later, the municipality acquires the land by pre-emption and then, to carry out a development scheme, ends the lease. The lease contained a levelling clause (clause de nivellement): at its end, the buildings were to be demolished or pass to the landlord without compensation. Can the evicted tenant nevertheless be compensated for its buildings, in addition to its droit au bail (leasehold right, the tenant’s right to the French commercial lease, which has a market value of its own)? And how is that compensation calculated? A reported decision of 23 November 2023 answers both questions. A second decision, of 15 June 2023, recalls who must prove what when the business is not lost.
The facts
On 12 September 1990 a town acquired by pre-emption two plots on which a couple held the leasehold right and had erected buildings. Wishing to carry out a development scheme requiring the permanent vacation of the premises, the town asked the expropriation judge to fix the indemnité d’éviction (statutory eviction compensation under a French commercial lease), no agreement having been reached. The dispute had already led to a first cassation (Cass. 3e civ., 4 March 2021, appeal no. 19-24.099); the PARIS Court of Appeal ruled on remittal on 30 June 2022 and awarded the tenants compensation including the value of the leasehold right and that of the buildings.
The town appealed to the Cour de cassation (French supreme court for civil and commercial matters). In its view, pre-emption does not affect the rights encumbering the property, the levelling clause applies where the landlord ends the lease to develop the land, and the compensation therefore cannot cover the loss of the buildings. The tenants cross-appealed: they had asked for article 555 of the French Civil Code to apply, which would have given the town the choice between the increase in value brought by the buildings, put by their private expert at €800,000 as at 22 September 2016, and the cost of materials and labour, put at €980,640.
The decision
The Cour de cassation dismissed both appeals (Cass. 3e civ., 23 November 2023, appeal no. 22-20.866, reported).
On the town’s appeal, it relied on articles L. 213-10, L. 314-1 and L. 314-2 of the French Planning Code, under which “if the works require the permanent eviction of the occupants, they benefit from the provisions applicable to compulsory purchase” (translated from the French), and on article L. 321-1 of the French Expropriation Code: “the compensation awarded must cover the whole of the direct, material and certain loss caused by the expropriation”. It stated that “the tenant remains, for the duration of the lease, the owner of the buildings it has lawfully erected on the leased land; consequently, the early termination of the lease as a result of expropriation does not deprive it of its right to compensation for those buildings”. It follows that the tenant “is entitled to compensation for the buildings it erected on the property, even where a levelling clause applies at the end of the lease, provided that, on the date of the tenant’s permanent early eviction because of development works following a pre-emption that ended the lease prematurely, it owned those buildings”. The Court of Appeal “rightly inferred that Mr and Mrs [M] were entitled to seek compensation including, in addition to the value of the leasehold right, that of the buildings erected on the pre-empted property”.
On the tenants’ appeal, the Court held that “the expropriation judge freely chooses the method for assessing the dispossession compensation, so that there is no need to apply article 555 of the Civil Code to fix the amount of the compensation due to the evicted tenant for the loss of the buildings”. The argument based on the cost of materials and labour was therefore ineffective.
A few months earlier, in an ordinary dispute over a refusal to renew, the same Chamber had dismissed a landlord’s appeal against a decision of the SAINT-DENIS DE LA RÉUNION Court of Appeal (Cass. 3e civ., 15 June 2023, appeal no. 22-16.076). The Court of Appeal had noted that the tenant’s new premises had “lesser attractiveness, accessibility and visibility” (translated from the French), found that the eviction had been accompanied by a loss of custom and turnover, “adopted the method of calculation proposed by the expert to assess the value of the business in the light of that turnover and found that the landlord had not discharged its burden of proving that the loss caused by the non-renewal of the lease, which includes in particular the market value of the business, was lower”. It had thus “assessed the amount of the eviction compensation within its sovereign power”.
What the expert takes from it
Two separate heads: the leasehold right and the buildings. The leasehold right is valued according to the quality of the location, the remaining term, the permitted activities and the gap between the market rent and the rent paid; the Charte de l’expertise en évaluation immobilière (French property valuation charter, 6th edition, November 2025) lists the criteria (Title III, § 1.18). The tenant’s buildings are a separate asset: their value depends on their nature, their condition and their suitability for the activity, and is approached by depreciated replacement cost (Title III, § 1.9) or by comparison where sales of similar buildings exist. The 2023 decision confirms that the two heads are added together where the eviction occurs before the end of the lease.
The levelling clause does not apply to an early eviction. What matters is the legal position on the date of eviction: on that date, the tenant still owned its buildings. The report must therefore date the events precisely (pre-emption, notice, eviction date) and tie the compensation to the expropriation provisions, which require compensation for “the whole of the direct, material and certain loss” (Charter, Title III, § 1.20).
The judge is free to choose the method, but the method must be argued. Since the expropriation judge chooses the method, the report gains from presenting several approaches and explaining which best reflects the loss: increase in value brought to the land, depreciated reconstruction cost, value in use for the activity. In the La Réunion case, the court adopted the expert’s calculation based on lost turnover, the landlord having failed to show a lower loss. The Charter recalls that the principal eviction compensation is to be valued at a minimum by reference to the value of the leasehold right, and details the ancillary heads of compensation (Title III, § 1.19).
Further reading
The Eviction compensation page describes the assignment, its timescale and its fee. On the same theme: Eviction compensation: a photo shop in a French shopping centre, which discusses the appeal decision upheld on 15 June 2023, and Decontamination costs and eviction compensation: the 2022 ruling. The decisions are available on Légifrance: 23 November 2023 and 15 June 2023.
What next
Is a notice, a pre-emption or a development scheme ending your lease?
I value separately the leasehold right, the business if the clientele is lost, the buildings you have erected and the ancillary heads of compensation. The report is designed for the expropriation judge or the civil court.
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