A group of municipalities lets a restaurant on the shore of a reservoir. At expiry, it serves the tenants a notice “with an offer of renewal”, but makes that offer conditional on a reduction of the let area and on new maintenance obligations. The tenants leave and claim eviction compensation (indemnité d’éviction, the compensation owed to a commercial tenant whose lease is not renewed). The Bordeaux court of appeal refuses it: the notice was irregular, but it contained an offer of a new lease, and the tenants, who stayed on and then left of their own accord, can claim nothing. On 11 January 2024 the Cour de cassation (the French supreme court for civil matters), in a reported decision, quashed: “a notice with an offer to renew the lease on clauses and conditions different from the expired lease, other than the price, must be analysed as a notice refusing renewal and opening the right to eviction compensation”. For the valuer, the consequence is clear: as soon as the notice touches anything other than the rent, the eviction compensation is quantified.
The facts
On 15 January 1999 an intermunicipal tourism body, succeeded by a group of municipalities, lets a couple commercial premises for use as a restaurant. On 29 April 2016 the landlord serves them a notice with an offer of renewal, conditional in particular on a change in the extent of the let premises and on maintenance obligations for the tenants.
The tenants return the premises and sue the landlord for eviction compensation. The Bordeaux court of appeal, on 21 June 2022, dismisses the claim: the changes on which the landlord made its offer conditional, affecting both the extent of the premises and the tenants’ obligations, could not validly form part of a notice with an offer of renewal, but the notice nonetheless expressed an offer to conclude a new lease, so that it could not be analysed as a notice without an offer of renewal. The tenants appealed.
The decision
The third civil chamber quashed, under article 1103 of the Civil Code and articles L. 145-8 and L. 145-9 of the Commercial Code (Cass. 3e civ., 11 January 2024, no. 22-20.872, reported). “It follows from those provisions that, absent agreement to the contrary, the renewal of a commercial lease takes place on the clauses and conditions of the expired lease, save the power given to the judge as regards the setting of the price.” A notice “is a unilateral act which ends the lease by the sole expression of the will of the party who served it”.
“It follows that a notice with an offer to renew the lease on clauses and conditions different from the expired lease, other than the price, must be analysed as a notice refusing renewal and opening the right to eviction compensation.” By holding otherwise, the court of appeal breached those provisions. The case is sent back to the Toulouse court of appeal.
What this changes for valuation
The price is the only variable open at renewal. The renewed lease takes over the clauses of the expired lease; only the rent may be discussed, and set by the judge. A landlord who wants to reduce the area, change the permitted use, shift charges or maintenance obligations is not offering a renewal: it is refusing the lease as it exists, and it owes eviction compensation, save a serious and legitimate ground. For the valuer, this avoids a sterile debate on the “value” of a modified offer: either the tenant freely accepts new terms, and that is a new negotiated lease, or it refuses them, and the compensation is computed as for any refusal of renewal. The glossary describes the indemnité d’éviction and its components.
A reduction of the area is a partial refusal, compensated in full. The landlord wanted to take back part of the premises. The statute knows no imposed partial renewal: the tenant is entitled to renewal over the whole, and a notice that cuts down the premises is a refusal. The compensation is therefore quantified on the business as operated in all the premises, value of the business if the activity cannot continue elsewhere on equivalent terms, value of the leasehold right otherwise, plus relocation costs, trading disruption and ancillary indemnities. A restaurant on the shore of a lake, whose clientele is tied to the site, generally falls under the first hypothesis.
Transferred maintenance obligations are quantified too. Had the tenant accepted the offer, it would have borne new obligations without consideration; it is known, since the rulings on rental value and the parties’ obligations, that such clauses reduce the rental value. The valuer who compares, to inform the parties, the eviction compensation and the cost of a renewal on the proposed terms includes that item: it is often what tips the tenant’s decision.
Leaving the premises does not forfeit the compensation. The court of appeal had blamed the tenants for staying and then leaving voluntarily. The Cour de cassation attaches no consequence to that: the notice refusing renewal gives rise to the right to compensation, whether the tenant stays in the premises, paying an occupation indemnity, or leaves them. For valuation, the reference date is that of actual departure or the date closest to the judgment if the tenant is still in the premises; the report states it, because the value of the business or of the leasehold right is set at that date. The article on the two-year time limit to claim eviction compensation also recalls that the tenant must not delay.
A public landlord remains subject to the statute. The landlord was a local authority, and the premises stood on a developed tourist site. The commercial lease statute applies as long as the property belongs to the authority’s private domain; the eviction compensation is then computed as for any landlord, and the authority enters it in its budget. The valuer checks the domain status, because on public property the situation is entirely different, as recalled by the article on the lease on public land.
Withdrawing the offer on serious grounds: two years from discovery. In a reported ruling of 9 November 2017 (Cass. 3e civ., no. 16-23.120), the Court held that “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”. The article on eviction compensation in 2017 presents that ruling.
What the valuer takes from it
- Renewal takes place on the clauses of the expired lease; only the price is open.
- A notice with an offer of renewal on different terms, other than the price, is a refusal of renewal opening the right to eviction compensation.
- An imposed reduction of the area is compensated like a total refusal, on the business operated in all the premises.
- The tenant’s voluntary departure after such a notice does not forfeit the compensation; it fixes the valuation date.
- The report compares the eviction compensation and the cost of the proposed terms, transferred obligations included.
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, droit au bail and trouble commercial complement this article. On the same theme: Eviction compensation in France: the tenant has two years to act and Eviction compensation: once time-barred, the tenant has no title. The decision is available on Légifrance.
What next
A notice from your landlord that changes the floor area or the obligations of the lease, and eviction compensation to quantify?
I establish the eviction compensation, value of the business or of the leasehold right, relocation costs, trading disruption and ancillary indemnities, with the accounts and the references of the area, for negotiation or the court.
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